Initial Coin Offerings (ICOs) were extremely popular at the end of 2017 and in 2018, but in 2019 another type of fundraising mechanism is prevailing – Initial Exchange Offerings (IEOs). An IEO is essentially an improved version of ICO, as it utilizes cryptocurrency exchanges. The IEO token sale process more secure and half-automated, making it more appealing to investors and projects involved.
ICOs became very popular in the last years. Specifically, during the 2017 crypto bull market. But things have changed from that moment. Most of the ICO tokens lost their value or disappeared. This has created a large number of bagholders that now are keeping their tokens without knowing what to do with them.
Many of them thought that as Bitcoin (BTC) was already being traded at all-time highs, newly-issued tokens could offer them an opportunity to become millionaires. Of course, this didn’t happen to most of these investors.
Considering that almost anybody could launch an ICO, there were many projects that were taking advantage of it. Some of them were exit scams and others were simply too-good-to-be-true. This is why Initial Exchange Offerings were created.
What are Initial Exchange Offerings?
Initial Exchange Offerings (IEOs) are token sales that have been whitelisted by cryptocurrency exchanges. Crypto and blockchain projects can now raise funds from exchange users. These trading platforms are offering individuals with the possibility to get early access to new tokens.
Initial Exchange Offerings are not, by any mean, safer than ICOs. However, there are exchanges that are providing their platforms (and reputations) to some projects to sell their tokens. This is why they are called Initial Exchange Offerings. In general, most of the Initial Exchange Offerings end up with their tokens being traded in the platforms where they sold the coins.
For example, if a project launched an IEO using the Binance launchpad platform, the token would possibly be traded there. Nevertheless, this is not always true. In some cases, the coin might not be traded in this platform.
The Advantages of Initial Exchange Offerings
As already mentioned, the main advantage of IEO is that the token sale is organized by a cryptocurrency exchange. This makes the process more secure, but it also has a few other benefits. On the exchange, there is a much lower risk of users being led to fake websites (phishing) or paying to the wrong address.
Furthermore, investors can rely on the exchange to verify the IEOs as they don’t want their reputation to take a hit. Exchanges can also be very helpful with advertising and marketing as they can present their IEOs to their already established user base. Last but not least, the token is immediately listed on the exchange, which is beneficial for everyone involved. But as we mentioned before, this might not be the case for some of the coins and exchanges.
- The project, since they don’t need to pay the high listing fees.
- The users, since they can exchange the token soon after the end of the token sale.
- The exchange, since it increases the liquidity and the fees collected.
Picking the right exchange is of key importance for both investors and start-up companies. Therefore we present a list of Top 5 Initial Exchange Offerings platforms in our opinion.
The pioneer of Initial Exchange Offerings is Binance. This exchange definitely takes the first place on our list of exchanges. The Binance exchange currently dominates the IEO platform market, largely because of its 313,000 daily active users and a wide array of functions and services.
Binance also already conducted a few quite successful Initial Exchange Offerings, such as Bittorent and Fetch.AI. The Binance Launchpad team promised to add at least one token sale every month. Binance Launchpad relies on a lottery ticket system for users to be eligible to participate in IEO.
KuCoin’s Initial Exchange Offerings platform is called Spotlight. Token sales on KuCoin are usually conducted via a lottery ticket token sale format. In order to be eligible for lottery tickets, users must successfully complete a know your customer (KYC) process and lock up a certain amount of KuCoin Shares (KCS) for a predetermined time period, usually 12 days. The exchange has already successfully conducted token sales for MultiVAC and Chromia. The COTI IEO is underway at the moment.
Huobi Prime is Huobi’s IEO platform. Instead of the lottery ticket system, Huobi Prime relies on a more straightforward first-come-first-served approach. Nevertheless, users need to hold a certain amount of Huobi’s HT in order to participate in IEOs. Up to now, the exchange hosted 4 IEOs: TOP Network, Newton Project, ThunderCore and Reserve Rights.
Bitmax has already completed IEOs for Dos Network and DUO Network. Investors that want to participate in Bitmax’s IEOs have to pass a KYC process and hold a certain amount of BTMX tokens (10,000 BTMX in case of DUO Network IEO). If you don’t hold BTMX, you can purchase the tokens with USDT and BTC.
Bitforex is another exchange that is launching IEOs, except that they refer to them as “premium token offerings”. The exchange is quite active in terms of the number of IEOs. Up to now, it has hosted 4 IEOs with an additional 4 that have already been scheduled. Usually, the exchange conducts IEOs in multiple rounds, where earlier rounds offer better terms for investors.
You should also consider that there are many other platforms offering users with the possibility to get access to Initial Exchange Offerings. However, not all of them are going to be as safe as these ones mentioned in this post. Nevertheless, you should always do your own research.
These coins and tokens might never be able to reach the price at which they were sold. This is why you should never invest more than what you are able to lose. The cryptocurrency market is very volatile. Even if these coins are sold through Initial Exchange Offerings, you should understand which are these coins promises and assess the risks involved to them. Most of the ICOs went to zero in just months after being released.