You might be under the assumption that blockchain technology is extremely new, and you would be correct. Bitcoin truly made this concept shine after its release, however, there are thousands of crypto startups and companies out there, and a lot of them are competing in order to acquire investors through either ICO or IEO means.
Now, let us assume for a second that you want to launch a cryptocurrency project through an IEO. This procedure has to be followed before even the first dollar can be raised.
The team has to have a robust business model, experienced team members, a viable use case for the technology, and a whitepaper that is a crucial part of all of it.
Organizing this IEO is similar to stating that a company or a team is committed to the long-term success of the project they are attempting to launch.
They also need to determine if the IEO will have a hard or a soft cap.
A hard cap is essential so that no more a certain amount of money can be invested, while a soft cap is essential in the way where the goal needs to be reached but also allows for more investments afterward. After these decisions are made, the team has to pick a platform for the ICO.
Raising funds for a new crypto or blockchain project is difficult and there is a lot of competition. An ICO can be useful due to the fact that it is tailored towards a plethora of existing cryptocurrency holders.
Then there are also projects that want to raise money through the help of an exchange, where an ICO is a reliable option. Many IEO’s sell out quickly, however, this is highly dependent on both the project and the use cases of the project in question.
Typically, the token is also listed on the exchange after the sale comes to a stop.
Benefits of IEO’s
When it comes to the benefits associated with an IEO, as a user, you can participate easily as you do not need to manage any on-chain transactions through different wallets throughout different blockchains, and instead, you can use an account on the exchange where you can simply add some funds in.
As a team with a project that wants to raise funds, and IEO offers the promise of an immediate user base that can see the product, and depending on the size, allow the project to reduce the outside marketing funnels for fundraising and allow them to focus on the development of the product itself.
Verification of IEO’s
To avoid any scams, many exchange platforms that facilitate token offerings can perform many checks before beginning a sale. Aside from having to analyze the white paper, an IEO platform has to examine a lot of other factors.
This means analyzing the team behind the business and analyzing the technology in an in-depth way. This means that they will have to uncover the unique selling points, assess the Tokenomics, and decide if there is any demand for it within the world of crypto.
When the exchange platform decides to pick up the IEO and proceed, the investors will need to go through KYC and AML measures which are known as Know Your Customer and Anti-Money Laundering checks.
As such, the contributors will also be given a full level of transparency about exactly how the token issuers are progressing in getting their target audience to stay interested.
Pros and Cons of Initial Exchange Offerings (IEO)
Investors are a lot more convinced to invest when they see a digital token on sale on a trusted crypto exchange, and as such, the project itself has a higher level of legitimacy associated with it.
IEO projects will also run a lot more smoothly due to oversight from the exchange, IEO platforms can also offer marketing and development support alongside this. Initial exchange offering investors are also greeted through a much better experience due to the fact that it is easier for them to invest.
On the flip side, crypto projects have to pay listing fees, which can be in the form of a percentage of the tokens or through a commission, and some cryptocurrency exchanges tend to cut corners.
This is why you always need to do your research before you decide that you want to invest in an IEO.