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Access to capital is one of the hardest challenges for business growth, so when the ICO (initial coin offering) market started to slow down in 2018, the hope for quick capital rapidly vanished. But while ICOs were having a hard time raising capital, Binance unveiled a new fundraising mechanism called the IEO (initial exchange offering) through their Launchpad.
So, what is an IEO? What is the difference between an IEO and an ICO? The crypto market has some weird ways to camouflage the same methodology and terminology of raising funds. The tactics changed, adapted and were effectively rebranded.
An initial exchange offering follows a very similar pattern to the ICO. The main difference is that both the contributor and the developer have their transactions facilitated by a third party.
In the case of an IEO, that third party is an exchange. In this way, you can think of an IEO as a 2.0 version of an ICO.
Benefits of an IEO, you may ask?
- An IEO gives confidence to participants, because the exchange has done the due diligence, and by accepting the project on their platform, they are signaling a green light.
- Exchanges are a “secure” way of avoiding phishing sites, scams, and fraud attempts (assuming the credibility of the exchange). Also you are protected from potential bridges and flaws on the smart contract.
- Contributor protection – in the sense that most ICOs in the bear market, as soon as they get to the market, usually experience a 20% or higher dump, effecting the price of issuance. By raising capital through an exchange, projects will avoid this fate in the majority of cases.
- All the projects that make an IEO are benefiting from the marketing tools used by the exchange. It’s a big help, and fewer costs are required for the project to raise awareness.
- Liquidity is something that lacks in a bear market. For less-hyped projects, getting liquidity is a challenge. With an IEO, that’s a totally different scenario.
The next 3 IEOs to keep an eye on
- Matic Network is a layer-2 scaling solution for Ethereum, using a modified version of plasma with sidechains based on Proof-of-Stake, that wants to help scale decentralized applications. The IEO will be conducted on the Binance Launchpad on April 24th at 8:00 AM UTC.
- Ampleforth is a digital-asset-protocol for smart commodity-money. To address the deflationary shortcomings of commodity-monies like gold and silver, the project’s founders designed a synthetic commodity-money that propagates price-information into supply, much like how thermal expansion propagates nearby kinetic energy into a material’s volume in the natural world. This IEO is still unclear on where it will be launched.
- Oasis Labs is yet to release the full details on their IEO. There is a chance that they choose an alternative funding mechanism, but they are worth keeping an eye on. Oasis Labs is based in San Francisco and has an ambitious goal: a privacy-focused form of cloud computing powered by blockchain technology. They use zero-knowledge proofs to ensure privacy.
These projects may find great success going the IEO route. Recent projects to make an IEO include BitTorrent, Fetch.AI and MultiVac. BitTorrent raised $7.2 million in about 18 minutes and Fetch.Ai raised $6 million in 22 seconds. These are incredibly fast raises, but MultiVac, an IEO on Kucoin raised $3.44 million in 7 seconds with 1,661 participants.
Since the first wave of IEOs on Binance, many more exchanges started launching their own platforms. Exchanges like Kucoin, Huobi, Bittrex, FatBtc, Hotbit and many more have been releasing the same infrastructure.
The crypto market is evolving, and with the evolution in fundraising shifting towards IEOs, there is the potential for a new wave of money to enter the market. IEOs are a new phenomenon that is gaining a lot of traction.
Thomas used to trade on Wall Street before he became interested in cryptocurrencies. He now trades cryptocurrency and provides high-level analysis for several crypto publications. Thomas has contributed to the development of multiple white papers and is excited about the future of blockchain.