What Is An Initial Exchange Offering (IEO)?An IEO is something issued by a crypto-exchange for a startup business. IEO stands for Initial Exchange Offering and is a way for startups to gain capital through crypto-exchanges. An IEO and an ICO have the same principles. Both of these are ways to use cryptocurrency to raise funds for a startup to become successful. This article explains, in detail, the differences of an IEO and an ICO as well as, the many exchanges and projects you can find online about IEO lists.
What is an IEOWhen a new business is starting, or a new project within a company is in the idea phase, they will likely need some funding to get off the ground. Usually, people will go to investors and ask for money, or they will bootstrap what they can, but those aren't the only options.
Businesses are turning to an IEO list and finding platforms to obtain startup capital through the source of Cryptocurrency. It's a relatively new way to collect money, launched back in 2017 and gaining speed in 2019, but it's proven to be a way for businesses to get off the ground and get ahead of their competitors rather quickly.
Difference between an IEO and an ICOIEOs and ICOs are similar to how an IPO works. You launch your IPO, get investors, get the funding, and build your business towards even more success. An IEO and ICO are just like that except they work with Cryptocurrency. The ICO took a hit when the bubble burst and a lot of investors lost massive amounts of money, so now they're transitioning to IEOs that are regulated by the exchanges and have more security.
Stats from Cointelegraph say that in 2017, ICOs raised almost $6,000,000,000 and that number increased to over $11,000,000,000 in 2018. This shows a massive increase from investors and that it looked like an excellent place to put your money if you wanted to be profitable later on, but it looked to be a bad investment. This is because many of the ICOs lacked liquidity, didn't have much lasting power, and some of them were scams from day one that weren't caught.
Do IEO's solve the ICO Problems?Since the exchanges are in control of IEOs, there is much more security since the funds aren't given directly to a business or startup. Since the exchanges are in charge of the IEOs, they can watch them like a hawk and be sure everything is credible, which is why the investors are leaving ICOs and turning to IEOs.
The clear advantages of an IEOLike I mentioned above, the clear advantage of an IEO is that it additional standards, regulations, and rules compared to an ICO that does not. This is mainly because the IEO tokens are backed by a 3rd party and the exchanges offering these IEOs do their best to source only quality projects to put in front of investors.
In short, an IEO is just like an ICO except that an IEO is monitored and has additional layers of security to avoid any of the ICO problems we've seen in the past.
Investors are starting to love the fact that exchanges are taking over because they only need to deal with the exchange, not the token provider, and these platforms offer a wallet service for these tokens (another definite bonus).
The use of exchange tokensMore than not, the exchange will have its unique token that can be traded within the platform. These exchanges are taking on much more risk, so the investors don't have to worry as much about their trades and to lose money to scams.
Additionally, the exchanges are also helping by managing purchases, as well as deposits, by using smart-contracts. This makes KYC and the entire ICO process easier on the investor due to it having a much less margin of error.
An IEO is like an ICO with rules and regulationsAn IEO has taken the problems of an ICO into consideration and tried their best to remove them. If you looked through an IEO list of platforms, you would quickly realize it's a better bet to go with this model than an ICO that isn't regulated. The exchanges take on more of the risk when it comes to an IEO, and an ICO never had that due to you sending fund directly to the project.
An IEO has much more internal regulation and standards, which is why there aren't as many open projects for you to invest in, and that's a good thing because the projects you do come across are sure to be legitimate and trustworthy.
Trust and TransparencyIf you've been reading from the beginning, you remembered when I mentioned that IEOs and ICOs are mostly the same things, but one has more rules than the other. Another difference is the trust level and transparency you get with an IEO since the project has been vetted and looked over many times before ever going live for you to invest in. There's less due-diligence that an investor has to do since the platform performed this already, but they will still need to do their research before diving into a project to be sure.
A downside to this is the transparency of the IEO list exchange itself. The exchange is putting their reputation and potential profits on the line, but as an investor, you would like to know what the actual vetting process is. What kind of regulations is the exchange enforcing? What rules are they imposing on themselves? Etc.
Even though an exchange will have vetted the companies, you will still need to do some work to be sure it's a sound investment on your part. You can never be too careful with your money.
