Initial Dex Offering (IDO)

November 21, 2023 - Around 2 mins mins to read

Understanding Initial Dex Offering (IDO)

An Initial Dex Offering (IDO) is the launch of a cryptocurrency on a decentralized exchange (DEX). It is a fundraising method where a blockchain project introduces its coin to the public through a DEX, with the goal of raising funds from retail investors. IDOs are similar to initial exchange offerings (IEOs) in that they allow for immediate trading while raising funds. However, IDOs offer a more cost-effective token sale and listing model compared to centralized exchanges.

Unlike traditional startups that receive venture capital before launching, projects conducting IDOs obtain financing from individual investors. It is important to note that investors in IDOs do not have any equity in the project, unlike in an initial public offering.

There are several benefits to IDOs that make them more attractive than initial coin offerings (ICOs) and IEOs. Firstly, IDOs provide immediate liquidity and trading opportunities. Additionally, they offer lower costs for listing on a DEX.

Centralized exchanges impose strict rules on projects conducting IEOs, such as requiring payment of a significant sum or offering a portion of the tokens to the exchange. They also prohibit the project from listing their token on competing exchanges and limit the project’s control over the token sale parameters. In contrast, IDOs offer a more flexible and cost-effective token sale and listing model.

One of the advantages of IDOs is the availability of liquidity pools in a DEX, which ensures quick liquidity with minimal slippage. Furthermore, IDOs have cheaper listing costs compared to other fundraising methods. Similar to IEOs, IDOs allow for instantaneous trading.

Notable DEXs that offer IDO services include Binance DEX, Polkastarter, and Uniswap. Many traders prefer IDOs over ICOs because IDO listings prevent the issuer from controlling the fundraising round. One of the pioneering IDOs in the industry was RAVEN, which was listed on Binance DEX in June 2019.