Demystifying Crypto Terms: Initial Exchange Offerings
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Recent legislative practicing restricting the use of ICOs to run token projects has seen most crypto startups run for alternative methods for raising project funds. As a result, the trend of Initial Exchange Offerings (IEOs) has began gaining traction. Mainly because IEOs allow crypto projects to perform crypto funding without reluctance from the law/regulators.
Initial Exchange Offerings vs ICOs
Contrary to an Initial Coin Offerings an IEO; is run on the crypto exchange platform on behalf of a startup that is raising funds. While conducting the IEO, token issuers pay a listing fee; plus a given agreed percentage of the total tokens sold through the IEO. Eventually, at the end of the IEO, the exchange lists tokens and sells them for the crypto issuers.Token issuers allow a percentage of total tokens to the exchange to incentive the exchange to help with the token issuers marketing operations.
IEOs rose to fame after the launch of Binance Launchpad in late 2018.There have been more than 50 IEOs running since 2019, which as per ICObench have raised up to $159 million. The main role of IEOs is to promote legitimacy in the crowdfunding space for crypto projects. Mainly given the high number of ICO scams that became prevalent during the crypto bubble. A scam project raising projects through an IEO places an exchange’s credibility at stake. Hence, the exchange subjects token issuers to a thorough vetting process. Contrary to a Sales Token Offerings (STOs), Exchange offerings are more accessible to any person that is willing to participate as long as their register with the exchange platform. The IEO is also beneficial to the token issuers as they are not likely to suffer regulatory repercussions due to a profound vetting process.
Pros and Cons of IEOs
Pros
Cons