Cryptocurrency trading is growing rapidly, with more coins emerging and various financial institutions and payment giants shifting to Initial Exchange Offerings (IEOs).
High demand for digital currencies results in the rise of initial exchange offerings and more upcoming ieo emerging.
Major blockchains prefer the ieo platform. IEOs and ICOs work similarly. IEO evolved from Initial Coin Offerings (ICOs) as users experience a lack of transparency or mistrust when purchasing cryptocurrencies.
Startup platforms believe in IEO as it offers due diligence processes in the funding phase and the sale of tokens.
So what is IEO? How does IEO work? And what are the benefits of an IEO?
Keep reading!
What Is Initial Exchange Offering (IEO)?
An initial exchange offering (IEO) is a new way for crypto projects to raise funds and get their tokens listed on an exchange.
Unlike initial coin offerings fundraising events, IEO allows users to use funds directly from their exchange wallet to purchase the cryptos.
The IEO project came in during the launching of Binances’ platform – Binance Launchpad.
BitTorrent Token (BTT) was the first to use the IEO platform in January 2019, raising over $7.1 million in 15 minutes. So far, Binance, the world’s largest exchange, has launched 64 projects.
Most investors are turning to IEO as it’s easier to take part. It also lets its user assess project reliability and trade their asset under one roof.
In addition, project developers can easily contact crypto exchanges’ user base at no cost.
How Do Initial Exchange Offerings (IEOS) Work?
IEO allows startup companies to raise money from investors without funding through traditional crowdfunding and saves them time, effort, and money.
These companies liaise directly with crypto exchanges to start token sales to investors interested in the said digital asset.
Initial exchange offerings(IEOs) aim to foresee these trading platforms carrying their due diligence process and assessment before the sale of tokens.
Blockchain Projects Assessment Process
These blockchain projects must abide by the IEO assessment process to ensure no scams for their users and that the new digital currency is real, as it claims.
The procedures include:
1. Drafting a White Paper
The startup company must draft a white paper explaining how they will fund and back sources.
They should also explain the payment platform will use for transacting or transferring cryptocurrency. Also, the project vision, architecture, and tokenomics.
A detailed outline showing how funding supports this digital currency will be obtained. Also, the expected value of the cryptocurrency.
2. Project Submission
The blockchain submits the draft to the registered ieo platform to show they are selling tokens via their platform.
3. Vetting Process
The cryptocurrency exchange will then scrutinise the white paper draft to confirm the token issuer and that the project is creditworthy.
These platforms look at the team’s background, the technology behind it, the selling points, tokenomics, demand, and any available public information.
4. Contract Agreement
The initial exchange will wait for the exchange to approve.
Once approved, the project pays a proportion of its utility tokens and a listing fee. After, it gets listed on the exchange within a week.
5. Security and Legality
The IEOs don’t offer investment interest in the company. This is to ease the processes of token sales and issuance of IEO tokens for startup companies.
Therefore, the U.S. Securities and Exchange Commission (SEC) does not regulate IEOs investments. However, this may differ from country to country.
6. Notice
Upon approval of IEO tokens, they post a notice of token sale to allow investors to purchase the utility tokens.
The company issuing the IEOs may also list tokens on its official website to publicise the new cryptocurrency.
7. Safety Measures
Investors willing to purchase the crypto must use the IEO’s safety measures.
Before accessing the project, they must follow Anti-Money Laundering (AML) and Know Your Customer (KYC) measures. They should also communicate full information on the project’s progress.
Steps Involved in Launching a Successful IEO
Initial Exchange Offerings(IEOs) are a great way for crypto projects to raise funds for their projects.
They are also great for investors to get involved in a project from the beginning. Which can be lucrative if it succeeds.
Here are some steps to launch a successful IEO crypto project:
Step #1. Market research
The first thing to do is to analyse what the market needs and know the weaknesses of the potential competitors. It’ll help you leverage immediate problems and how to address them in your project.
Also, plan how you’ll approach your investors and how to present your new currency. Have solid research and facts to back up your project. It’ll help users, investors, and the exchanges trust you.
