If you’re one of the 32 million cryptocurrency adopters who’ve lived through the torrential crypto climate, you would understand Initial Coin Offerings (ICOs) as one of the most prominent phenomenons to have fallen out of fame (and favour) globally in recent times. It’s over-hyped business model and intrinsically weak security measures were among the primary reasons for its downfall.
This 2019, they’re making a comeback, seemingly in the form of a more assuring, secure and enhanced version of its old self, together with a powered-up organ fused to its fundamentals — cryptocurrency exchanges. ICOs are no more; we’re now looking at a whole new ball game aptly christened Initial Exchange Offerings (IEOs).
Wait a Minute…This Sounds Familiar
The workings of an IEO is very similar to that of an ICO. In ICOs, investors keen in contributing to the projects sends Ethers to the smart contracts governing the ICO. This process gathers the funds directly into the pockets of the project, hence providing the support it needs to reach completion.
As for IEOs, the process is the same except for the fact that users have to first create an account with the participating cryptocurrency exchange(s) before any form of monetary exchange can take place. These accounts would then be used as the medium of exchange for investors to purchase the project tokens, an intermediary where funds would first flow through instead going directly to a smart contract issued by the token issuer.
So, We’re Bulletproof Now?
What’s so great about this is powered-up version is that cryptocurrency investors now have lesser to worry about when it comes to the security and liquidity of their investments. With the exchange platforms coming in as an intermediary of the token issuance process, investors no longer have to deal directly with token issuers who are typically new, little-known players in the field. Tokens issued via an IEO are also immediately tradable once it has been issued/sold, hence eliminating all the liquidity problems that ICO projects have been known to be plagued with.
Moreover, with their reputation at stake, participating exchanges are also incentivised to perform the necessary due diligence before the investors even come into the picture. This automatically filters out dubious projects with little or no potential, hence alleviating the risks investors have to bear as compared to that of an ICO.
In many ways, an IEO presents a win-win scenario for investors, projects and the exchange platforms. Investors get to have their potential projects screened before any form of commitment, while projects get to save costs by tapping on the existing user base of the exchange platforms. Because of the influx of trading activities that would come with an IEO, the participating exchange platforms stand to gain as well.
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