The Initial Exchange Offering (IEO) is the coming-of-age of the “traditional” ICO to crypto-banking that is slowly catching the interest of ICOs and traders across the world. It bolsters trust and security for investors and blockchain projects.
SO, WHAT EXACTLY IS AN IEO?
The chief medium of fundraising for blockchain projects has been the Initial Coin Offering (ICO). As blockchain continues to evolve, so do the mechanisms used for fundraising new projects and the new concept replacing ICO is Initial Exchange Offering (IEO). This latest approach provides exchanges to supervise and launch new blockchain projects themselves. IEO is a smart and quick way to launch a blockchain-based project and place your token on the exchange without taking the risks associated with a traditional ICO or STO.
An IEO depends on having an exchange function as a counterparty. Developers mint the tokens of the project and send them to the exchange, which then sells the tokens to the contributors for Ether.
An IEO is a fundraising strategy that implies collaborating with a crypto exchange as a counterpart. The project doesn’t sell tokens directly to the investors but it sends them to the exchange, which in turn would sell the tokens to individuals.
WHO CAME UP WITH THE IDEA OF IEO?
While Initial Coin Offerings (ICOs) were having a hard time raising capital, Binance disclosed a new fundraising medium called Initial Exchange Offering (IEO) under the banner of its Binance Launchpad.
An initial exchange offering follows quite a similar pattern to the ICO. The main difference is that both the contributor and the developer have their transactions facilitated by a third party.
But in the case of an IEO, that third party is an exchange. In this way, IEO can be considered as a 2.0 version of an ICO.
WHY DO AN IEO OVER ICO?
One of the major advantages of IEOs is trust. IEOs can eliminate scam and suspicious projects from raising funds via cryptocurrency exchange platforms, and it becomes much harder to scam contributors with IEOs. The next important benefit of IEOs is security as the exchange manages the IEO’s smart contracts. KYC/AML process is also handled by the Crypto Exchange. IEOs seem like a more efficient and secure alternative to ICOs.
WHAT ARE THE BENEFITS OF AN IEO?
- There is no risk of ‘Gas War’ between the contributors in IEO.
- Since the investors know that the exchange is the only place where tokens can be bought, the risk of third-party fraud is also eliminated.
- An IEO makes it easier for the token to hit the exchange since it is already there.
- You don’t need to worry about the transaction fees, token distribution, etc.
- KYC/AML (Know Your Client / Anti-Money Laundering) is not required if the exchange has its own KYC/AML procedure.
- Transactions are undertaken on the exchange, not between individuals and projects so it is secure and reliable.
WHAT IS THE FUTURE OF IEO?
While it was not called an exchange offering then, 2019 has seen a new wave of IEOs (Initial Exchange Offerings) springing up. On the 28th of January 2019, TRON launched the BitTorrent ICO through Binance launchpad making it the first IEO of 2019 and raising as much as $7 million within 20 minutes. I thought that rang a responding bell. Looks like the glorious years are back again. We have since seen Binance launch another for Fetch.AI team and
many other exchanges such as Huobi, Bittrex, Okex, Kraken, BITMAX etc. racing to announce their soon to launch IEO.
The Initial Exchange Offering is still a quite new phenomenon but there is no doubt that this will continue to grow with time. An IEO is completely different from ICO as the exchange is a tangible execution model, rather than an idea in a technical document. Hence, the chances of it performing in the long term are greater. With time, the IEO may change the face of crypto banking for the better for it might help to make crypto-currencies and exchanges more appealing to the wider market.
We hope that this new service will allow our loyal members to partake in token sales in a more user-friendly, secure and safe environment.
MORE EXCHANGES JOIN THE IEO TRAIN
- IEOs on Binance Launchpad has raised the highest number of funds ($79 million).
- Hong Kong and Singapore have raised almost a half of the total amount of raised funds ($124.5 million).
- Singapore is the leader by the amount of projects with its eleven IEOs presented.
March 2019 has been a dynamic month for all these exchanges, as none of them wants to be forsaken by missing this opportunity to provide extra value to their users by letting them fundraise their favorite projects and the greater cryptocurrency.
THREE UPCOMING IEO PROJECTS TO WATCH RIGHT NOW
- Matic Network – Launching on Binance
- Evedo – Launching on Bitforex
- Ocean Protocol – Launching on Bittrex
IEOs provide an excellent alternative to the now-risky undertaking of an ICO for tech founders. And it looks like the IEO is here to stay.