Do your own research and don’t rely on third-parties to verify the legitimacy of projects for you. The IEO raises interesting prospects for projects and exchanges to revitalize the crowdfunding model for startups in the cryptocurrency sector, but still leaves investors in similarly precarious ieo meaning positions. IEOs take place on a cryptocurrency exchange on behalf of the company issuing new tokens. To fundraise on the exchange, start-ups are charged a fee and a certain amount of sold tokens. Following the completion of the IEO, the tokens are placed on the exchange, which helps to increase the company’s visibility in the eyes of investors. Participants send donations through the platform that hosts the IEO, as opposed to ICOs, where contributions are delivered to smart contracts.

The Outlook on the IEO And Further Cryptocurrency Investment Trends

An Initial Exchange Offering, or IEO, is a fundraising event https://www.xcritical.com/ where the sale of tokens is conducted through an established cryptocurrency exchange platform. However, since ICOs are not yet subject to any regulations, the ICO process can be quite risky and opaque. For example, many investors that bought in the 2017 ICO hype were eventually burned by low-quality projects or assets that were deemed unlicensed securities. This challenging set of demands eventually gave rise to Initial Exchange Offerings (IEOs). For blockchain projects that generate a lot of buzz, IEO platforms can help them raise capital quickly.

Pros and Cons of Initial Exchange Offerings

Just look at BitTorrent, which managed to raise $7 million just 14 minutes after its listing on Binance Launchpad went live (it was later bought by Tron). That said, there are some marked differences from initial public offerings and IEOs you need to be aware of. An Initial Exchange Offering, or IEO, is a modern fundraising method where a cryptocurrency startup sells its tokens through a cryptocurrency exchange rather than directly to investors.

• As a result, crypto enthusiasts looking for a decentralized form of fundraising may be put off by this model.
• STOs involve the sale of security tokens, which are regulated financial securities.
• This shift from ICOs to IEOs has occurred due to the loss of trust and confidence in ICOs caused by numerous cases of fraud and scams.
• Investors are required to follow KYC and AML procedures to participate in the IEO.
• IEOs provide a more secure and trustworthy platform for startups to raise capital and for investors to participate in token sales.
• IEO’s allow for startups to participate in large scale investments opportunities with the introduction of their business to a large investment ecosystem.

Who Invented the Initial Exchange Offering?

Lots of ICOs were scams, too, with developers abandoning their projects after raising funds, never to be seen again. IEO is a sort of crowdfunding where funds are raised through a trading platform. It is the opposite of the initial coin offering (ICO) which is when businesses attempt to raise interest in their projects on their own websites (it was banned in China in 2017). Binance Launchpad was one of the first IEO platforms to start in the sector, and many competitors rapidly followed.

IEO meaning in the crypto industry

Other exchanges have also set up their own IEO platforms, each with its benefits, requirements, and potential drawbacks. However, its IEO platform is Bittrex International, which is based in Malta because Malta offers crypto exchanges the regulatory certainty that the U.S. does not. Exchanges will commonly have a well-organized legal structure that protects them from regulatory consequences.

What Are Initial Exchange Offerings (IEOs)?

The platforms’ vetting procedures, at best, allow new projects that they believe are a good fit for the platform. Remember that investing in IEOs, like any investment in the cryptocurrency space, carries risks. Conduct thorough research and consider your risk tolerance before participating in any IEO. The lower frequency of IEOs has helped weed out some of the less savory projects in the cryptocurrency and blockchain space. However, no method is foolproof, but it appears that IEOs are at least on the right track.

History of IEOs: Evolution of Crypto Fundraising

Ideally, with exchanges assisting with fundraising and marketing, project teams can focus more on building a great product. The most popular crowdfunding platforms such as Kickstarter, GoFundMe, and Indiegogo, mainly showcase projects from the U.S. and Europe and only accept payments via credit cards and traditional fiat currency. These mainstream crowdfunding platforms are also focused on supporting products, projects, and causes, but do not offer the ability to purchase a share of an organization or network. Scams and potential fraud is less likely to happen with IEOs than it is with ICOs because the token sale is conducted by a regulated cryptocurrency exchange.

The user experience of an exchange is far more familiar to most people than participating in a pure ICO. Similar ICO sale parameters like fixed pricing, supply to be distributed, and hard/soft caps are also determined for the IEO. At its core, the IEO is basically an ICO but run through an exchange (or ‘launchpad’) as the intermediary conducting the sale. They have gained prominence among media outlets following several of the first sales — particularly BitTorrent’s token sale on Binance’s Launchpad. After the IEO, continue to promote your project to maintain momentum and attract more investors.

