What is Initial Exchange Offering (IEO) and how does it differ from ICO?

At the beginning of 2017, there was an ICO boom in which a lot of people were deceived. Now, the ICO has been replaced by IEO, which should reduce the number of scam projects. Earlier, I wrote about IEO from Huobi, I advise you to look.

What is IEO?

The initial exchange offer, as its name implies, is conducted on the exchange platform. Unlike Initial Coin Offerings (ICO) , IEO is managed by the exchange on behalf of a startup that is trying to raise funds with its recently issued tokens.

Since tokens are sold on the exchange platform, tokens issuers must pay a listing fee along with the percentage of tokens sold during IEO. In turn, crypto start-up tokens are sold on exchange platforms, and their coins are listed after the end of IEO.
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IEO members do not send money to a smart contract, such as the ICO manages. Instead, they must create an account on the exchange platform where IEO is held. Participants then deposit funds into their exchange wallets using coins, and use these funds to buy tokens of the fundraising company.

IEO on stock exchanges

More and more exchanges began to create IEO. One of the first in the lineup was Binance, which released its IEO Binance Launchpad platform. In January, BitTorrent, bought by TRON, initiated the sale of tokens on the Binance Launchpad and collected $ 7.2 million in less than 15 minutes. The next IEO on the platform broke this record and closed in just 22 seconds.

Watching the success of Binance Launchpad, other well-known exchanges announced the launch of their own IEO platforms. IEO platforms include Bitmax Launchpad, Bittrex IEO, OK Jumpstart (OKEx), KuCoin Spotlight and Huobi Prime.

IEO vs. ICO - what are the differences?

We created a spreadsheet to show you the main differences between IEO and ICO. Here is:

The advantages and disadvantages of IEO.
The trust

One of the main benefits of IEO is trust. Since crowdsale is conducted on the exchange platform, the counterparty views each project that wants to launch IEO on its website. Exchanges do this to maintain a good reputation by carefully checking tokens issuers.

Thus, IEO can eliminate fraudulent and doubtful projects due to fundraising through exchange platforms.

IEO RAID is a great example. Bittrex recently announced that it canceled IEO for a RAID project several hours before the start of a crowdsale. The reason for the cancellation was a discontinued partnership between RAID and OP.GG.

According to Bittrex, the partnership between the two companies was a vital part of the project, and when the cryptocurrency exchange became aware of this event, she decided to cancel the sale of the token, because she believed that it was not in the interests of Bittrex customers.

Security

Token issuers do not have to worry about the crowdsale security, as the exchange manages the smart contract IEO. The KYC / AML process is also handled by the exchange, as most service providers do KYC / AML for their customers after creating their accounts.

Easier for projects

Start-ups producing tokens benefit from a more flawless process of launching IEO on exchange platforms - compared to launching their ICOs. While fundraising organizations have to pay listing fees and a percentage of their tokens. Thus, startups launching their IEO require a lower marketing budget than if they decided to go with ICO. In addition, issuers of tokens can take advantage of a stable client base of the exchange, to obtain a greater contribution to their projects.

Listing

Since the listing of tokens is also “included in the transaction”, this is a natural process when the exchange, in which IEO is held, leaves the startup token after the end of the crowdsale.

Although IEO seems to be a safer and more effective alternative to ICO, the costs associated with selling tokens can be high for startups. The listing fee can go up to 20 BTC, while the exchanges can even get a 10% discount from fund-raising tokens.

How to participate in IEO?

Since IEO is now relatively rare in the crypto community, it’s not so difficult to find what you like. After you have found your IEO, you need to find out which crowdsale is placed on which exchanges.

The next step is to register your account on the cryptocurrency exchange and complete the process of checking KYC and AML.

After you are done with this, check the cryptocurrencies that you can use to participate in IEO, and boil them. The final step is to wait until IEO begins.

Will IEO create the next fundraising boom?

ICO created a fundraising boom in 2017 and 2018. However, a significant percentage of cryptographic projects were fraudsters. Because of this, and also because of ICO bans, we can say that this is not an effective fundraising model for cryptocurrency startups.

On the other hand, IEO provides an increased level of confidence in cryptocurrency projects, because the crowdsale exchanges on which are actively involved in the fundraising process, which increases the efficiency of the crowdsale. Consequently, IEO can become a standard model for raising funds in the crypto space, and maybe even create the next fundraising boom.

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