Initial Coin Offering (ICO) in 2017 was the coolest way to raise funds by shifting from conventional methods such as angel investment, banker loans or venture capitalists. In 2019, we have something better, more secure, and validated – Initial Exchange Offering or IEO, the latest development in the blockchain-based funding.
How is IEO more secure and validated?
It is a known fact that ICO revolutionized fundraising but it also gave birth to a lot of scammers. It was a challenge to find a trustworthy ICO and it needed business acumen. This is completely negated with IEO. In an IEO, the exchange will have to perform due diligence before listing which is normally done by the company that seeks money. This otherwise would be a stain on the quality of the exchange.
IEOs are influential compared to ICOs as exchanges assure immediate listing and visibility to the user base.
How IEO works?
Investors who find a project interesting will send the money to the exchange’s wallet. And the exchange sends it in the form of tokens to the project (the company or startup). All this takes place with smart contracts.
The working might slightly differ from exchange to exchange, however, the foundation remains to be marketing, fundraising, and secondary trading. Unlike in ICOs, the exchange lists the token instead of fundraisers and makes it available for the trading. The exchange is the platform conducting the sale.
Also Read: The Era Of Revolution In Digital Marketing
Why IEO over ICO?
Fun Fact: If the exchange doesn’t reach the soft cap posed by the company, then it returns the money to the investors.
With IEO, the investors can take a back seat because the risk is transferred to the exchange from the investors.
This also brings in more credibility and is comparatively cost-effective than ICOs. One of the major challenges investors faced with ICO was liquidation. With IEO, the invested tokens are immediately routed to the user’s exchange wallet.
Exchanges that have integrated IEOs not only provide trust and security to investors but also for the companies who come to them seeking for funds. As the token is listed by the exchange itself, capital can be raised quickly (due to the huge distribution and wide user base). All the transactions happen only via the exchange which gives no room for sending wrong wallet addresses.
A look at a few successful IEOs by one of the leading exchanges.
Binance pioneered IEO with the BitTorrent sale in early 2019. They have launched three successful IEOs so far, namely,
- BitTorrent (BTT)
- Fetch.AI (FET) and
- Celer Network (CELR)
Cumulatively, they have managed to successfully raise over $17 million of funds with the help of Binance’s Launchpad.
With this feat, Binance earned name and fame and is also the most favorite launchpad for IEOs.
IDAX and LA Tokens are also joining the IEO league.
How to start an IEO?
- Find the exchange that complies with your regulations, your investor’s regulations and the project’s requirements.
- Complete the KYC/AML
- Wait for the investors to invest
To start an IEO with Binance, firstly you need to fill in a ton of details. The details include information about the founders, technical deliverables, queries and questions regarding the project, etc.
The exchange will review the project based on certain factors. The project may get rejected if you screw up even in one of the procedures put forth by the exchange.
Make the payment with the exchange so they can go ahead with listing and trading. There are companies in the market who are ready to help you with the above processes; from filing details and publishing a whitepaper to payment and marketing.
The mechanism of IEO is easy but the push and visibility a project needs might not be achieved. An exchange has a huge user base and markets for the project but if you don’t get the required attention of potential investors you can always go for secondary marketing. You can hire a team or an IEO development company to aid with marketing.
IEO is attracting investors and it is a good sign. Nobody can guarantee anything, especially in the early stages with just a few Successful IEOs. However, IEOs have resurrected the trust in fundraising with Blockchain technology, which was essentially lost during the latter half of 2018. Only time and challenges will tell if IEOs will be the next big revolution in the blockchain technology.
Patricia Dixon works as a content writer at Blockchain App Factory. She has a masters degree in history but prefers to archive and examine all things digital or technical. During the weekends, you may find Patricia exploring the countryside or reading Japanese manga at the local coffeehouse.