What is an Initial Exchange Offering (IEO)?

A brief overview of the Initial Exchange Offering, its advantages to various parties, and how to participate in one.

Gene Yan Ooi
Mar 13, 2018 · 3 min read

The primary medium of fund raising for blockchain projects has been the Initial Coin Offering (ICO). Since the first Initial Coin Offering in 2013 by Mastercoin, there have been hundreds of ICOs. At its core, an ICO revolves around a developer collecting contributions denominated in Ether (or some other cryptocurrency), and issuing a newly minted token. Whether or not there is a Smart Contract governing the ICO, the effective counter-party faced by each contributor is the developer himself.

Initial Exchange Offerings

An Initial Exchange Offering (IEO) relies on having an exchange (or set of exchanges) function as the counter-party. Developers mint the project’s tokens and send them to the exchange, which will then sell the tokens to individual contributors for Ether. Subject to the agreement between the developers and the exchange, conditions traditionally found in an ICO can be emplaced in an IEO. These conditions include capping the contribution per individual and having a fixed price per token.

From the perspective of a contributor, instead of sending Ether to a Smart Contract governing the ICO, each IEO participant has to create an account with the exchange and send ETH to this account. When the IEO commences, the participant can purchase the token directly from the exchange.

Why do an IEO over an ICO?

Given that there have been so many ICOs, why should a team seek to conduct their fund raising differently? There are several advantages afforded by conducting an IEO, including:

How to participate in an IEO?

Generally, the steps to participate in an IEO begin with checking if the project you are intending to crowdfund is indeed conducting an IEO. After which, you should:

How does the exchange benefit?

Running an exchange has been a profitable endeavour from trading fees alone, but incumbents are faced with increasing competition for users and their trade flows. The following are some of the benefits accrued to an exchange which facilitates IEOs:

Disclaimer

I am a co-founder of traceto.io, which will be conducting its public sale via an Initial Exchange Offering in the first week of April.

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Gene Yan Ooi

Written by

Co-founder @ traceto.io

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