The Initial Exchange Offering (IEO) is basically an innovative mutation of the Initial Coin Offering (ICO) – which has been the fundamental means of fundraising for blockchain projects.
IEO depends on an exchange, or a group of exchanges, operation. The developers generate the tokens and deliver them to the exchange – which will be sold to participants. The terms and conditions that are typically implemented in an ICO can also be executed in an ICO. The terms may include a limited contribution for each participant and a percentage for each token sold.
In contrast to ICO, IEO participants do not send contributions to a Smart Contract governing the ICO. Instead, they are required to create an account on the exchange platform where the IEO is being conducted. Once the IEO begins, the participants can fund their exchange wallets and use it to purchase tokens directly from the exchange.
What are the advantages of conducting IEO over ICO?
In the crypto world, where ICO is the primary means of fundraising, why should a project administer their fundraising differently?
One of the main benefits of conducting an IEO is security and trust. Crowdsales are conducted on an existing and established exchange platform. Therefore, the counterparty screens and monitors every project that aims to launch an IEO – this process reduces the risk of scam on the part of the contributors as they can only purchase tokens directly from the exchange.
Additionally, token listings are considered as “part of the deal,” it is a natural process that the exchange platform where the IEO has been carried out lists the coin of the startup after the crowd sale has commenced.
Startup projects benefit from the easy, efficient process of conduction IEO – compared to ICO. While there are listing fees and percentage of their tokens may be required as payment, the exchange platform helps them with their marketing and creates a buzz – which is essential. In other words, it is a mutually-beneficial partnership as the exchange also gains benefit because apart from the fees it earns from the IEO operation, some new users may gradually become loyal users of the exchange.
How to participate in an IEO?
Even though IEOs are currently relatively peculiar in the world of cryptocurrency, it’s not that difficult to find one that you prefer.
Normally, the first step to participate in an IEO typically begins with verifying if the project you are interested in is definitely conducting an IEO. After you have found the IEO of your preferences, it’s essential to figure out which exchanges are hosting the IEO as there can be more than one. You may also want to join Crypto Airdrops prior to the token sale.
The next step is to create an account on the cryptocurrency exchange and go through the KYC and AML verification procedures.
Once you’re done with the signing up process, you need to determine what cryptocurrencies you can use as a contribution and fund your account.
Finally, wait for the IEO to commence and start purchasing your tokens!