Step #2. A ready, minimum viable product
Note that you need a progressive or minimum viable product to launch. It is a requirement to get listed on cryptocurrency exchanges.
Having at least a functional app with big organic users will help.
Step #3. Choosing an exchange platform
Once you get ready with a good plan and have a viable product, it’s time to choose an exchange. Choose a reliable and secure crypto exchange.
Ensure the exchange follows the right practices and due diligence processes in crypto. Some top exchange platforms include:
- Huobi Prime
- Binance LaunchPad
- KuCoin Spotlight
- OKEx Jumpstart
- Bittrex
Step #4. Drafting a white paper
When you are starting a new cryptocurrency, white paper drafting allows you to put together all of your thoughts and ideas in a cohesive form. So that when it is time to create the coin, everything is ready to go.
The idea is that the white paper should be the first step in creating your cryptocurrency. You want to ensure that you have all of your ideas, concepts, and plans before moving forward. Because if you don’t, it can lead to many problems down the line.
Here are some points to think about when you’re writing one:
- What kind of cryptocurrency it will be (for example, a privacy coin or a utility token),
- Why that’s important,
- What makes it different from other cryptocurrencies,
- What makes it better than other kinds of cryptocurrencies,
- Why someone would want to use it,
- Who specifically would want to use it and why they would want to use it over other kinds of cryptocurrencies
A good white paper should include:
- Project vision
- Project mission
- Tokenomics
- Overall growth
Step #5. Token development
You create tokens through blockchain platforms like Ethereum, NEO, EOS, etc. Determine how many tokens to issue and a great system to evaluate its value.
Some steps to consider when developing your tokens include:
- Deploy a smart contract
- Decide on a good token supply
- Enable token sending
- Set a name, decimal units, and symbol for your tokens
- Create a transfer event
Step #6. A clear goal
Having a clear goal will help you mitigate risks and avoid failures. Not only should you do listing on the crypto exchanges, but you need maximum funding requirements.
Select a hard cap or maximum funds you can raise. It assures investors of your tangible and practical goal.
Step #7. Listing the tokens on an IEO exchange platform
Exchanges requirements vary from one exchange to another. Ensure you comply and pass the criteria selection.
If the exchange completes its procedures and checks, a listing follows, and the sale proceeds.
Step #8. Promoting your IEO project
Several crypto exchanges do promote IEO projects but it’s advisable to have a good strategy to promote your IEO project.
Various strategies to market IEO projects include:
- Through press releases
- Email marketing
- Social media marketing
- Blogging
What Are the Benefits of IEO?
There are several potential benefits of IEO, including
- More confidence
- Less fraud
- Responsibility for overseeing the transaction
- Open to existing members, not the public
- Better users experience compared ICOs
What Are the Disadvantages of IEO?
Some drawbacks of IEOs include
- Higher listing fees
- Not created equal
- Crypto pump and dump scams
Initial Exchange Offering(IEO) Alternatives
IDO: Initial DEX Offering(IDO) is a blockchain project running and launching its coin via decentralised liquidity exchange. It may be music albums, cars, etc.
STO: Security Token Offerings (STO) is a digital token with a monetary value traded on public blockchains. It presents the actual assets.
ICO: Initial Coin Offering(ICO) is a traditional way of fundraising used by blockchain projects. ICO is not regulated, thus non-compliance with federal securities laws, making it risky.
Final Verdict
As an investor looking to purchase a cryptocurrency via a low-risk platform, initial exchange offerings(IEOs) are better. The Journal of Alternative Investments has touted IEOs as the next evolution in cryptocurrencies. Remember, doing more research before making the final decision is wise.
IEO FAQs
What is the cost of IEO?
The cost of IEO ranges between $150,000 – $1,000,000. It depends on the exchange entrepreneur chooses.
How do I participate in an IEO?
For you to participate in an IEO, you MUST have a verified account. It’ll allow you to deposit some funds with accepted tokens in the project token sale. Navigate to the project launchpad page to purchase tokens, and give it some times to get deposited to your main account.
Where can I buy IEO?
You can buy IEO on Binance Launchpad. Binance services are faster and more transparent. It has a perfect dashboard for beginners.