Last year saw the emergence of a promising alternative to ICOs called IEOs, which many investors follow closely. Let’s understand the difference between these concepts behind such nice-sounding acronyms.
ICO (Initial Coin Offering) – is the issue by a start-up of its cryptocurrency units (tokens) to attract investors to its development.
IEO (Initial Exchange Offerings) – is a promising method of raising funds for startups, which are selected by the cryptocurrency exchange. It is the exchange that mediates between the new project and investors, organizes the token sale, and sells tokens.
You can say that IEO is an improved ICO, where the leading partner of the startup is the exchange, and the listing takes place a couple of days after the end of the token sale, instead of six months, as it often happens in the case of ICOs.
How to participate in IEO?
To become a full-fledged IEO participant, you need to register and verify (KYC check) with the cryptocurrency exchange. Then, you need to pay 20 BTC to start the tokenseal. In addition, it is necessary to conclude a contractual agreement, where the following transaction parameters should be spelled out: the value of one token, the volume of issue, soft cap, hard cap, exchange commission, etc.
Disadvantages of ICOs:
- There are no mechanisms to protect investors’ rights.
- There are no security guarantees. The placement of virtual coins is carried out through smart contracts on the platform of the project creators, and at any moment, unscrupulous organizers, having collected a large sum of money, can simply disappear.
- Many investors are unhappy with the fact that most of the projects reach a major exchange after a long time. This reinforces their distrust of ICOs.
- Some teams promoting their projects do not have enough experience to competently dispose of the received investments.
- And not all investors can understand which projects are worth investing in.
Advantages of IEO:
- Investors trust IEOs more than ICOs. This is because it is the exchange that evaluates projects, examining the commercial risks, reputation, and professionalism of the team, investment attractiveness, their competitors, etc. Thus, the cryptocurrency exchange assumes part of the reputational risks, which undoubtedly leads to increased confidence on the part of investors.
- Startup teams will be able to save significant money on advertising, as the exchange itself will attract investors.
- The listing is guaranteed.
- Greater likelihood of making a profit. Exchanges carefully select startups and conduct IEOs only when they are promising.
- It is possible to invest with fiat money. If before the investment in ICO was made by transferring money in certain cryptocurrencies, now in IEO there is an opportunity to use any currency that is supported by the cryptocurrency exchange (unfortunately, so far this practice is not applied on all exchanges).
ICO video information:
IEO video information: