In this article, we shall study the topic “what is Initial Exchange Offering?”. Also, we shall see how it relates to limitations of the Initial offering, benefits of IEO, cryptocurrency, blockchain, etc.
Initial Exchange Offering is a cryptocurrency crowdfunding scheme, where business beginners generate capital by being on exchanges.
The Meaning Of Initial Exchange Offering (IEO)
These are undoubtedly fundraising schemes, that support cryptocurrency projects through a trading scheme. This is in disparity with an initial coin offering. Here, the business itself will attempt to generate returns in its project on its own website.
Consequently, ICOs got a prohibition by China at the end of 2017. Thereby leaving the cryptocurrency world scrambling to find other soluble ways to fund new businesses.
The company launching new tokens. IEOs take place on a crypto exchange on its behalf.
In order to fundraise on the exchange. Start-ups are charged a fee, as well as a certain proportion of tokens sold.
Therefore helping to raise the company’s profile in the eyes of investors, the tokens are then listed on the exchange upon completion of the IEO.
Participants send contributions through the platform that hosts the IEO. Unlike ICOs, where contributions are sent to smart contractors.
IEO’s Rise To Popularity
IEOs have risen in popularity among key cryptocurrency exchanges.
One of the first few IEO platforms to be launched in the industry is Binance Launchpad which has many rival exchanges quickly following suit.
IEOs are one of the biggest advantages of increased transparency and trust.
cryptocurrency exchange conducted by regulated token sale, the chances of fraudulent activity and scams are less likely than through ICOs — with reputable platforms to users. performing their own due diligence into a project before offering it.
An investor can also enjoy/benefit from the exchange’s extensive client base to solicit greater interest. Token issuers are not tasked with managing the crowd sale security under an IEO.
Know Your Customer and Anti Money Laundering, token issuer processes are also conducted by the exchange — while marketing their businesses, they’ll often get assistance.
IEOs can involve high costs for start-ups in return for increased safety and visibility. Despite the fact that deemed more credible than ICOs.
Benefits Of An IEO
An IEO for a user is easy to participate considering they don’t need to manage on-chain transactions with different wallets on different blockchains. Rather, a user only needs an account to participate completely in the exchange and some funds in their account and through the trusted website’s interface. Furthermore, the exchange is offering a higher degree of trust behind staking its reputation on its platform, and project.
IEO offers the promise of a prompt user base that can see their product, also considering the size of the exchange’s audience, could possibly lower their outstanding market funnels for fundraising, thereby focusing on their development product.
Outstanding Attributes Of IEO Platforms
This raises a fundamental question – which IEO platforms are the best? In our what is an IEO Guide; we have counted more than 32 IEO platforms. There are all different, and some of them are better than others. We must note that most exchanges have a monetary incentive to launch as many IEOs as possible as they make good capital by doing so.
These are IEO platforms to pay mindful attention to the key factors:
When choosing an IEO platform; credibility and reputation of exchange are the most crucial factors to look out for. Hence exchanges evaluate all IEO projects, you need to trust them completely. Whereas IEO provides lucrative opportunities for the exchanges, and all IEO profits come from eager investors like you. Always do your own research (DYOR). Therefore, you have to look for exchanges that are genuinely focused on the quality of the projects rather than useless token sales.
Unlike ICOs, IEOs are mediated by the exchanges, although participation in an IEO should be as frictionless as possible, so it is their responsibility to make it accessible even for novice investors.
Always remember that an IEO token is listed on its exchange almost immediately after the IEO, so you should be assured that you have no issues when selling later. A solid IEO platform should have an abundance of investors willing to trade the token.
Stability And Security
No user wants to risk losing their funds to an inexpert exchange, IEOs attract many investors from various backgrounds, which are prone to all sorts of cyberattacks, technical glitches, or bad performance. so the IEO platform must be robust and secure.
However, most investors donate one or two coins, so having multiple options definitely helps. when investing, IEO is an increasingly popular way for exchanges to increase the value of their native token.
Six Notable IEO Platforms
Below are six IEO platforms that are worthy of your attention. Based on these criteria, we’ve selected the top.
1. Binance Launchpad
The average ROI for Binance IEO investors is nearly 580%. Nevertheless, Binance Launchpad is the pioneering IEO platform that launched in 2017 just to become mainstream in 2019. It had many successful IEOs, including Matic Network (MATIC), BitTorrent (BTT), Celer Network (CELR), Fetch AI (FET), Bread (BRD), and others. At pixel time.
The launchpad is powered by leading technology (capable of processing over 1,400,00 orders per second) and high-level partnerships, which bring an abundance of investors to every token sale. Binance Launchpad is arguably the best token launch platform on the market. It is literally backed by one of the top exchanges in the world and is led by a class act Chengpeng Zhao. Hence, liquidity is rarely a problem with Binance.
For a fact, Binance Launchpad has captivated so many investors, Besides, the platform supports all sorts of languages and devices. It had to introduce a lottery method to give everyone equal opportunity to invest. In most cases, investors must purchase BNB (Binance native token) to participate., making it easier to invest in IEOs regardless of where you are.
In summary, although it requires luck and BNB tokens to enter a sale, its solid relationships with industry leaders, high-profile investors, and industry-leading advisors make it a high-quality platform, Binance Launchpad is both a pioneer and a leading IEO platform in the market. which is why it tops our list.
2. Gate.io Startup
Initial exchange offering platform that also offers an opportunity to purchase blockchain assets at a discount. Gate.io Startup, As a result, has its offerings come with three distinct labels:
- Crypto and blockchain are launching and crowdfunding new projects into existence. Initial exchange offering (red label).
- Blockchain and cryptocurrency were crowdfunded by noninitial exchange offerings (blue label). Existing projects that would like to exchange some of their coins for extra funding.
- Gate.io startup also offers you an opportunity to purchase major crypto-assets like Bitcoin (BTC), Ethereum (ETH), XRP Discount deals (orange label), and others with 20% or so.
As of 2020, the launchpad has officially launched over 40 offerings, whereas all the projects seem to raise substantial amounts of either Gate.io’s native Gatechain (GT) or USDT tokens. In other words, the raised capital is its most successful offering which is the initial sale of Crypto Neo-value Neutral System’s tokens (CNNS). The offering got 112,484,289 USDT in total thereby raising 3124% of its goal and – a considerable sum for a new crypto project.
Gate.io’s IEOs still have net positive average profitability in April 2020, thus making IEO investors view the platform as a great option.
3. OK Jumpstart
It offers a high-quality liquid market, top-notch disclosure, and token listing opportunity in one of the most popular exchanges in the world. OK, Jumpstart by OKEx is an excellent platform for quality blockchain projects.
OKB is the only accepted token on the OK Jumpstart IEO platform. OKEx has introduced a contribution plus allotment approach to avoid oversubscription. More so, there’s a brief 30-minute subscription window before an IEO, which closes if the max limit is reached. The allotment amount is based on your OKB holdings. The more OKB user has, the more significant the allotment amount one gets. Then, the allotment part follows: an investor must hold a minimum of 500 OKB (OKEx exchange token) for seven days or at least, that way, 3,500 OKB at the snapshot time before the token sale.
As of April 2020, the platform has approx. -20% as the average ROI on OK Jumpstart, subsequently most of the negative price action due to the recent market crash. The average all-time high ROI on OKE’s IEOs is more than 570%.
However, the platform checks all the required marks to be one of the top IEO platforms – a reputable, easy-to-use high liquidity exchange, powered by top technology and a credible team.
4. Bittrex IEO
First and foremost Bittrex has no unique name for its IEO platform, but it is undoubtedly that they need one. Because cryptocurrency exchanges with sturdy security measures, infrastructure, and liquid markets. Has long been established and popular
IEO for the RAID project, Bittrex IEO has made headlines with VeriBlock token sale which lasted 10 seconds. Although the exchange had some troubles before launching.
Bittrex token sales raise funds with Bitcoin (BTC), due to the fact it doesn’t have an exchange token. That makes its IEOs more accessible to everyone. However, it hasn’t introduced any fair dispersal procedure either, which means you have to be extra fast to make your IEO purchase count.
Recently, Despite Bittrex remaining a competitive IEO platform with many hot projects on it. The Bittrex IEO platform is negative in terms of profitability.
5. Huobi Prime
In March 2019 Huobi Prime by Houbi Global launched an ambitious crypto project to provide them with funding. It’s as powerful as a platform built on top of one of the exchanges with leading trading volume.
Huobi Prime boasts of its innovative Direct Premium Offering (DPO) feature. It stands out due to the following advantages:
- Premium projects ensure it makes the cut, rigorous project screening process.
- Houbi Global for Houbi Token (HT) allows trade on all purchased coins which are immediately deposited into a user’s account.
- below-market prices require early access to coins.
- Where individual purchases cannot exceed $1,000 worth of HT. They had equal opportunities for both big and small players.
- when the market opens. There are periods of tiered price limits that mitigate extreme volatility
As such, Houbi Prime has proven to be a robust and reliable IEO platform with a decent incentive structure.
6. KuCoin Spotlight
Trying to regain its significance to a former top 10 exchange. Its native IEO platform, after upgrading the exchange to a new 2.0 version. It literally still remains one of the best and most recognized exchanges in the market.
The IEOs are powered by its native KuCoin Shares (KCS) token, and the token sales follow the first-come, first-served policy, so you have to be right on time. Secure and easy to use is the platform itself.
In sum, KuCoin Spotlight ranks among the best IEO platforms out there. Although there have been some complaints from the investors who didn’t manage to make their purchases on time, it has been an issue with most IEOs.
The cryptocurrency exchange platform is buying utility tokens that confer preferred status with its company through which capital is raised to start-up companies to an initial exchange offering (IEO). In fact, crypto exchanges help to oversee the token sale by making sure the project vetting process is scrutinized. The IEO originated in January 2019 when Binance Launchpad launched the BitTorrent Token (BTT). The initial offering sold out within 15 minutes of release, raising funds of more than $7.1 million.
Thus the IEO is a win-win for both users and developers. The IEO has gained popularity mainly because it’s easy to participate in. Instead of processing on-chain transactions across multiple blockchains and wallets, the IEO offers a solution for users to assess the reliability of a project and to participate in funds exchange all under one roof. At the same time, project developers get immediate exposure to the crypto exchange’s user base without needing to fork out millions of dollars to formulate and execute their marketing strategies.
Working Principle Of Initial Exchange Offering
An IEO is used by start-up companies to obtain crowdfunding for their enterprises. These companies raise funds by working directly with a cryptocurrency trading platform to commence a token sale to interested investors. The key highlight of IEO is the exchange platforms will carry out their due diligence to perform a profusion of assessments before the sales.
The IEO process of assessing these blockchain projects works like this:
White Paper Drafting
The start-up company drafts a white paper that explains precisely how the tokens will be funded, along with the backing sources and the payment platform that will be available for transfers and transactions using this new cryptocurrency. This white paper outlines exactly how the funding that supports the cryptocurrency will be obtained and the expected value of the cryptocurrency upon its release.
The company or project registers with the platform chosen for their IEO to signal their interest in selling tokens through that platform.
The crypto exchange platform then performs due diligence to confirm that the project and the token issuer are creditworthy. That includes assessing the project’s unique selling points, tokenomics assessment, team background check, and the projected trajectory. That is to determine if any loopholes, threats, or other issues exist within the project offers. They accomplish this by examining the company’s white paper, financial records, and other information available through public sources.
Contract agreement: If the cryptocurrency exchange platform approves the IEO, they will require the project to pay a certain proportion of their utility tokens. Also, pay a listing fee to the platform before the tokens are brought to the market for sale. This will result in the IEO being listed on the exchange within a few days after its approval.
Security and legality
Because IEOs do not offer an investment interest in the company, the U.S. Securities and Exchange Commission (SEC) does not generally regulate IEO investments.
This can simplify the process of sales and issuance of IEO tokens for companies looking for start-up funds for their new cryptocurrencies. However, the regulations are can differ from one country and region to another.
- Once they complete all investigations and the IEO project passes muster, the platform creates awareness for token sales. This allows investors to purchase these utility tokens. The company issuing the IEO will typically also list the tokens on their own site to publicize their availability.
- Investors who have an interest in the project need to go through the IEO platform’s “Know Your Customer (KYC) ” and “Anti-Money Laundering (AML)” before gaining full access to the project development.
For companies with an interest in raising funds, IEOs come before ICOs. Understanding why can help you to make the best choice for your investment activities.
What Validates a Good White Paper?
A reliable white paper should possess a few criteria, but generally, is to educate the potential investors with regard to the project prospects. At the bare minimum, a good white paper should disclose detailed information about the project architecture, the team behind the project, a project roadmap, the facts, and technical explanations with credible diagrams and statistics that appeal to technically-focused individuals or interested buyers.
Overall, the white paper should clearly inform the potential investors of the project’s vision, mission, overall growth, and how the token translates its value to the holder. For example, BitDAO white paper provides full transparency of the project.
IEO vs. ICO: Which Is Better?
ICOs were the pioneer fundraising scheme that was useful to cryptocurrency companies. According to Forbes, the launch of the very first ICO was by a company, “Mastercoin” in 2013. Ethereum followed suit in 2014, raising about $18.3 million. The charitable foundation model is the base of its blockchain project. Also, investors make donations to back the project.
IEOs offer some important advantages over ICOs, as described below.
They comprehensively vet IEOs for compliance with legal regulations and safety by the cryptocurrency platforms on which they sell them. These platforms evaluate the IEOs for viability and to eliminate any possibility of fraudulent activity and market manipulation. This process can significantly improve investors’ confidence in the security of their financial outlays. ICOs, by contrast, don’t undergo the same degree of scrutiny. They consider it to be a riskier investment than most financial authorities.
