text author: Oleg Sharpaty, co-founder of W12
Last year saw the emergence of a promising ICO alternative called IEO, which is closely watched by many investors. Let’s see what the difference between these concepts, hiding behind such euphonious abbreviations, is..
ICO (Initial Coin Offering) – is the release by a startup of its own units of cryptocurrencies (tokens) in order to attract investors for its development.
IEO (Initial Exchange Offerings) – it is a promising method of fundraising for startups, which are selected by a cryptocurrency exchange. It is she who, acting as an intermediary between the new project and investors, organizes a token sale and sells tokens.
We can say that IEO – this is an improved ICO, where the main partner of the startup is the exchange, and the listing takes place a couple of days after the end of the token sale, and not six months later, as is often the case in the case of an ICO.
How to participate in IEO?
To become a full-fledged IEO participant, you must register and verify (KYC verification) on a cryptocurrency exchange. Then you need to pay 20 BTC to launch the token sale. In addition, you need to conclude a contractual agreement, where the following transaction parameters must be spelled out: the cost of one token, the volume of issue, soft cap, hard cap, exchange commission, etc..
Disadvantages of ICOs:
- There are no mechanisms to protect the rights of investors.
- There are no security guarantees. The placement of virtual coins is carried out through smart contracts on the platform of the creators of the project, and at any time, unscrupulous organizers, having collected a large sum of money, may simply disappear.
- Many investors are unhappy with the fact that most of the projects go to a major exchange after a long time. This reinforces their distrust of ICOs..
- Some teams promoting their projects do not have sufficient experience to properly dispose of the investments received. And not all investors are able to understand which projects are worth investing in..
- Investors trust IEOs more than ICOs. This is due to the fact that it is the exchange that evaluates projects, examining commercial risks, reputation and professionalism of the team, investment attractiveness, their competitors, etc. Thus, the cryptocurrency exchange takes on some of the reputational risks, which undoubtedly leads to an increase in investor confidence..
- Startup teams will be able to save significant money on advertising as the exchange itself will attract investors.
- Listing is guaranteed.
- High probability of making a profit. Exchanges carefully select startups and only conduct IEOs when they are actually promising.
- You can invest in fiat money. If earlier investing in ICOs took place by transferring funds in certain cryptocurrencies, now IEO has the opportunity to use any currency that is supported by the cryptocurrency exchange for this (unfortunately, this practice is not applied on all exchanges so far).
What is an IEO? Initial Exchange Offerings Explained Simply