IEO (Initial Exchange Offering)
Basic Information
An IEO is a way for startups to raise capital by selling tokens or coins. Central exchanges (CEXs) ensure that cryptocurrencies are sold with confidence by conducting a thorough vetting process.
IEO has gained popularity due to its ease of participation. It is not necessary to process on-chain transactions across multiple blockchains and wallets. A key feature of IEO is that it offers users a solution for assessing the reliability of a project and for participating in the exchange of funds under one provider. As a result, project developers can instantly interact with the CEX community without having to spend money on marketing. Therefore, an IEO is a win-win situation for both developers and users.
In general, you can purchase a cryptocurrency during its initial release through an Initial Coin Offering (ICO). However, the ICO fever of 2017 created a dangerous environment for investors. IEOs, on the other hand, provide a safer alternative for investors who wish to purchase cryptocurrency.
How to verify a project in an IEO
CEXs conduct several checks before listing in order to reduce fraud risks. Ultimately, if the project (token / coin) offered is not what was advertised, the reputation of the CEX may be compromised following the IEO.
In addition to reviewing the white paper, the IEO platform will consider a number of other factors before approving the blockchain project. CEXs will begin vetting the developers behind the project, testing the technology, evaluating the tokenomics, and determining whether the project fits into the crypto industry to protect their reputation.
If the exchange decides to proceed, investors will be required to undergo KYC procedures. The project road map and follow-up steps will also be presented to potential investors in order to illustrate how the developers intend to achieve their objectives.
PROs
- Investor assurance
- Smooth running projects
- User-friendly
CONs
- Projects pay a fee to be listed on CEX
- Risk of scam projects
- Buying via bots
Conclusion
IEO is concerned with two issues: investor safety and time management. A platform offering IEO is a good way forward if it can protect investors from maliciousness and allow projects more time to develop, as this will protect investors' interests.
The IEO was created by Binance Launchpad in January 2019 when the BitTorrent Token (BTT) was launched. The initial offering sold out within 15 minutes of its release and raised more than 7 million USD.
Analyst opinion
If you are an investor who wants to reduce the risk of investing in new cryptocurrencies, an IEO may be a better choice than an ICO. According to Reuters, the Securities and Exchange Commission (SEC) crackdown has restricted the ability of many ICO to offer cryptocurrencies to private investors. The Journal of Alternative Investments has described IEO as the next step in cryptocurrency investing and they are expected to remain at the forefront in the future.
Analyst
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