What is the primary of the exchange offer?
In 2018 there is an alternative ICO — initial exchange of proposals (Initial Exchange Offerings, IEO). The main difference between these methods of attracting investments lies in the key role of the exchange, which is engaged in the selection of promising and viable, in her opinion, projects.
ICO when listing tokens on the exchange can be carried out immediately, but a few months after the completion of licensee. In the case of IEO, the exchange initially is a key partner of the organizer of alternative licensee. So, the last produces the tokens and sends them to the exchange. That, in turn, distributes digital assets among interested investors that are verified users of the trading platform.
Instead of the usual ICO investor sending funds to the smart contract, the participant IEO must register (and typically verified) on the stock exchange, to transfer funds to the account after the start of licensee to purchase coins from the exchange directly.
The agreement between the exchange and the organizer of the IEO may contain different terms: the maximum amount of sales of tokens for one investor, a predetermined price of an asset hardcap and softcap, the percentage of sales and a fixed amount of funds to the trading floor, the distribution of marketing expenses, etc.
Why you need IEO if there is ICO?
The primary sentences of coins (ICO) has developed rapidly over the past few years, however, by the end of 2018 almost exhausted. The reasons for this legal uncertainty, the emergence of numerous projects of shell, the fraud of the organizers of tokentalk, the absence of mechanisms for the protection of investors and the crackdown from financial regulators.
It is not excluded that an improved method of raising funds will be a natural result of evolution of primary offerings of coins, repeat their success, restoring the credibility of takesall.
IEO than attractive for investors?
The exchange undertakes due diligence projects, evaluating their investment attractiveness, the viability of the developed products, risks, financial condition, market position, etc. the fact that the marketplace takes care of reputational risks, increases the confidence of investors.
Increasingly, the ICO began to replace private offerings of coins, mostly available only to large investors. IEO democratizing the process of investing in digital assets, making it accessible to a wide range of participants.
If the exchange on which IEO is centralized, we excluded the probability of occurrence of the so-called «gas wars». We are talking about a situation where the sending Ethereum participants licensee compete with each other, establishing high gas limits. This is done to increase the speed of transactions and the first to get their tokens.
What are the benefits for IEO stock exchanges and organizers?
The main advantage of this approach for organizers — ready database of potential participants of the IEO of the huge number of users of the exchange. This reduces marketing costs.
In addition, marketing does not only exchange, but also the organizers of the IEO. This approach not only saves money, but creates a synergy that enhances the effectiveness of advancement tokens on the market.
The main source of income of stock exchanges — trading commissions. More users and coins in the listing — the more transactions and, therefore, higher income from commissions. The holding of the IEO on its own platform provides the exchange the ability to attract new users and to offer, at times, exclusive coins that are not on other sites. All this increases trading volumes and therefore income.
In the case of ICO listing on the exchange is the next logical step after the completion of licensee. The listing procedure are often very costly and time consuming. When there is no guarantee that the coin will quickly find yourself on a popular exchange and become liquid.
IEO, in fact, optimizes the output token to the marketplace. Asset almost immediately after the campaign gets a little more liquid, because it appears in the listing, as a rule, major stock exchange.
This method of fundraising that is mutually beneficial for both exchanges and issuers of tokens. Despite the seemingly significant costs for the organizers, IEO increase the chances of project success in the long term.
What are the disadvantages of IEO?
Nothing is free — the issuers of tokens in any case have to pay a considerable amount for the listing on different exchanges can vary. Also, the marketplace may require a certain percentage of the total amount of funds raised.
The main marketing costs are borne by the startups that distribute the tokens through the IEO. These costs are considerable, their total amount can easily reach $100 thousand or more.
Exchange staff should consist of qualified and technically-savvy analysts who can competently and systematically evaluate the long-term project potential and viability of their business models. This may imply high costs of labor. In the event of the failure of the campaign, the exchange carries significant reputational risks.
In the IEO can only be the verified owner of the account on the exchange, not anyone. In addition, most exchanges — centralized platform. Users have to trust their own blockchain assets to a third party that is associated with the risk of outages and hacker attacks.
In General, some experts believe that amid widespread legal uncertainty model IEO is only a temporary alternative to ICO.
How to become a participant in the IEO?
First you need to make sure that a project really leads the IEO and not ICO. After that you should find out which exchanges are conducted IEO.
Choosing a suitable exchange, you need to create her account, and the procedures and KYC («Know your customer»).
You also need to know what cryptocurrency adopts IEO project and submit them to your exchange account. Then it only remains to wait for the beginning of licensee and, finally, to acquire new assets directly on the exchange.
What trading platform spend IEO?
Recently it became known that the largest cryptocurrency exchange Binance restarts the platform for tomenselo Launchpad. This platform was originally launched in August 2017. At its base within seconds was conducted IEO-tocancel BREAD ($6 million) and GIFTO ($3.4 million).
Now on the Launchpad preparing to launch tocancel projects BitTorrent and Fetch.AI. In General, in Binance promise in 2019 to conduct at least one monthly IEO.
In addition, plan to spend IEO government of Paraguay jointly with the South Korean company Commons Foundation. The funds for the construction of the «world’s largest» data center for mining cryptocurrency. Commons Foundation promises the investors to pay in tokens MicroBitcoin 30% of the profits from mining and 70% of daily profit from crypto currency exchange.