Supply and RetentionJust because something is an IEO doesn't mean it has lasting value. If the founders plan to flood the market with their tokens right away, there will be no retention, and this is also known as a "pump and dump." This means the founders had planned on getting funding and profiting from it as soon as possible by mainly selling off the company and leaving.
Minimum Holdings vs. LongevityThe minimums of an IEO are much higher than that of an ICO. Two concerns for this are that the minimum could exclude the majority of investors due to not being able to release that amount of funding. The second is that the minimum could inflate the value of the native token due to manufactured scarcity.
The demand for IEOs is exceptionally high, but there are still some concerns, and the longevity of these could come with question. How long will an investor have faith in the IEO over time, or would they instead dump their tokens for a quick profit that could damage the IEO long term?
Recently we've begun to notice the change of the ICO market that had a dying model of giving and selling tokens directly to a model where they were sold by exchanges where the tokens were listed right away after the end of the sale. This new model has been called the Initial Exchange Offering or IEO, and even though this has been going on since 2017, it hasn't started to pick up speed until early 2019.
An IEO and an ICO are pretty much the same things, except the IEO has specific rules and regulations. An IEO and ICO use the same crowdfunding process except an IEO require an exchange to do the crowd sale instead of doing this directly.
As of today, there is an IEO list of 15 exchanges that are supporting these IEOs, or they have announced they plan to soon.
The IEO ListBinance Launchpad One of the tops on this IEO list is Binance pioneered the IEO platform back in 2017 and helped push it into the mainstream. A lot of successful IEOs have happened with them like Fetch, Gifto, Celer, Bittorent, Bread, and Maric, to name a few.
Huobi Prime A close second on this IEO list, after Binance, Huobi is the next big player when it comes to IEOs. They completed their very first token sale within a few seconds after adapting to the IEO concept, and the price of tokens exploded 250% soon after.
OKEx Jumpstart This exchange made the IEO list simply because of the trade volume they're doing each year. It's no surprise that OKEx jumped onto the IEO trend since they're crushing it in every other field. Their platform is called "OK Jumpstart" but there isn't much public information going around just yet, but we can expect big things from them soon.
Coineal Launchpad A titan in the crypto field with a staggering $700,000,000 daily trading volume, it's expected that Coineal Launchpad would jump on the IEO train. They've already completed some cases, such as Levolution, Kizuna Global Token, IPW Token, and an ongoing one Rebglo Token.
ZBG Launchpad This is a side project of the major exchange ZB.com which is new to a lot of crypto enthusiasts, but quickly rose through the ranks and landed within the top 10 on CoinMarketCap. They have been accused of inflating their trade numbers and volumes, but that didn't stop them from completing two IEOs with V Systems and Kamari projects.
BW Launchpad They made this IEO list because they are a strategic partner of ZB.com and is deeply rooted within the Asian market. They have supported three IEOs so far, and they are Blockbuster, V Systems, and an ongoing one Grabity.
Coinbene They were talking about an IEO platform back in 2018 and officially announced it back in March of 2019. They are usually listed within the top 10 exchanges and has a pretty large following, so it's no wonder they made it on the IEO list.
BGOGO Apollo They are a digital asset exchange and recently announced their IEO platform, Apollo. They have talked about two token sale events they're currently working on which are ARM and X-Block projects.
IDAX Foundation A global digital financial services platform that focuses mainly on bitcoin traders that have a high daily trade volume. They have announced their first IEO for ZeroBank project, and that took place back in April of 2019
BitMax Launchpad You may not have heard of BitMax much since they are a new exchange, but they've come on board the IEO train and launched DOS Network, but it hasn't had the community following that other projects currently have. It's still early to determine if BitMax is going to cut it with their DOS Network, only time will tell.
Bittrex International A long-time fan for many crypto community members, Bittrex announced in February of 2019 that they were in the market. Their first IEO and only one so far was for RAID project but was canceled. They are expected to stick with it and try their hand at another IEO soon.
Porbit Launchpad Not so much a heavy hitter when it comes to trade volume, but known enough to make the IEO list, Probit Launchpad is looking to distinguish themselves from the smaller exchanges. They've already had a few IEO cases hosted on their platform but haven't gotten nearly as much media as a platform like Binance. Their IEOs are Spin Protocol, CharS, Wegen, Steemhunt, and a few others.
