Initial Exchange Offerings, IEO – The newest Blockchain-Based Crowdfunding Method.
Ever since blockchain startups started springing up across industries with a promise of immutability and better security of data – developers, product managers, finance professionals, private as well as government officials, and even marketers have been trying to explore next-gen solutions based on blockchain technology.
While it’s true that there have been significant developments in almost all the segments where use-cases with blockchain have been experimented with, finance and especially – crowdfunding has seen the actual change that can be backed with numbers as more than $20 Billions have been raised so far with ICOs. However, a new form of blockchain based crowdfunding method, i.e. IEOs (Initial Exchange Offering) are now being touted as the next step for Blockchain and crypto community. In this post, we will be sharing some insights about them. Let’s get started:
Also Read: How to make a Decentralized Exchange
Just like ICOs, tokens are offered to investors in an IEO. The only difference being that these tokens are offered to investors via a partnering exchange, unlike an ICO where the tokens are offered directly to the investors.
In an initial exchange offering, an exchange or multiple exchanges act as a counter-party and allow their users to buy into the companies or projects offering the tokens. The developers need to just mint their tokens and send over to the partnering exchange(s), from where the average retail investors can easily buy tokens for Ether or any other cryptocurrency for that matter.
Also Read: How to Launch an ICO
How is IEO different from ICO?
As we all know, the rampant rise of ICOs and their popularity among developers, investors, and founders to raise funds had seen a significant halt. So, in order to make sure that Initial exchange offering are perceived as a great option for crowdfunding, they need to differentiate from ICOs. And not only this, key problems with ICOs must be duly addressed in IEOs if there’s any chance for them to be perceived as a viable crowdfunding option. Some of the key differences between ICOs and IEOs are:
Immediately Tradable: IEOs tokens are tradable immediately after the person has bought the tokens. With ICOs, as you all must remember, you had to wait for the tokens to be listed over the exchanges. Now with IEOs, that part is inherently taken care of.
Increased Legitimacy: Since the partnering exchanges are involved, the participants who already use their services are more confident about taking part in the IEOs whereas they had to know each and every company or project in case of ICOs.
Higher Trust Factor: Another very important difference between ICOs and IEOs is the way project owners and developers mint their tokens. While the developers had to mint their tokens after the crowdfunding process had been finished, the project owners have to generate the tokens and send over to the partnering exchange even before the IEO takes place. This enhances the transparency for crowdfunding and makes the retail investors more comfortable.
Upsides of Initial Exchange Offering:
Increased Transparency: To begin with, the investors and product owners looking to raise capital are more content with a safe, reliable and yet decentralized intermediary to prevent any bad players in the whole process.
Verification of Participants: By partnering with a suitable exchange, the product owners and founders can have access to the existing user base of the partnering exchange. Verification of retail investors can be made more streamlined and simpler too.
Accessible to more investors: As the retail investors won’t have to go around signing up for the various token offerings, it gets fairly simpler for them to access the Initial Exchange Offerings.
If you are looking to understand Initial exchange offering better or have a problem related to blockchain based crowdfunding, feel to free to get in touch with our team. Our team has been exploring many solutions in the crowdfunding space and would love to help you out with any questions you must be having.