What is IEO (Initial Exchange Offering)

ICO, which stands for “initial coin offering,” was the main way to raise money for a new blockchain project a few years ago. Mastercoin was the first ICO in 2013. Since then, there have been hundreds more like it. ICO is different because the person on the other side is the developer, and everything revolves around him.

For IEO, the cryptocurrency exchange acts as a counterparty. Developers make tokens and send them to an exchange, which then sells them. Depending on what the exchange and the developer agree on, the IEO can have many different kinds of conditions. There might be a limit on how much one person can give or a fixed price for the token.

IEO (Initial Exchange Offering)

IEO is like ICO, but it is more advanced. In this case, the fundraising is being done by a cryptocurrency exchange that would not put its reputation at risk.

The project that gives out tokens is a new one that makes a cryptocurrency as a separate asset class in order to get the money it needs for development. Most of the time, the issuer pays the cryptocurrency exchange for listing (but not always; it depends on the exchange’s rules), and they also take a cut of the tokens sold through IEO.

In exchange, the exchange agrees to sell new tokens and add them to the listing after the fundraising is over. More importantly, since the exchange gets a cut of the tokens that are traded, it encourages people to do so. So, good marketing of tokens is important for both the exchange and the person who made the tokens.

What distinguishes IEO from ICO?

IEO is not available to everyone; only people who use the services of a certain exchange can join. In ICO, on the other hand, investors can get tokens by sending money to a certain address.

At first glance, from this point of view, the ICO model seems to be better because it makes more people eligible to invest. But there is a problem with fraud, which has made people less interested in ICOs. Under the guise of starting a blockchain project, scammers took money from people and ran away without giving anything back.

It turns out that the biggest problem with ICOs is that they are not regulated. With a White Paper, anyone can start a project, as long as they can get people to invest in it. IEO has a model that is completely different. Even though the basics are the same, the way the exchange runs the project gives strange results.

Some people don’t like this because they think the exchange might be working with the developers, but this isn’t likely. Big exchanges don’t want to risk their reputation, and trustworthy blockchain projects won’t do something so dishonest.

By letting IEO happen, the exchange is taking a risk because it doesn’t have control over how the team works on the project or how well the finished site will meet users’ needs. Because of this, due diligence is done very carefully before the IEO is put into place, which adds another layer of protection.

Almost all new blockchain projects that are worth mentioning today prefer to launch through IEO, which helps them get their first funding.

How are IEOs Worth It?

Because the exchanges pay attention to the projects they choose, some of the user’s work has already been done. It’s up to you to do your own research on the available options, read the white papers of different startups, and choose the ones that seem most promising to you.

Most investments work out well. After being listed, many tokens gave out hundreds or even thousands of Xs. Please keep in mind that each user can usually only buy a certain number of tokens.

Conclusion

To make sure that the token sale goes well, the exchange needs a team of experienced business strategists, technologists, computer scientists, and engineers from different fields. Human resource is a big part of figuring out how new ventures will work from a technical and business point of view. This, of course, makes it harder for crypto exchanges to use the new trend to their advantage. Some sites had trouble because they didn’t have enough qualified employees to choose blockchain projects that could be successful.