Public Offering Approach
ICOs allow anyone to purchase tokens. IEOs, however, require that investors be part of the platform that offers the IEO in order to make these financial investments. This reduces the probability that unverified individuals will purchase tokens. ICOs, by contrast, require investors to “go it alone,” purchasing directly from the company issuing these tokens. This not only reduces visibility for the issuer but can result in fewer protections for the investor.
Cost For Token Sales
In return for the added security offered by IEOs, investors will typically pay somewhat more for IEO tokens than for ICO tokens of the same apparent value. Additionally, IEOs generally list tokens on the exchange nearly immediately. ICOs can take months to list these sales. Companies that issue IEOs usually pay a higher price for this privilege than those which issue ICOs.
For investors, ICOs typically hold much higher financial risks than IEOs. For both types of initial offerings, however, the possibility exists that these investment opportunities may be in violation of certain regulations or legal requirements. Some of the most common legal risks of ICOs and IEOs include the following:
The Legality Of The Smart Contracts Made For Cryptocurrency
- ICOs and IEOs aren’t under the governance of a comprehensive and nationwide legal standard. The sole federal regulation which covers these types of transactions is the Electronic Signatures in Global and National Commerce Act of 2000, which requires specific timings for electronic disclosures and forms. This lack of regulation can sometimes lead to legal issues if the provisions of the smart contract aren’t in alignment with local or state contract law. Jurisdictional issues are one of the primary legal problems facing cryptocurrency issuers and investors.
Financial fraud and unauthorized access to confidential data
- They are also significant legal issues that can affect ICOs and IEOs. Bloomberg published information on a security flaw that affected Ethereum accounts that could have put $250 million at risk. In a similar vein, CoinDesk reported in September 2021 that Ledger was the victim of a data breach that put about one million email addresses at risk and revealed the personal information of more than 9,000 customers.
- Sometimes, they can accomplish money laundering more efficiently through the use of cryptocurrency. The MIT Technology Review published a report in January 2021 indicating that about $2.8 billion in Bitcoin transactions by criminal organizations took place in 2019. The completion of most of these transactions as possible through over-the-counter brokers. This points to the limited ability of cryptocurrency exchanges to prevent these illegal activities.
Failing To Report Cryptocurrency Transactions Can Lead To Problems With Tax Authorities In Various Countries.
- The U.S. Internal Revenue Service doesn’t allow federal agencies to use cryptocurrency for payments. Also, they require U.S. taxpayers to provide accurate information on their transactions when they file their tax returns.
Determining the legal implications of ICO and IEO investments can help you to avoid issues that could cut into your profits and lead to unwanted legal entanglements associated with your cryptocurrency investment activities.
Why Do People Prefer IEO Blockchain Projects?
Initial exchange offerings are typically far more beneficial than ICOs for all parties involved:
- Project initiators can benefit from the marketing expertise and vetting provided by the cryptocurrency exchange for an IEO. This can help them to reach potential investors much more easily. Also, boost the chances for legitimate projects to obtain the necessary funding.
- Most investors prefer to purchase IEO tokens over ICO tokens. Thanks to the significant amount of investigation and examination these offerings receive before publication. This reduces undue risk and makes IEO investments more attractive for investors.
- Cryptocurrency exchanges that offer IEOs can often attract new traders and increase buzz for their platforms. This can add up to increased profitability and traffic for their companies.
Limitations Of Initial Exchange Offerings (IEOs)
While most cryptocurrency exchanges work diligently to ensure that they examine IEOs, some platforms may cut corners. This is to ensure a wider range of products for their potential investors. As mentioned, IEOs aren’t subject to the regulators’ oversight. This means that without adequate investigation on the part of the issuing platform, the IEO tokens can be of less value.
Additionally, crypto projects often pay listing fees to the crypto trading platforms. Hence, exchanges may charge a higher rate for tokens both to the issuing company and to investors. By contrast, ICOs can set their own rates. This allows investors to snag bargains during this phase of cryptocurrency issuance. Any token they purchase for IEOs is usually at a cap of $20,000. It is also in contrast to the lack of limits enforced by ICOs.
Perhaps you’re an investor looking to lower your risk when purchasing cryptocurrency, IEOs can do that. It can mitigate some of the most important drawbacks of ICOs while helping you to pursue your investment goals. Reuters notes that SEC crackdowns have limited the ability of many ICOs to offer tokens to private investors. , However, the Journal of Alternative Investments consistently touts IEOs as the next evolution in cryptocurrencies. Also, they are likely to remain at the forefront of cryptocurrency investment for many years to come.
See the List of things to learn.
- Blockchain Technology
- Web 3.0
- Altcoin Tokenomics
- Smart Contracts