The cryptocurrency industry has introduced several innovative ways to raise funds, diverging from traditional methods. In 2017, Initial Coin Offerings (ICOs) were prominent. However, after China’s ban on ICOs in late 2017, crypto startups in the region sought alternative fundraising methods.
As a result, Initial Exchange Offerings (IEOs) gained traction, providing a legal and secure fundraising option.
This article explores the concept of IEOs and the platforms on which you can participate.
What is an IEO?
An Initial Exchange Offering, as the name suggests, is conducted on a cryptocurrency exchange platform. Unlike ICOs, IEOs are managed by the exchange on behalf of the startup, enabling them to raise funds through newly issued tokens.
IEOs have distinct differences from ICOs. Organizers may need to pay a listing fee and a percentage of the tokens sold during the IEO.
Tokens are sold on the exchange’s platform, and post-IEO, they are listed on the exchange.
Participants in IEOs create accounts on the exchange conducting the IEO, fund their exchange wallets, and purchase tokens directly, unlike ICOs where contributions are sent to a smart contract.
Upcoming and Recent IEOs
| Name | Status | Date |
|---|---|---|
 Sandbox |
finished | 13/08/20 |
 Cartesi |
finished | 21/04/20 |
 WazirX |
finished | 03/02/20 |
 MATIC Network (Polygon) |
finished | 24/04/19 |
 Celer Network |
finished | 19/03/19 |
 Kava |
finished | 23/10/19 |
 Band Protocol |
finished | 16/09/19 |
IEO Platforms on Exchanges
Various cryptocurrency exchanges have started supporting IEOs. Binance was among the first with its Binance Launchpad. In January 2019, BitTorrent, acquired by TRON, raised $7.2 million on Binance Launchpad within 15 minutes, reaching its crowd sale hard cap.
While selling all tokens within 15 minutes is remarkable for any crypto startup, Fetch.AI, the second IEO on Binance Launchpad, set an even higher standard, hitting a $6 million hard cap in just 22 seconds.
Following Binance’s success, other exchanges like Bitmax Launchpad, Bittrex IEO, OK Jumpstart (OKEx), KuCoin Spotlight, and Huobi Prime launched their IEO platforms.
Advantages and Disadvantages of IEOs
Trust
One of the primary advantages of IEOs is trust. As the fundraising occurs on a cryptocurrency exchange platform, each project is carefully vetted to maintain the exchange’s reputation. This scrutiny reduces the risk of scams, although thorough research is still necessary.
The RAID IEO case illustrates the importance of trust. Bittrex canceled its IEO for RAID hours before it started due to a terminated partnership with OP.GG, a critical part of the project.
Security
The exchange manages the IEO’s smart contract, ensuring security. The KYC/AML process is also handled by the exchange, streamlining the process for token issuers.
Easier for Projects
IEOs simplify the fundraising process for startups. While there are fees involved, exchanges assist with marketing and offer a stable customer base for contributions.
Listing
Following an IEO, the exchange typically lists the token, providing a natural transition to market availability.
While IEOs offer a secure and efficient alternative to ICOs, the associated costs can be significant for startups.
How to Participate in an IEO?
Once you find your desired IEO, identify the hosting exchanges. Register an account on the exchange, complete KYC and AML verifications, and fund your account with accepted cryptocurrencies to participate.
Conclusion
Initial Coin Offerings and Initial Exchange Offerings have generated significant attention and capital in the crypto industry. While IEOs introduce a centralization component, they offer numerous advantages and reflect the industry’s evolution to cater to diverse user needs.
