During the 2017 crypto boom, ICOs became a very popular fundraising method. However, according to researchers, 80% of these projects are just scams, as virtually anyone can launch its own ICO, which is not going to be controlled by any third party. Initial Exchange Offering (IEO) seems to solve this problem. What is it and is it old wine in a new bottle, or rather a revolutionary solution? Let’s take a look:
What is IEO (Initial Exchange Offering)?
Simply put, unlike ICO, IEO is not open to the public. As its name indicates, IEO is a token sale backed by a cryptocurrency exchange platform. Tokens are available on sale only for registered and verified users. Like in ICO, an amount of tokens is intended for sale at a fixed price, but IEO guarantees users more safety due to the control of a third party (cryptocurrency exchange). Exchanges risk their reputation hosting an IEO if the starting crypto project turns out to be a scam, their level of trust provided to members would become significantly lower. While tokens sold via IEO are more likely to be part of a legitimate project, you should always be careful and do your best to make sure that the project you would like to invest in is a trustworthy one.
On the other hand, there are many advantages to the IEO model for token issuers. First, they gain access to an existing user base and more marketing opportunities. Secondly, the exchange supports the necessary KYC / AML processes. What’s more, the token sold through IEO is usually listed on the stock exchange shortly after the token sale is completed, ensuring smoothness and easy access.
Not really old wine?
IEOs have a chance to become more and more appreciated in the cryptocurrency environment; however, they are not likely to take ICO’s pole position. Even with its disadvantages – including many fake projects – it is still the easiest way to crowdfund a new project. However, we’ll see what direction in the future the crypto world will go, seeing how it aims to be as transparent and secure as possible.