Recently, Yazan Barghuthi, CEO of Jibrel, was a guest panelist and competition judge at Slingshot Accelerator’s “Best of the US” Primary Token Listing 2019 Competition in NYC, where he spoke about ICOs vs. IPOs and emerging Initial Exchange Offering (IEO) trends.
While ICOs were responsible for the inception of over 2,000 coins and tokens throughout most of 2017 and 2018, IEOs have recently emerged as the newest form of capital raising in the cryptocurrency space. In this article, we will explore what they are, how they differ from ICOs, and what we can expect in the near future.
What are IEOs?
IEOs are alternative fundraising methods to ICOs where a project’s tokens are initially sold directly on a cryptocurrency exchange. Unlike ICOs, where a project’s team has to raise capital and get listed on exchanges, during IEOs, the supporting exchange is entirely responsible for the fundraising process.
As the token sale commences on the exchange’s platform, token issuers have to pay a listing fee and give a percentage of the tokens to the exchange as payment. Since the cryptocurrency exchange takes a percentage of these tokens, the exchange is interested in the success of the sale. Therefore, they tend to help out with certain business operations such as marketing.
The Emerging Trend
An increasing number of cryptocurrency exchanges have started to embrace IEOs. One of the first was Binance, which launched its IEO platform, Binance Launchpad, managing to sell projects such as BitTorrent and Fetch in minutes. After observing the success of Binance Launchpad, other major exchanges announced their own IEO platforms. Among these platforms are Bitfinex, Bitmax Launchpad, Bittrex IEO, and Huobi Prime.
What Are the Main Differences Between ICOs and IEOs?
Like ICOs, IEOs have low barriers to entry for investors. All one needs is cryptocurrency and a verified account on a hosting exchange. However, since the exchange puts its reputation behind a project, it tries to ensure that the project is trustworthy and not a mere exit scam. Also, tokens are listed immediately after a token sale and are available for trading. Thus, projects do not have to go and seek out other platforms, which often results in having to pay ridiculous listing fees. Still, it is important to remember that the tokens are very much like the utility tokens of ICOs in terms of their highly volatile prices.
Ultimately, the ICO craze of 2017 was primarily the result of regulatory uncertainty and an overabundance of projects. IEOs are an evolved form of token offerings where an exchange runs the token sale itself. The exchange takes upon itself the due diligence of the project, assessing the viability of the products, market positioning, risks, financial condition, etc. The fact that the trading platform puts its name on the project increases the trust level for potential token buyers.
While IEOs have the potential of becoming the standard model for raising funds in the crypto space, they are currently somewhat rare in the crypto community. Still, personal due diligence is very important, and one should always weigh the risk before investing in any project.
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Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained here constitutes a solicitation, recommendation, endorsement, or offer by Jibrel or any third party service provider to buy or sell any securities or other financial instruments in this or any other jurisdiction.
