IEO

IEO (Initial Exchange Offering): The New Type of ICO?

Traditionally, there are multiple ways for a company to raise funds to further develop and expand their businesses. They can choose to wait for a long time for the profits to build up or look for a third-party investor to provide an influx of financial support.

For companies that deal with blockchain technology, one of the most effective ways to raise funds for new projects is called Initial Coin Offering (ICO). It is similar to a traditional public offering, which allows companies to exchange fresh and unique tokens that have preexisting digital cryptocurrency with interested investors.

However, there are high reports of unvetted ICO projects that lead to fraud, so developers and investors are slowly steering away from ICO to its much safer form, the Initial Exchange Offering (IEO).

Initial Exchange Offering (IEO): Just another ICO?

For those whose interest in ICO has ebbed, IEO is a better option to consider. IEO is a form of ICO that is best for project developers who are seeking funds for freshly issued cryptocurrency tokens.

However, it is different from ICO in many ways.

To begin with, IEO offers tokens via partnering exchange rather than to individual investors. Having an exchange venue gives developers access to a wider scope of funding sources.

Another distinction between the two is in terms of project participation. ICO allows everyone to participate, but with IEO, only members of that specific exchange can buy the tokens. Luckily, it is easy to join an exchange.

Finally, the token issuer in IEO pays the exchange platform, which compels the platform to sell the new tokens and to list the token on the exchange immediately after the crowdsourcing fund event concludes. In an  ICO, some of the supposed coins are never listed on exchanges.

With these differences, it is clear that IEO addresses some of the concerns that come with the ICO.

Advantages of Participating in an IEO

There are many reasons that developers and investors prefer to participate in an IEO. To start, it is less stressful and more user-friendly than an ICO because its processes of buying and storing tokens are more standardized. In contrast, an ICO requires many specific steps to be followed.

Furthermore, IEO transactions are a bit safer, since they allow freshly minted coins to be available in the exchange in the future. This shows that the tokens offered in the IEO are more legitimate compared to those found in ICO platforms.

In addition, exchangers are likelier to conduct a Know-Your-Customer (KYC) and Anti-Money Laundering (AML) analysis, which add more protection and deters illegal investors from acquiring exchange partnering membership.

Conducting analyses gives all involved parties–from developers to crypto-traders–the confidence to participate in exchanges without worrying about possible frauds and scams.

In addition to providing protection from suspicious potential investors, an IEO can also help participants maximize the power of the existing user base platform, since the exchange makes it easier for members to participate and invest in the projects.

An IEO can also compel the stock market to actively participate in the crowdfunding process, which in turn attracts more potential investors. Therefore, startup developers do not need to have a sizeable marketing budget to promote their new token, which can entice investors.

Lastly, because the IEO is relatively new, all parties have a chance to participate in an exclusive market that offers better user experience and interface.

With the advantages making IEO very appealing, developers and investors are encouraged to know and learn how it works.

How IEO works

With a clear process, it is easy to be involved in an IEO. Before anything else, though. An important requirement to keep in mind is that the investor must not come from a country that restricts private exchange platforms.

investors living in China, North Korea, New Zealand, Venezuela, and the United States might want to find other ways to raise funds since the ICO, IEO, and other related forms are barred in their countries.

An investor will be required to undergo KYC and AML checks to ensure their credibility. However, it is important to note that there are some dubious exchange platforms suspected of selling their membership for profit.

For this reason, participants must also do their own due diligence before they try to join an exchange platform.

Next, a transaction can be conducted on the platform by making sure that the exchange and project teams come to an agreement. The exchanger should do a comprehensive review of the project, and the project team must guarantee that the venture is worthy and authentic.

This step reinforces the credibility of the project. Once the review is done, the platform will reveal the token sale date and the fixed token price.

To participate in the exchange, the investor must have a membership account on that platform. If the platform has its own token, then the member will be required to purchase a certain unit of those tokens before they can participate in the exchange.

When the tokens are sold, a percentage of the proceeds will be sold to their exchange partner. This percentage cut acts as an incentive for the platform to continue marketing the new tokens even after the IEO event. Fortunately, the pricey listing fee and sizable cut from the sold tokens are the only downsides of joining an IEO project.

Finally, the exchange platform sends the fund contribution to the participant’s virtual wallet. With a successful project from an IEO, companies can develop and grow effectively.

Conclusion

Although the IEO is at its infancy, it is still one of the fastest growing trends in the blockchain industry, which is being embraced by  a growing number of exchange platforms.

While minor tweaks in the exchange process are still being developed, making an early investment through an IEO is highly recommended.

Its security features have undoubtedly increased the level of trust and confidence among participants. At the same time, its system design provides bigger funding opportunities and an easier process to follow. In this regard, the IEO is a worthy endeavor that can potentially lead to a gold mine in the future.

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