IEOs: To Go Or Not To Go
An initial exchange offering or IEO is a crowdfunding strategy that provides an alternative to the already well-known initial coin offerings (ICOs). In an IEO, the tokens are administered by a cryptocurrency exchange on behalf of the startup and not by the startup itself, as is the case with ICOs. This gives IEOs some crucial advantages over ICOs, but there are two sides to every coin.
There are several crucial benefits IEOs have over ICOs, and they are contributing to the growing popularity of IEOs. Firstly, IEOs provide better protection against scams to the investors, which remains one of the biggest issues of ICOs.
When it comes to IEOs, it is in the exchange’s best interest to list honest projects, so investors can partially rely on exchanges to weed out scammers. Furthermore, the whole process of an IEO is more transparent. The price of the tokens or coins remains the same throughout the same funding phase and there should be no hidden fees involved.
The IEO model also provides some benefits to the startups that are seeking fresh capital. By doing an IEO one of the reputable platforms, the startups are guaranteed to have increased exposure as the exchanges usually have an already established community and a big user base. Additionally, the developers can focus on the development of their core product as they don’t have to deal with setting up the ICO and attracting prospective investors.
Last but not least, once the IEO is complete, the tokens are guaranteed to be listed on the exchange, which was not always the case with ICOs. Up to 90% of ICO projects never got listed on an exchange, leaving investors with no other options than holding on to the, probably worthless, coins.
Although IEOs are quickly gaining traction, there are still a few disadvantages and quite a bit of space for improvements in the future. The biggest disadvantage for the startups is that IEOs are not free. Assuming that your project will get listed on any exchange and raise lots of money for is just wishful thinking.
An IEO is a payable service and listing and marketing fees of the biggest exchanges are rather high. In fact, the cost is so high that not all projects can afford it. In terms of regulation, the rules are no clearer than they are for ICOs. It goes without saying that even though there are several compelling benefits associated with IEOs, there is still no guarantee of success.
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