What is an IDO (Initial DEX Offering) in Crypto?
IDOs have become an integral part of the general cryptocurrency ecosystem for a long time. For this reason, if you are not new to the crypto ecosystem, you must have heard something about IDOs before. However, this does not mean that you know everything about IDOs and you don’t need extra information. If these are what you need, this article is at your service! Enjoy!
Introduction
A crypto token offering conducted on a decentralized exchange is known as an IDO (Initial DEX Offering). It is a fundraising strategy that gathers investment funds from everyday people. The IDO was developed to address the “conventional” ICO crypto crowdfunding model’s drawbacks.
An IDO gives retail traders the opportunity to purchase a token at launch which can be very lucrative. However, this only tells part of the story. Looking back, the initial coin offering (ICO) excitement that occurred on Ethereum (ETH) in 2017 wasn’t totally great. Investors frequently experienced significant losses as a result of scams and rug pulling.
What are the Differences between IDO and ICO, IPO and IEO?
All four types of fundraising have a role in the investment sector, but there are important differences between them. What precisely are the differences?
Since the issuer is in charge of everything, an ICO is similar to an initial public offering (IPO). The duty is handled by a centralized exchange host in IEO, in contrast.
IDO can be viewed as a hybrid between an initial exchange offering (IEO) and an initial coin offering (ICO). But the sole distinction is that IDO use a decentralized exchange rather than a centralized exchange (CEX) (DEX).
IDO can also be used to address IEO-related problems. When issuers are prohibited from offering tokens on competing exchange platforms, this occurs. Additionally, the issuer must pay a substantial fee in order to list the token on an exchange.
What are the advantages of an IDO?
Over time, token offerings have mostly become fairer and more secure for investors. IDOs have some distinct advantages that support this:
- You don’t have to work with a project personally or have faith in its smart contracts. A trustworthy IDO platform will have a number of closed sales. You can have some confidence in the offering if the smart contracts are the same.
- Post-sale liquidity given immediately. To create a liquid market after the sale, IDOs will place a portion of the funds raised in liquidity pools. This lessens volatility and slippage.
- No registration is necessary. Personal information is not necessary to participate in the sale; all you need is a wallet and money. This makes it accessible to all users. However, the absence of KYC or AML procedures might also be seen negatively
- IDOs for projects are accessible and inexpensive. A smaller, lesser-known startup may frequently find it simpler and less expensive to launch their token through a DEX than through a major, centralized exchange.
- Anti-whale procedures are frequently used by IDOs, preventing any one investor from purchasing a sizable amount of tokens.
What are the disadvantages of IDO?
Some of the IDO’s advantages also contribute to some of its drawbacks. These issues are mostly caused by an IDO’s decentralized and anonymous nature.
- No AML or KYC. When the necessary checks are carried out, investors and projects are protected. These precautions aid in preventing the laundering of illicit funds and the circumvention of financial restrictions. For instance, if the token qualifies as a security, some nations might not be able to legally participate in an IDO.
- Less project due diligence. The distribution of a token by a dubious enterprise is considerably simpler through an IDO than it is through an IEO (Initial Exchange Offering) with a sizable, regulated exchange.
What you should do to stay safe in an IDO
There are simple, practical suggestions to protect yourself as much as possible. Let’s check those.
- To subscribe to the IDO, use the appropriate link. Scammers will set up fake subscription pages and take advantage of the enthusiasm and hype surrounding an IDO. Any cryptocurrency that you send to a fraudulent page will be lost forever.
- Employ a reliable Launchpad. You can already take part in IDOs on a number of reliable platforms, such as Babylons. Using these increases your chances of receiving your tokens from the sale successfully.
- Review the terms and conditions of the IDO. Your tokens might not arrive right away, or they might even be staked and locked for a while. The project’s tokenomics will determine almost everything, thus you should fully comprehend them. If you plan to participate in IDOs on Babylons, we suggest you check Babylons Fairness Guideline in order to fully understand the terms and conditions for an IDO.
- Only make investments you can afford to lose. The reputation of token sales as being extremely volatile exists. It’s simple to get carried away and invest more money than is prudent. But keep in mind that sales are still dangerous, and even with a thorough investigation, you could still fall for a fraud, scam, or rug pull.
About Babylons
Babylons is the ultimate GameFi destination, pioneer launchpad, blockchain tooling provider, and NFT platform with its 100+ gaming partners and a young and active following of GameFi enthusiasts. For its gaming partners, Babylons offers INO hosting, IDO hosting, and secondary sales services tailored to their exact needs. Babylons has a vibrant gaming community that is eager to participate in new gaming projects private, and public token offerings & IDOs; while the platform aims to democratize this process with its innovative mechanisms.
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