Cryptocurrencies and ICO took the fundraising to a new level and gave new projects the opportunity to start the journey without having to go through a search for venture capital investors. Recently, ICO has an improved version with optimized token listing — IEO, where cryptocurrency exchanges play a decisive role.
An Initial Exchange Offering allows crypto projects to directly raise funds on digital exchanges, so there has been a lot of talks around it lately. Let’s find out what IEO is, is it just a short-lived hobby, or is it a crypto-tendency that will not just remain but become even more popular?
Pros and cons of IEO
The pluses of IEO projects are the following:
- Trust. It is the major advantage of IEO projects. Main platforms do not tolerate scams.
- High gains. Exchanges are very thoroughly selecting projects and initiate IEO only in case if the project looks to be highly profitable.
- Lower competition. In ICO projects the costs were often overvalued by the investors to leave behind the buyer queue and have extra time to purchase a token. Consequently, the costs were higher for everyone. This issue disappeared in IEO.
- Fiat money investing. It was possible to take part in ICO projects by exchanging fiat money in various kinds of crypto coins. The IEO offers will involve any money accepted by the trading platform. Not every exchange initiating IEO provides this option, but it is obvious that this approach will be widely spread feature in the near future.
- Minimum efforts. The customer can take part in a few projects, being a client of one exchange. It is very convenient as no need to sign up on various sites and study the terms investment for every single project.
- Advertisement. Large platforms have a numerous audience, many clients could invest in a particular token, but they do not follow ICO. The IEO appearance attracts an additional amount of future customers, it reinforces investment flows and the spread of the token.
But there are also a few drawbacks:
- IEO projects go through a complex verification process. For this trading platform needs to keep experts and analysts, which is associated with high costs.
- The service will definitely ask to pass the KYC (“Know Your Customer”) procedure, according to the rules of which the exchanges request documentary identification.
What are the major differences between ICO and IEO?
Both types of projects look very similar and differences may seem very minor at first. The customers are already familiar with something similar – ICO: projects generate a digital token and raise capital by selling them. What is different if tokens are sold by the exchange?
ICO was once a real breakthrough in the collection of investments and was rapidly gaining popularity. Now, this method has gradually become obsolete. Basically, due to the fact that the market is overflowed with empty projects that run exclusively to raise funds from unsuspecting investors. ICO has no investor protection mechanism at all.
Although IEO acts as a middleman for the decentralized fund generating model, it provides investors with a strong sense of security with participation. It is already a well-known fact that many ICOs appeared to be a scam, investors do not have any more trust. Meanwhile, cooperation with trustworthy exchanges and reliable projects will attract the desired authority.
One more discrepancy is that ICOs normally create their tokens after completion of the funding. IEO works in a different way. IEO has a more optimized process for running coins into a listing. The asset immediately receives relative liquidity, since it is placed on sale on a large trading platform.
How to take part in IEO?
To invest in new projects offered in IEO, you just need to have an account on one of the exchanges that provide this opportunity. Trading platforms may impose additional requirements on participants, such as mandatory verification.
First of all, investors, as a rule, need to purchase internal tokens of the exchange, for which the new project coins will be sold. The next step is to select one from the projects offered by the exchange’s administration, where you can see the perspective of earnings and make an exchange in the direction of “exchange tokens – tokens of a new project” if you can see in it prospects for earnings.
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