Are IEOs Performing Better Than ICOs In 2019?
IEO or Initial Exchange Offerings, the centralized cousin of the ICO model is taking the crypto space by storm right now. With as many as 100 IEO projects being launched so far, the IEO trend really picked up pace in 2019 while ICO has fallen.
As much as $1.6 billion has been raised by IEO projects so far with a vast majority- $1.4 billion, being raised in 2019 alone. (source), it’s safe to say crypto enthusiasts are keen on IEO projects.
While these feats are impressive, one must ask the question “Are IEO projects performing better than ICOs?” Is there any truth to the IEO hype?
Funds Raised By IEOs During 2019
*Total funds raised includes $1 billion raised by Bitfinex. Not represented in the graph
In 2019, ICO projects have collectively raised a cool $ 1.1 billion, an impressive amount when considering the declining investor interest in ICO projects. But remember during the same time frame IEO raised $1.47 billion. So for the first time, funds raised by IEO projects have crossed that of ICO projects.
Average sale time is another category. Investors seem to be bullish on certain IEO projects, especially quality projects on popular exchanges. What’s the proof? Some of these token offerings sold out in a matter of minutes, some even in seconds. For example, BitTorrent IEO- sold out in 15 minutes and raised a cool $7.2 million.
It’s not just BitTorrent though, on average IEO projects have a lower average sale time when compared to ICOs.
Average Sale Time IEO Vs. ICO
The average sale time for IEO projects is just 5.5 days while for ICOs it’s as high as 97.2 days.
So what’s fueling investor interest in IEOs?
Demystifying Initial Exchange Offerings (IEOs)
An Initial Exchange Offering is actually very similar to how an ICO, in terms of its core functionality. Both are crowdfunding programs meant to raise capital from a large investor pool as opposed to the traditional venture funding which often restricts its investor pool to a small number of wealthy individuals.
Also, IEO tokens are not backed by any real-world assets like the security tokens offered in a Security Token Offering. Instead, IEO projects offer investors utility tokens- and these don’t pay dividends or doesn’t represent an ownership stake in that company, similar to an ICO. These tokens can often only be used to gain access to that company’s utility/service in the future. That’s it.
So what’s the key difference?
In an IEO — the token offering is launched and managed by a cryptocurrency exchange on its platform, instead of, the company management doing it themselves. And this simple change in the fundraising process has a whole host of interesting ramifications.
For example, investors believe IEO projects bring in a certain element of trust into the crypto space. How? Because most exchanges have some vetting process before they launch an IEO, although not all exchanges have this process. Instead of sieving through the inordinate number of crypto projects out there- an IEO platform offers an easier alternative.
The Shift From IEOs Is Already Taking Place
So for better or for worse, IEOs are taking the crypto space by storm and shift from decentralized ICOs to relatively more centralized IEOs is already taking place.
IEO Projects Breakdown
As much as 70% of IEO projects had previously also conducted an Initial Coin Offering as well. Indicating that startups are embracing the latest IEO trend despite its regulatory risk involved with its operation.
As of yet, we’re not sure as to where regulators stand on the subject on IEOs but considering its similarities to the ICO financing model, it is unlikely to be a favorable one. Especially in countries like the US, where regulators have prosecuted ICO projects.