April 24, 2019 – Initial Exchange Offerings (IEOs) has been a trending topic lately. What draws investors to it is the added security it brings compared to the most common funding method in the crypto space, an Initial Exchange Offering (ICO).
ICOs have no legal registration and could be deployed from anywhere in the world siphoning funds from whoever wishes to take part, most commonly the uninitiated. As such, the ICO industry is plagued with worthless projects. According to a study, 80 percent of ICOs turned out to be scams while only 8 percent got listed on exchanges. IEOs intend to fix this by improving upon the ICO model.
Table of Contents.
IEO – Initial Exchange Offering Guide
What is IEO?
Essentially, an IEO works similarly to an ICO except it’s issued by an exchange instead of the project leaders. The team usually pays a cryptocurrency exchange a listing fee and percentage of the tokens sold in the funding.
Initial Exchange Offering Advantages
The cryptocurrency exchange is obliged to sell the newly issued tokens on their platform and list it in their exchange, allowing users to trade it in the market subsequently.
One of the best features of IEOs is near-instant liquidity; unlike ICOs that have to wait for months or even years with no guarantee of getting listed and being tradable in an exchange.
IEOs are also more secure in a sense that crypto exchanges carefully assess the quality of projects being offered, since they have to protect their reputation as much as possible. They perform due diligence on the investor’s behalf.
On the flipside, the project team needs to pay the crypto exchange for the benefits their service provides. The problem is crypto startups at this stage have little to no funds and exchanges charge premium prices for these types of services.
Another drawback is the fact that investors need to trust the exchanges, as they serve as an intermediary in this case. And frankly, crypto exchanges are not the most trustworthy entities in this space, as proven by a recent study that 95 percent of trading volumes in exchanges are fake.
Furthermore, not all exchanges are made equal. The QuadrigaCX exchange lost its funds when its founder died and Coinbase had a history of hiring a team of hackers dubbed ‘One of Five Corporate Enemies of The Internet”.
Examples of IEO Platforms
|Cryptocurrency Exchange||IEO Platform|
|Bittrex||Bittrex International IEO|
If you’re looking for an IEO platform, you don’t need to look further. Most major crypto exchanges offer such services already. The first project funded through an IEO was BitTorrent Token, which raised $7.3 million in 18 minutes, last January in the Binance Launchpad.
This article originally appeared on BitPinas: What is IEO? | Initial Exchange Offering Philippines Guide