Latoken Launchpad Back in 2018 Latoken launched their IEO launchpad and have recently announced their newest IEO for the 7Eleven project.
KuCoin Spotlight A former heavy hitter in the top 10 exchange list, and now big time on the IEO list, was dethroned due to lowered trade volumes but still well known worldwide. They announced a new IEO for the MultiVac project which you could see on their platform called Spotlight.
Exmarkets Launchpad This is a newer generation exchange which provides thick order books and very deep liquidity. They have four completed IEOs and four that are ongoing. They haven't gone public with much, but they're a platform to watch in the near future.
With all of that consideredYou must remember that an IEO is an ICO that is regulated. It is something that has been edited to be better for the investor, but it's still not perfect in the end. You will need to do your research on the IEOs to be sure it's a sound investment on your part.
The regulations at the end of the day are imposed by an exchange, and you aren't sure what those are. Exchanges are working to increase the standards when it comes to investing in startups, but it's still relatively new, so you'll need to keep your money safe. You need to understand that a token only has value if the company stays profitable. If the token starts to drop in value, or a lot of them are getting dumped, it's likely due to the startup not doing what they intended, and profits aren't there. You will always need to watch your token value and be sure your investments stay healthy.
Be sure to do your researchI may sound like a broken record, but you need to do all the research you possibly can before you start to invest in an IEO, even if it's regulated by the exchange. Sift through the IEO list above and be sure you're working with a well known exchange. You need to be as sure as you possibly can before you begin to invest, and here are some questions to answer and figure out if it's the right time to invest.
1. Is the IEO going to fill a gap, a void, or a need in its niche or market? If there is a gap in the market, if nothing like it exists already, and it can help out a massive amount of people, then it's likely going to do well. If there are already 100 competitors, you should probably avoid it, and this is because the startup has an arduous journey ahead of itself if it wants to be successful. Remember, most businesses fail within the first five years, and that means if there is more competition, then it will likely fail quicker.
2. Why does the IEO claim to have value? Every startup thinks they're the next best thing, but they could be jaded by potential profits, and that's not a good thing. Don't let sales copy convince you they are the next best thing, do your research and determine if they have actual value in the industry they're targeting.
3. How much supply and how much is the supply team keeping? You need to understand if the startup is holding a large number of tokens and if they plan to dump them immediately. You need to know if there is a plan to release them over time to new investors, current investors looking to purchase more, or if the startup has no intentions of releasing more soon.
4. When will the majority of tokens be publicly available? All IEOs will have a plan for when they will release some tokens. If an IEO does not have a plan in place, avoid them, because they will likely dump as soon as funds start coming through. Regulations are seen to be the main reason we don't get many "pump and dump" IEOs, but it can still happen.
5. How will the additional supply affect the value of your tokens? If a startup wants to dump a lot of tokens on the exchange, they will likely dilute the value of your tokens. This is why "pump and dump" hurts so many people, but does the IEO have plans to roll out additional tokens as they become more profitable? Are they planning only to release tokens in a fashion that will keep them valuable for the investors? Know these things before investing in an IEO so you can be sure your investment will stay healthy.
6. Is the exchange platform on the Top 10 IEO list? Many platforms out there will offer IEOs, but you'll want to be sure you're working with a trusted exchange. If you've read to this point, you go through the 15 exchanges on in the world on the IEO list, so be sure to work through one of them.
Final ThoughtsI know this was a long article, but thank you for sticking with me! If you were wondering the difference between an IEO and ICO I'm sure to have answered most of your questions. An IEO is much more secure, usually, and can be found on any of the exchanges I mentioned above in the IEO list, so be sure to check them out.
Using an exchange to invest in an IEO is more secure due to the exchange itself vetting the startups and companies for legitimacy, and that's always a good thing for investors. You will still need to do your due diligence to be sure of what you're investing in since we don't know what the standards are for these exchanges on the IEO lists.
Be sure to ask yourself those crucial questions right above here to be sure the IEO is something you're ready to invest in. Every investment is a gamble, but you can increase your chances of winning if you know the nature of the startup, their intentions, and if they will be filling a void/gap and if they will be helping users. Be as confident as you possibly can that you have a winner in sight, and you will usually be right. Remember, investing is always risky, and an IEO is no different, but at least it's not an ICO!