What is an Initial Exchange Offering (IEO)?
Sometimes back in 2017, it was “cool” for a blockchain project to raise funds through an Initial Coin Offering (ICO).
Well, blockchain was a thing, Bitcoin was at a then-record high, and all that was needed was an internet connection and a flashy launching page.
ICOs had Serious Loopholes
With the success of previous ICOs, thousands of projects announced their ICOs with nothing more than a glossy whitepaper and a flashy website.
It only took a few months for crypto folks to realize that most ICOs were nothing more than scams. A confirming report noted that over 80 percent of ICOs were scammed.
Damning, investor trust was irreparably broken.
In place of ICOs, the blockchain community decided to innovate once more. This time, the goal was to enhance transparency and regulate crowdfunding.
This trust was pinned on some cryptocurrency exchanges, mainly with operations away from the United States.
This evolution and enhancement of ICOs birthed the Initial Exchange Offering (IEO) wave.Crypto crowdfunding is evolving. An Initial Exchange Offering (#IEO) is gaining prominence as a safer alternative to #ICOs. Learn more: Click To Tweet
What is an IEO?
To simplify, an IEO is a crowdfunding model where a centralized exchange oversees the token sale. A project leverages an exchange’s client base to raise funds in this arrangement. Immediately after the token sale, the project’s token is launched on the exchange.
This arrangement cushions the investor since the exchange does its due diligence. For instance, a requirement for a project is a functional business model, onboarding an experienced team, demonstrating how they would leverage blockchain, and a comprehensive white paper laying out their plans.
Also, because of mandatory KYC—submitting personal details, the investor must submit personal information before investing. At the same time, the project gets a liquidity injection due to guaranteed listing.
Examples of launching pads where projects can conduct IEOs include the Binance Launchpad, Huobi Prime, OKEx Jumpsmart, and more.
In this podcast with Douglas Borthwick, learn how one exchange bridges the world of crypto and securities.An Initial Exchange Offering (#IEO) is a #crowdfunding model where a centralized exchange like #Binance or #OKEx oversees the token sale. It is an improvement of #ICOs. Learn More: Click To Tweet
Dalmas is a very active cryptocurrency content creator and highly regarded technical analyst. He’s passionate about blockchain technology and the futuristic potential of cryptocurrencies.