Simple: How does an IEO work?

Simple: How does an IEO work?

One of the main topics of the last year was IEO (Initial Exchange Offering). Startups achieve unprecedented success, collecting millions of dollars in seconds and many times surpassing the first ICOs. It is not without reason that against this background, IEO predict much more popularity than ICOs once won. We understand what IEO is and what explains the recovery in the ranks of investors.

What is IEO (Initial Exchange Offering)

IEO stands for Initial Exchange Offering. On the cryptocurrency market, it is a crowdfunding model along with ICOs. In fact, this is an ICO that is conducted through the crypto-exchange.

The crowdfunding model in the crypto industry turned out to be working, and ICOs would have developed to this day, if there had not been so many hopeless and fraudulent projects among startups. The market needed an intermediary to check startups entering ICOs and evaluate them. There have been several attempts to create a global analytical agency on which crypto investors could rely, but not one of them was successful.

Today, cryptocurrency exchanges have taken over the functions of an intermediary. The largest trading platforms have the necessary resources for auditing and technical verification of projects and are interested in including promising tokens in the listing. At the same time, the legalized activities of large exchanges arouse investor confidence and a legitimate interest in the offered tokens. At the junction of these interests, IEO emerges.

How IEO works in the cryptocurrency market

IEO consists of two stages: interaction of the exchange with the developer and interaction of the exchange with the investor.

The developer offers his product and token that satisfies the provisions on listing cryptocurrencies on the exchange. The team of analysts conducts a full audit of the company's activities, evaluates the readiness of the product, its market prospects and the investment attractiveness of the token. Depending on the results of the verification, the token is included or not included in the listing.

If the exchange refuses the token, nothing happens and the developer is free to conduct an ICO or private sale of tokens. If the project is promising, an IEO will be announced.

An interested investor learns about the upcoming token sale, is registered on the exchange and during the sale buys a token, transferring money to the exchange, and not to the developer.

The developer in accordance with the agreement concluded with the exchange, receives the collected money. The token continues to be traded on the exchange. Provided that the developer fulfills its obligations, the token grows, due to which both investors and the exchange win. If the developer does not fulfill its obligations, the token can be removed from the exchange or other sanctions follow.

Other news

STO Switzerland Regulation Sets Stage For The Country's Crypto Valley Boom

Regulation in financial markets plays an important role in promoting fair competition and cooperation to build vibrant ecosystems. This is, however, still ambiguous in the emerging crypto asset class with…

  • 06 Aug 2020

Poloniex will introduce the LaunchBase IEO platform

The company will introduce the Launch Base platform. New alt coins will be sold in a live queue. Other platforms abandoned this model due to the fact that fundraising campaigns ended in seconds, and many…

  • 06 Apr 2020
View more update