IEO: The Role of the Exchanges
Lots of crypto investors and enthusiasts are still avoiding some unpleasant experiences that accompanied the 2017 ICO drop. IEOs are gradually becoming the most preferred method for crypto projects to raise funding. However, the performance of the first set of IEOs will be the determining factor on whether IEOs enjoy the same level of widespread acceptance than ICOs had.
With an IEO, there has to be a developer who requires funds for a project and contributors, or investors, willing to invest in said project. Finally, an exchange is needed to serve as the go-between for the developer of the blockchain project and the investors.
When the developers have their tokens ready to go, they make them available on the exchange. Investors and contributors create accounts on the exchange, which gives them access to the coins when they become available.
Investors then purchase the coins by trading reliable altcoins (or bitcoin) for the offering in which they’re interested. This is done in place of fiat currency. So, for example, bitcoin or Ethereum is deposited into the exchange account. The exchange acts as the middle man in this scenario, sending bitcoin or Ethereum to the developer and providing tokens to the investors.
This helps to reduce fraud since the exchange itself has vetted the project to ensure it’s a legitimate offering. The exchange does this prior to distributing the tokens to validate both the project and the investors interested in purchasing tokens.
This type of verification also creates confidence among other users as the project receives the support of a major exchange. Additionally, the listing fee and marketing costs are drastically reduced in an IEO, at least for the developer. This is due to the exchange using their own marketing and social media strengths to reach investors and users.
Now let’s take a look at Binance Launchpad as an example.
Binance is actively leading the charge to facilitate the mass-market adoption of cryptocurrencies around the world and one of the ways it is achieving this goal is through its Binance Launchpad platform. Binance Launchpad is branded as a “token launch platform for transformative projects” and it is designed to provide startups with the tools, introductions, and skills needed to raise funds through IEOs that is usually open to more than 10 million Binance users and potential investors.
IEOs are expected to restore responsibility into how crypto projects raise funds due to the quality of due diligence the exchange is expected to conduct before it hosts an IEO. This year alone, Binance has completed four IEOs for BitTorent Token, Fetch.AI, Celer Network, and Matic Network – about $22 million was raised in between the four projects. The launchpad is currently conducting an IEO for Harmony and it has several more projects in its pipeline for the rest of the year.
This piece compares the performance of four Binance Launchpad tokens over the last several months with a view to determining the common denominating factors could potentially be responsible for the widespread adoption of IEOs going forward.
To date, very little has been produced from the ICO wave. To make matters worse, current market capitalizations suggest that over 80% of those funds have diminished.
And now Coinbase is considering launching an initial exchange offering (IEO) platform in Asia. This would allow it to launch and broker “a proprietary exchange token” and other tokens in the region, Coindesk…