Are the days of the Initial Coin Offering (ICO) over?
The time of the Initial Exchange Offering (IEO) has come into play in the world of cryptocurrency. There are profound differences between the two, and for both new and more discerning cryptocurrency investors the latter system of company promotion offers many advantages.
As its name suggests, the IEO is simply the immediate flotation of crypto tokens on an exchange. The exchange conducts the exchange on behalf of the start-up which seeks to raise funds with the sale of its tokens. Token issuers have to pay a listing fee and typically a percentage of token sales to the exchange platform, but these are the costs of doing business and in any case the system offers a number of breakthroughs that could be very useful for start-ups, exchanges and investors alike. These include easier marketing operations for the token seller, as the exchange tends to handle marketing operations on behalf of the start-up. There is also no Smart Contract to negotiate through, unlike what is frequently the case with ICOs.
Another advantage is that registering to buy tokens on an IEO is easy. There is only the need to register on the Exchange, pass KYC, and the need for an investor to undertake painstaking and rigorous research into the reliability and trustworthiness of a company or start-up is reduced if not eliminated altogether. This is because the start-up concerned will already have been significantly background-checked by the exchange operators. Of course, that doesn’t mean that as an investor you don’t do your own research too. In the new and still volatile world of cryptocurrency every little bit of knowledge counts! There are counterpoints to this, such as the possible motivations of exchange companies to put certain start-ups on their listings. However, it logically follows that exchanges will not want to damage their reputation in the long-run by vouching for non-vetted companies.
Many companies have eschewed the ICO path and opted for IEOs instead, precisely because of the advantages in marketing and trustworthiness screening. Whereas with an ICO a company had to market its’ tokens and make the logistical preparations for sale, much of which is managed by the exchange itself with an IEO. The fundraising, crowdsale and Smart Contracts are all managed by the exchange. For the cost of a percentage of token sales, it appears that this new and popular method of achieving fast token sales heralds an exciting future for many start–ups in the cryptocurrency world.
IEOs have all the advantages of ICOs, without the drawbacks, particularly the marketing costs and the arduous task of proving their worth and integrity to the community. It is possible to raise substantial funds very quickly on IEOs, as has been the case for companies such as BitTorrent which launched on the Binance Exchange and raised $7.2 million in 15 minutes. The Initial Exchange Offering may herald a new start for ambitious technology companies who can prove themselves to the IEO market.