Weighing The Crypto Fundraising Options ICO, IEO, And IDO

During the fundraising campaign, enthusiasts and supporters purchase tokens of the projects with sovereign or digital currency. These tokens or coins issued and purchased are similar in representation to the fragmented ownership in each project.

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A cryptocurrency fundraising is a project funding campaign through the sale of digital tokens. The sale is created to turn ideas into reality through funds generated from the issuance of tokens. The buyers are supporters turned investors in the project who believe that the venture will yield greater capital. The worth of tokens based on the value of the project or company. These represent fragmented ownership in the business and some companies offer voting rights the way a traditional stock would.

Initial Coin Offering: ICO

An initial coin offering (ICO) is the virtual currency industry’s equivalent of an initial public offering (IPO). A company seeking to raise money to create a new decentralized application launches an ICO as a way to raise funds.

When a cryptocurrency startup wants to raise funds through ICO, it normally publishes a whitepaper. The whitepaper outlines the objectives of the project, the time to set the project in motion, the number of tokens the founders reserve. Moreover, the kind of money to accept, and the length of time the campaign should run for.

During the campaign, enthusiasts and supporters purchase tokens of the projects with sovereign or digital currency. These tokens or coins issued and purchased are similar in representation to the shares of a company sold to investors during an IPO. The token may have some utility in using the product or service on offer, or it may just represent a stake in the company or project.

Initial Exchange Offering: IEO

In an Initial Exchange Offering or IEO, the token sales are through platforms such as Binance, KuCoin, and Huobi. The token issuers pay a listing fee together with a percentage of tokens sold during the IEO to these platforms.

In return, the platforms allow the sale of the tokens, and their coins are listed once the fundraising campaign is over. The exchange reserves a percentage of the tokens and provides incentives to help market the operations of the token issuer.

The participants of the IEO do not contribute to the smart contract. They have only to create an account on the exchange wherein they shall hold a wallet to contain their tokens.

Initial Decentralized Exchange Offering: IDO

Initial dex offerings, or IDOs, are tokens representing any type of asset put on sale on a decentralized exchange (DEX). Essentially, an IDO takes shape when a project launches a token via a decentralized liquidity exchange. One can create IDOs for anything ranging from cryptocurrency to a music album, extending to aether-powered battleships. IDOs provide businesses with a tool to engage their communities within an economy that helps build efficient products and services while allowing them to make smart business decisions regarding their assets.

IEO vs IDO

In the case of an IDO, a designed blockchain project makes a coin’s first public debut on a DEX or decentralized exchange in order to raise funding from retail investors. Drawing similarities with (IEOs), wherein the crypto projects host and raise funds via an exchange. This happens as both allow instant trading on top of raising funds.

This however comes with centralized exchanges implementing stringent rules including:

‍1)Payment of a lump sum amount or offering a percentage of the tokens to the exchange.
2)Prohibition on listing project tokens on rival exchanges.
3)Permitting very small leeway in controlling the parameters of a project’s token sale.

IDOs, on the other hand, offer a far more flexible and cost-effective token sale and listing model. To begin with, an IDO provides instant liquidity with sparing to no slippage through available liquidity pools in a decentralized exchange. It comes with relatively cheaper listing costs and like IEOs, it allows immediate trading.

Also Read: Less Money Invested Into Crypto Funds Due To Stagnated Market

Conclusion

Weighing the popular crypto fundraising methods is clear that each has its specialized benefits that span a range of products and services. While ICOs are by far the reigning models’ others are sure to catch up with time and ever-emerging requirements.

The newer and up-and-coming solutions provide a view of the innovation that is rooted in the technology that powers these engines.