The fever of Initial Coin Offerings (ICO) has subsided giving the way to a much better, efficient and trustworthy method of investment. The last few years have seen rapid developments in the crypto sphere. With the rise in Initial Coin Offerings (ICO) to the hype around Security Token Offerings (STO’s) and now a matured form of investment in the form of IEO- the crypto sphere has seen it all!
Different types of cryptocurrency saw their token sale through the medium of ICO. However, most of these ICO’s proved out to be nothing but scams. Over the course of a year, people lost their trust in the model of ICO’s. Hence came in IEO-an evolved concept to crowdfunding projects.
What is Initial Exchange Offering (IEO)?
IEO’s are an evolved form of fundraising mechanism for blockchain and crypto startups. As the name suggests, IEO’s are conducted on exchange platforms instead of the issuer’s platform. Exchanges act as a middle party between the investor and the startup.
Exchanges thoroughly conduct their research and due diligence before enlisting the project on their platform. The startup pays a listing fee to the exchange in the trade-off for getting its project listed. Any investor or user can directly buy the startup’s token from the exchange platform. This whole system ensures a greater degree of credibility and further brings back a certain level of trust that the model of ICO lost.
Benefits of Initial Exchange Offering
The IEO’s streamlines the whole crowdfunding process, benefitting the investor and the startup as well. It adds an extra layer of intervention and protection that clearly lacked in an ICO investments.
The exchange, much familiar with the crypto sphere, conducts due diligence and security checks for an IEO. Additionally, as the exchange lists the project on its own platform, it takes extra cautious steps to validate the legitimacy of the project.
All investors from this sphere are not familiar with blockchain or IT space. In the case of an IEO, the streamlining process of projects is done by the exchange itself. This gives investors a sigh of relief while investing in any crypto projects. Moreover, as each investor is registered with accredited AML and KYC, the level of anonymity is also decreased in an IEO.
The legal protection for an investor is also considerably higher in IEO’s. The exchange at the time of screening also gives higher credibility to startups that are legally bound by regulations.
Additionally, a legitimate startup with an innovative idea won’t have to spend over the top money for promotion and marketing. With the project listed on the exchange, it receives better visibility without having to put in extra bucks for promotion. Instead, the amount can be spent on product improvement.
In almost every which way, an IEO is more credible, with an increase in the level of trust, and an efficient crowdfunding platform.
How to Conduct an IEO?
Step 1: First and foremost, it is of utmost importance that you come up with a solid idea. A valuable idea that is feasible under the market conditions.
Step 2: After building a solid plan, look for a team of advisors and partners that are relevant to the project. A project’s success largely depends upon the team handling the startup.
Step 3: A practical proof of the project or development architecture needs to be developed before enlisting the project on an exchange. You also need to ensure that all your due diligence and legal regulatory framework are in place.
Step 4: Selecting the exchange platform and accordingly, fulfill the selection criteria required by the exchange. Also, at the same time start drafting a whitepaper along with mentioning every detail of future roadmap, tokens, distribution, etc.
Step 5: The token is now launched on the exchange platform in exchange for a listing fee that you pay to the exchange directly. Simultaneously, you also need to develop a marketing or personal website of the product or token where users can receive more information.
Step 6: Once the token is successfully listed, you need to develop a plan for promoting your project to the wider audience in the crypto community.
The year 2019 has been a maturing period for the crypto sphere. Aside from IEO’s, the asset-based securities model of STO has also been gaining traction. These new concepts hold much more substance than the ICO model.
In the next few years, there is going to be a dynamic shift in the cryptocurrency industry. Multiple factors are pointing in that direction. Now, which ones are going to be leading the race? All we can do is wait.