Until 2019, the main source of fundraising for blockchain projects has been the Initial Coin Offering (ICO). The first ever ICO was launched by Mastercoin (now called Omni) in 2013 and since then ICOs have raised billions of dollars every year. Just to give you a hint, alone in 2018, 1247 ICOs raised around $7,541,925,063 which these projects could never have raised through IPO. The basic idea behind an ICO is simple:
- Crypto enthusiasts buy crypto tokens/coins of a company in an exchange with Bitcoin or Ethereum
- The startup uses that raised money to develop its business model
- Investors get their tokens with an expectation of its price to grow in future
But participating in an ICO can be dangerous if you are not good at evaluating the project, forecast its future growth or unable to spot the scams. According to a report by a NewYork based ICO advisory company, “80% of ICOs are scams and only around 8% of the floated ICOs manage to reach the trading stage on the various cryptocurrency exchanges” — Jess Lu.
These stats are quite alarming and one has to be careful before investing his/her crypto assets in an ICO. But if you are one of those restless investors and always looking for good opportunities, there is a thousand times better alternative to an ICO — its called Initial Exchange Offering (IEO).
What is Initial Exchange Offering (IEO)?
An Initial Exchange Offering (IEO) is a process in which a startup sells its crypto coins/tokens with the help of a crypto-exchange with the same purpose of ICO i.e financing the project.
During an ICO, the developers sell their tokens directly to the investors but in an IEO, developers have to rely on a 3rd party exchange to complete their crowdfunding campaign. Since most of the startups have a fantastic development team behind it, but they are not expert at ICO and fundraising. That’s where the exchanges came to the rescue. Exchanges not only help to attract investors to buy the tokens but also help in the marketing of the project.
Above all, investors don’t have to send ETH/BTC to the smart contract governing the ICO, rather they can create an account with the exchange, and send ETH/BTC to this account. This ETH/BTC can be used to buy any other tokens listed on that exchange too.
5 Reasons why IEO is better than ICO:
Although there are hundreds of ICOs active right now, due to higher chances of getting stuck in a scam, people are shifting their priorities towards IEOs. Here are 5 reasons why startups should do an IEO over ICO.
i) Exchanges offer existing user-base and blockchain projects can take benefit of it and save huge marketing costs.
ii) Investors don’t need to pay for Gas when buying IEO tokens on an exchange.
iii) From the investors’ point of view, participating in an IEO is less time consuming as they have to do KYC only once at the time of registering with the exchange. Later on, buying the tokens of all the IEOs will be hassle-free.
iv) IEO adds the vote of “Credibility” to any blockchain project as exchanges will have to conduct due diligence on the projects before listing.
v) Once an IEO is over, startups can list their tokens on the exchange where IEO had been carried out.
There are a few projects that go with both ICO (private ICO) and later on instead of crowdsale T.G.E, they prefer to conduct IEO. Such projects are no doubt have already raised money from potential VCs and have gained enough trust to prove themselves very feasible. Investors should definitely focus on such projects and it would be worth buying their tokens when the projects get listed on the exchange.
Futurepia (blockchain for high traffic dapps) is one of those projects to look up for. Keep checking their Telegram channel and other social media accounts to know about their upcoming schedules and mainnet release updates.