Is this type of more restrained, orderly, curated, and serviced crowdfunding the next standard in the blockchain industry? Perhaps the idealism of the very early crypto adopters was too extreme, and the resistance to centralization is softening in order to accommodate more mainstream users, adopters, and builders. To showcase the due diligence and review process of the IEO system, Bittrex actively removed one of its IEO projects right before it was scheduled to take place.

Initial offerings are conducted in rounds that consist of five-minute intervals. The IEO tokens will be freely available for trade on the main Huobi exchange after the supply of tokens from the IEO get sold out, or three rounds of IEO trading are completed. Projects that choose to launch an IEO are curated and vouched by the exchanges. Though every exchange has a different reviewing standard, this process is a major difference from ICOs, which commonly had no external review processes at all, leading to greater risks for investors. It is likely that being on an exchange from the start will bring more types of investors who would not have normally participated if it involved a direct, smart contract interaction.

Initial Exchange Offerings (IEOs) have emerged as a more secure and regulated alternative to Initial Coin Offerings (ICOs) in the cryptocurrency fundraising landscape. Your project’s website is important for providing information to potential investors. Highlight the unique selling points of your project and keep the website updated with the latest developments. IEOs often implement Know Your Customer (KYC) and Anti-Money Laundering (AML) measures to protect investors and prevent fraud. Overall, IEOs aim to restore trust and credibility in the cryptocurrency fundraising landscape.

Bolivia’s Financial System Supervision Authority (ASFI) issued a resolution in July 2018 that prohibited the use of cryptocurrencies, including ICOs, in the country. Opting for an IEO often can be an interesting option, assuming the developer has a plan of action and is dedicated to seeing the project’s vision delivered.

The near-immediate sell-out of BitTorrent and Fetch.AI are indicative of this advantage for projects. For exchanges, the primary advantages are that they get a listing fee and can attract more users to their platform who want to participate in the IEO. These users may even become long-term users of the exchange, whether because they are impressed with the trading experience or are just there solely for the IEOs. IEOs are ostensibly agreements between project developers and exchanges for initial placement of the token on the exchange.

The energy and speed in which new IEOs (IEO list here) are being launched and closed could signify that this is just an outlet for the demand that had been simmering beneath the surface this entire time. Binance Launchpad’s first IEO was for Bittorrent Token (BTT) and ended on 29 January 2019. BitTorrent was acquired by TRON in July 2018 so the BTT token is built on the TRON network.

It is possible that the project raising funds will not be able to realize its vision. This can and often will impact the token price, regardless of its value during the IEO. Blockcloud is a blockchain-based architecture that was recently launched on the OK Jumpstart platform as the first IEO venture selling 1 billion tokens and raising a total of 8 million dollars. The crypto exchange KuCoin launched its own IEO platform called KuCoin Spotlight. In order to participate, KuCoin users must complete KYC identity verification before the offering. Like Binance, certain jurisdictions or countries are not allowed to participate in its IEOs.

The first iteration of blockchain-enabled fundraising was the Initial Coin Offering (ICO), a form of crowdfunding in which an organization sells cryptocurrency or tokens as a means of raising funds. This form of fundraising is generally faster and less cost-prohibitive for companies than more traditional methods such as Initial Public Offerings (IPOs). That’s where a nascent crypto project sells coins for its new blockchain or tokens to run on another one like Ethereum or BNB Chain. Securities and Exchange Commission chased after issuers for securities violations.

Unfortunately, this method of attracting investment in blockchain startups has several disadvantages, as well. However, it could also be taken that this is the ecosystem maturing and offering much-needed improvements in standards and user experience. It could also be argued that the regulators and extreme market conditions had stopped the initial ICO craze too early when in reality there was still underlying demand that was simply being suppressed. The IEO projects themselves have also learned not to have such extreme or uncapped funding rounds.

Consider expanding your reach and targeting diverse communities to attract a wider range of investors. Hire community managers who understand the specific needs and preferences of different regions. Investors are required to follow KYC and AML procedures to participate in the IEO. This ensures that only legitimate investors are involved and helps prevent money laundering and other illegal activities. This comprehensive guide will walk you through everything you need to know about IEOs, including their definition, how they work, their advantages and disadvantages, and tips for a successful IEO fundraising event. A margin call occurs when the value of a trader’s margin account falls below the required maintenance margin level set by the exchange or trading platform.