IEO - the next step in ICOs evolution?
In this era of digital almost everything, digital cryptocurrency is at its peak. We have talked about Bitcoin, Ethereum and Altcoins in our previous post but there are yet quite a few 'mystery' words navigating in the crypto universe.
ICO and IEO are two relatively new phenomenons that have recently become highly discussed by the blockchain community.
The ICO (Initial Coin Offering) and IEO (Initial Exchange Offering) models are closely associated with each other, however, IEO is often called as the next step in ICO's evolution. Many blockchain specialists view IEO as a result of market evolution.
To put it simply, both ICO and IEO are the ways of finding financing for startups. In other words, they are fundraising mechanisms. However, unlike ICO, IEO operates by selling tokens under the supervision of a registered and fairly significant crypto exchange that carries out the initial evaluation of the startup as a means to identify any fraudulent activity. These exchanges, which can also be considered as administrators, analyze different projects through audits, technical analysis, and the potential of the token in addition to managing the sale directly on their platform throughout the entire process. The 3 primary participants of the sale to be evaluated are exchanges, projects, and investors.
According to experts from IBCGroup, IEOs are more favored by exchanges as they can attract new investors and get new deposits. Also, exchanges do benefit from putting new tokens on their lists.
IEO offers high transparency, high liquidity, and higher safety. Whilst basically anyone can launch ICO, in IEO the project team must first carry out a comprehensive assessment of the project and comply with the requirements of the exchange to launch the token sale.
As for ICOs, most of them operate by having investors send funds (usually bitcoin or ether) to a smart contract that stores the funds and distributes an equivalent value in the new token at a later point in time. There are very few restrictions on who can participate in an ICO, and it is not monitored by any third parties. One of the biggest risks with ICO is that most of them raise money pre-product which renders the investment rather speculative.
In the long run, the hype around the ICO attracted the attention of controlling authorities which in the end resulted to be a good thing. All the control over ICO projects made it more reliable and fraud-resistant. However, the blockchain industry does not seem to be pacing itself - it develops without waiting to be controlled by anyone. And namely, this independence is what attracts and grows the user community the most. Investors started gaining more access to more authentic projects, and so ICO slowly developed into IEO.