Trends of Tokenization: The Replacement for ICO
Following the short-lived, volatile era of the ICO towards the end of 2017 and early 2018, crowdfunding methods for altcoins seemed on the edge of fading away. That all changed with the high-profile emergence of the “Initial Exchange Offering” (IEO), a new take, this time directly from exchanges, on quickly raising vast sums for projects that go on to be listed on the exchange.
While the regulator raises a cautionary statement that the token categories are not mutually exclusive, suppose that a token issued as a utility token can also transform into an exchange token over the timespan. Quite a few tech-savvies perceive this property of tokenization mechanism as an apprehensive thing to consider. The Half Yearly Report: Deciphering Token Offerings: IEOs, STOs, and ICOs, compiled by token sale analysis platform InWara, identifies new trends in the token sale market such as the emergence of a new blockchain-based investment vehicle, the Initial Exchange Offering (IEO). It says that the entry of major players from established industries such as the Facebook Libra Project and JP Morgan has helped revitalize interest in the sector.
Clearly, the ICO has fallen out of favor. However, a resurgence in wielding blockchain-based financing took the mold of security tokens soon after, with speculation reaching a fever pitch that security token offerings (STOs) would revolutionize conventional finance. Security tokens have failed to gain any meaningful traction either though, as regulatory gridlock and uncertainty on the part of institutions have hindered their adoption.
Exchanges like Binance, OKEx, and Huobi have stood out amongst the rest with some lucrative early IEO listings. CoinGecko, the coin market ranking chart app, has recently released its crypto market study. In this report, it is declared that Initial Exchange Offering (IEO) has steadily been on the rise with over 72 startup projects raised a total of $262 million within Q2 2019. The start of this IEO craze been is strongly related to Binance. The number one crypto exchange started its launchpad in January 2019 raising $7.2 million in just 14 minutes for the BitTorrent project.
Proponents of the IEO argue that they will be different since projects are vetted by exchanges themselves, but there still exists a dark underbelly relationship between some of the major players in the coin listing process, a notion that is hard for parties hurt by scams to overcome. Exchanges still profit from listings of new tokens, particularly when they coincide with a resurgent bitcoin market that attracts record spot trading liquidity. The history of crypto proves that IEOs may ultimately prove to be short-lived, but there are some projects tinkering with their design — whether that draws from targeting specific subsets of audiences or taking a hybrid approach with more advanced financial products. Perhaps, those more practical endeavors may be the lindy-compatible fundraising model in the crypto markets — one that consistently evolves.
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In 2018, ICOs raised nearly $8 billion. But as many know too well, the ICO wave has since come crashing down. ICOs now raise about 58 times less than they did just a little more than one year ago.