Are IEOs better than ICOs?
IEO is a similar way of sourcing funds as ICO, only that it is run through an exchange. With IEO, projects are assured of more legitimized token sale since the exchange ensures that they have done their due diligence on the integrity of the project.
Are IEOs better than ICOs?
There is always something new revolving the cryptocurrency market. Two years ago, the market was revolutionized by Initial Coin Offerings — a crypto-based fundraising instrument that enabled startups all over the world get funded without having to rely on heavily bureaucratic venture capitalists. However, many projects took advantage of the lack of regulation in the sphere to scam retail investors, resulting in multi-million losses.
The crypto industry is now witnessing the rise of Initial Exchange Offerings, a fundraising method comparable in many ways to ICOs but with enhanced reliability. In this article, we explore the difference between IEO and ICO and reasons why you should opt for an IEO.
But first things first, we have to acknowledge that there has been a dramatic increase in the applicability of cryptocurrencies. Actually, the number of businesses accepting transactions in digital currencies is on the rise, especially as big companies like Facebook jumping into it.
Since cryptocurrencies began to gain momentum worldwide back in 2017, the go-to crowdfunding method has been the Initial Coin Offering (ICO). However, the numerous setbacks of this instrument has opened the doors to Initial Exchange Offerings (IEOs).
What is an Initial Exchange Offering (IEO)?
As the name suggests, an Initial Exchange Offering is conducted by a cryptocurrency exchange on behalf of the startup looking to raise funds with its newly issued tokens. Initial Exchange Offerings are not entirely different model from ICOs. Actually, both ICO and IEO share similar rationales with the traditional Initial Public Offerings (IPOs). The major difference between them is that ICOs are not monitored by any third parties while IEOs are controlled by an exchange.
When conducting an IEO, the team has to comply with the requirements outlined by the exchange before launching a token sale. This means that the contributors are protected by the exchange. Ideally, since the token sale is carried out by the exchange platform, the token issuer has to pay a listing fee as well as a percentage of the tokens sold during the IEO. On the other hand, the issuer benefits from the privilege of the tokens being sold on the exchange’s platforms, which also helps with the marketing operations.
How IEOs differ from ICOs?
Should You Opt For An IEO Instead Of An ICO?
If you are looking for a crypto-based fundraising method for your project, it’s important to understand the key elements before deciding whether an IEO is the best choice.
With an ICO, the only counterparty involved is the project developer. That means not only the company develops the utility token, but also takes care of its sale and distribution. Lack of standard requirements allow the developer to quickly raise funds.
Initial Exchange Offerings add an extra layer to the fundraising equation. While the company is still responsible for developing the token itself, the distribution is outsourced and handled by a selected exchange. This boosts accountability and legitimacy and increases the chances of success as the project leverages the exchange’s user base.
Coin management
Once the project owners generate the utility tokens, these are moved to the exchange so that the entity initiates the token sale within its own client base. Since only one exchange will handle the token sale with exclusive rights, it’s vital that the chosen exchange is big enough to compensate the opportunity cost of not going with the token to other counterparties.
Launch process
While the token sale execution, marketing, and final contracts with customers of IEOs are carried out by the exchange, everything should be coordinated beforehand. If you want to maximize the reach of your IEO, you can also conduct a specific marketing campaign on the sidelines, without direct involvement of the exchange.
Trust and confidence
ICOs have been linked to numerous scams, which hurt the confidence and reliability of this fundraising method. As most cryptocurrency exchanges are regulated on a certain level, partnering with one for your IEO will increase the confidence of potential investors and customers. The startup must pass through a Due Diligence procedure which involves disclosing information about the company, owners, and employees.
What Are The Key Advantages of IEOs?
● High Transparency
● High Safety
● High Liquidity
The major drawback of ICOs is that anyone can launch it since there aren’t third parties monitoring the process. As previously mentioned, that isn’t the case with IEOs. The project team will have to comply with the exchange requirements before initiating a token sale. This is a crucial factor since you’ll be giving investors higher protection.
Selling your tokens through an IEO instead of the ICO model also offer the following benefits:
● Extensive base of potential investors with direct access to your token sale
● Most exchanges offer listing benefits if you conduct an IEO. Saves you time and fees.
● Picking an exchange with a solid reputation will impact positively on your project image.
Getting ready for an IEO?
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