What is an IEO? Is IEO investment safe?
What is an IEO?
IEO – Initial Exchange Offering, as its name suggests, is implemented on a cryptocurrency exchange platform. Contrary to the ICO, the IEO is regulated and represented credibly by a cryptocurrency exchange for a startup seeking to raise funds with tokens issued.
Since the sale of tokens is conducted on an exchange platform, token issuers pay a listing fee and a percentage of the number of tokens sold in the IEO. In return, tokens will be sold on exchanges, and their coins will undoubtedly be listed on the broker after the IEO ends. Since the cryptocurrency exchange will own a percentage of the number of tokens sold, it is encouraged to provide marketing support to token issuers.
IEO participants will not be able to govern as ICO on intelligent contracts. Instead, they must create an account on the broker, where the IEO is conducted. IEO participants must deposit their coins in the broker’s wallet to purchase an IEO.
IEO on exchanges
More and more cryptocurrency exchanges have started to “catch” IEOs. One of the first brokers nobody else has ever seen is Binance, which launched Binance Launchpad, a platform dedicated to IEO. In January, BitTorrent – was acquired BY TRON and initiated the sale of tokens on the Binance Launchpad and earned 7.2 million dollars in less than 15 minutes, mainly from crowd sales.
Just 15 minutes to sell off all the tokens in a crowd sale is not easy and is the dream of crypto startups. This IEO on Binance Launchpad has set a new record so far. The second IEO on the Binance Exchange is Fetch.AI, which has hit the $6 million mark in just 22 seconds.
After observing the success of Binance Launchpad, other major brokers have also announced the launch of their own IEO platforms. IEO platforms are Bitmax Launchpad, Bittrex IEO, OK Jumpstart (OKEx), KuCoin Spotlight, and Huobi Prime.
Comparison of differences of understanding between IEO and ICO
Advantages and disadvantages of IEO
One of the main advantages of the IEO is trust and credibility. When crowdsale is conducted on the cryptocurrency exchange, it is one thing to be sure that the broker will screen every best project to “run” the IEO on its platform. The broker does this to maintain credibility by protecting investors with the best projects.
As a result, the IEO can eliminate scam projects and those with no prospects through cryptocurrency exchanges, and scamming IEO participants becomes much more difficult.
The raid IEO case is a good example. Recently, Bittrex announced that it had canceled the IEO for the raid project hours before the start of the crowd sale. The reason for the cancellation of the IEO raid (target $6 million) was the terminated partnership between the raid and video game data analysis company OP.GG.
According to Bittrex, the partnership between the two companies was essential to the project. When the broker became aware of it, they decided to cancel the IEO because they believed it was a disadvantage for Bittrex’s users.
Token issuers do not have to worry about the security of crowd sales as the broker will manage the attached smart contract for the IEO. The cryptocurrency exchange also handles the KYC / AML process as most service providers will implement KYC / AML for their clients after they create their accounts.
Easier for projects
Token-issuing startups benefit from a more flawless process of launching IEO on exchanges than implementing ICO on their own. While fundraising, organizations pay a fee for the listing and a percentage of their tokens for marketing. Therefore, startups launching IEO only need to spend less on marketing than they decided to use ICO. Moreover, token issuers can take advantage of a stable customer base to receive additional contributions to their projects.
Token listing is also seen as a process in the IEO, so it is a natural process that the cryptocurrency exchange where the IEO is conducted will list coins after the crowd sale ends.
The IEO seems a safer and more efficient alternative to the ICO, as the costs associated with token sales can be very “cheap” for startups. Listing fees can go up to 20 BTC, while brokers can cut 10% from fundraising companies’ tokens.
How to participate?
Since the current IEO is relatively rare in the crypto community, it is not difficult to choose an IEO that you prefer. Once you have found your IEO, you need to find which brokers are hosting the crowd sale for the IEO.
The next step is registering an account on that cryptocurrency exchange and completing the KYC and AML verification process.
Once you’ve done that, check which coins are being IEO and top up your account with the currency accepted in crowd-sale (e.g., BNB of Binance). The last step is to wait until the IEO starts and buy your token.
Will the IEO help the crypto market to be more lively again?
The ICO created a boom in 2017 and 2018. However, many crypto projects are operated by scammers or have bad intentions (BitConnect, Hextracoin,…). However, we cannot say this is an effective fundraising model for cryptocurrency startups as no one knows the future.
On the other hand, the IEO provides a higher level of trust between crypto projects because the exchanges organize the crowd sale for the fundraising process, improving crowd sales efficiency. Therefore, the IEO has the potential to become the standard model for raising capital in the cryptocurrency market and may even create other booms.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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