IDOs: How Secured is it for Investors?
In Cryptocurrency industry, there are many ways to launch a project to the public and attract investors to fund it. The most popular way has been ICO which means Initial Coin Offering and this has been used by Crypto projects.
What is the meaning of ICO- Initial Coin Offering are major ways to raise funds for early stage Crypto projects in an unregulated way. Over the years, ICOs are faced with strong limitations and challenges. Recently, this led to the adoption of IDO by different Crypto project.
It has gained wide popularity among different Crypto projects. IDOs are a more excellent option to launch and raise funds for Crypto projects
You might have heard about ICOs but have you heard about a crypto model of fundraising called IDO
An IDO is one of the most popular model of listing Blockchain project to the public in a Decentralised Exchange (DEX) to attract funding from investors. Asides IDO, other relatives of tokens offerings include; Security Token Offerings STOs, Initial Exchange Offering IEO, Initial Coin Offering ICO, SEO etc.
IDOs are tokens that represent any type of asset hosted on a decentralized exchange (DEX) . The benefits of DEX is that they help Companies launch their project and access liquidity very fast. Most IDOs require participants to sign up on a landing page to wait.
Do you think IDOs are safer and secured for investors? Well, This will take us to the next subtopic.
ADVANTAGES OF IDO
1.Lower cost of listing - With IDOs, the operations and related activities carried out by the projects team are reduced.
2. Immediate liquidity - Once an IDO token is launched, it can be easily converted to cash for profit.
3. Access to fast trading - With IDOs, tradings are done once the token is listed. This benefit early investors to make profit from the token because of the initial cost.
4. It is transparent- Anyone can participate on the IDO independent of the traditional way of listing a token sale.
5. KYCs are not required- Your private information is not a criteria to participate in the IDO. Only your wallet and cash are needed.
DISADVANTAGES OF IDO
1. Lack of control mechanism- A decentralised exchange doesn’t have a control mechanism and this can pose as a negative factor for IDOs.
2. Prone to price manipulation- The investors or whales holding a large amount of the token at the base can easily manipulate the price of the token.
3. Fraudulent projects and tokens-IDOs' easy access and skip of verification has its prons and cons. It has increased the chances of fake projects launched in markets.
SAFETY MEASURES IN IDO
1. Do a great research work on the crypto project - The DYOR will not fade out so fast in the web 3 ecosystem. DYOR means Do Your Own Research is compulsory especially for newbies and wannabe investors in the ecosystem and individuals. The truth is that one can not rely on the information passed on but be ready to commit to research in the ecosystem. Without research, you might fall risk of fake tokens and scam projects.
2. Read their terms and conditions- To avoid being a prey to scam project. Read the necessary rules associated with a project. Follow the right link to avoid unforseen circumstances.
3.Invest wisely- Do not invest what you can not afford to loose is a well used sentence among the Blockchain folks. Invest wisely in any project.
4. Use a trusted DEX- With many Decentralised Exchanges, it is highly encouraged a project uses the popular ones for their IDOs to avoid risk of scam and fraudulent activities.
CONCLUSION
In this emerging technologyBlockchain, creative ways and frameworks are constantly unfolding everyday. The growth of IDOs might likely lead to something more decentralised. What do you think the future holds for IDOs? Let me hear your thoughts in the comment section.
