An Initial Exchange Offering (IEO) is the process by which a cryptocurrency exchange oversees the token sale process. In an IEO, a cryptocurrency exchange acts as an intermediary between the project and the investors, raising funds for the project in exchange for tokens. Typically, the exchange will promote the IEO to its users and provide a platform for contributors to buy the tokens. In return, the exchange will typically charge a listing fee and/or take a percentage of the total tokens sold.
This structure allows projects to get their tokens listed on a major exchange right away, giving them a much needed boost in visibility and liquidity. After 2018, IEOs have grown to become a popular way to raise funds for cryptocurrency projects in recent years, as they provide greater visibility and credibility than traditional crowdfunding methods such as ICOs.
After ICOs became rife with fraud, investor funds started drying up. Large cryptocurrency exchanges stepped in to lend their credibility to crowd sales to assure investors. They vet the project on behalf of the investor, lending legitimacy and trust.
What Is An ICO In Cryptocurrency?
An ICO operates like a company’s Initial Public Offering (IPO). An ICO is a way of raising funds used by cryptocurrency projects. In an ICO, a project sells digital tokens to investors in exchange for cryptocurrency or fiat currency. The tokens can be used to access the project’s products or services, or they can be traded on cryptocurrency exchanges. Meanwhile, funds raised in an ICO can be used to finance the development of the project or business. Often, during the ICO, retail investors purchase tokens at a stipulated price in the hope that they will appreciate just like company shares. The difference with IPOs is that ICOs are unregulated because cryptocurrencies fall in a regulatory grey area.
What Is The Difference Between ICO And IEO?
An Initial Coin Offering (ICO) is a public offering of a cryptocurrency at inception to raise funds to support the project. ICOs became incredibly popular in 2017 but also drew proficient scammers. Accordingly, ICOs became controversial with over half of ICO funds going into baseless projects during the peak ICO boom. Initial Exchange Offerings (IEOs) are public offerings sanctioned by reputable cryptocurrency exchanges. Both ICOs and ICOs are in the regulatory grey area, with regulators like the SEC raising questions over unregulated securities offerings.
What Makes An ICO Valuable?
The lucrativeness of an ICO depends on the nature of the cryptocurrency project. Unfortunately, most ICOs beyond 2017 were junk projects that ride on market hype. Great ICOs elaborately explain the value proposition of the cryptocurrency token. Besides, they must be different from other tokens in the market. Besides, the people fronting the ICO must have some repute or expertise in blockchain circles. Crypto projects with shady figures are likely to be scams. The proliferation of scams, as studies went on to reveal in 2018, gave ICOs a bad reputation, with most significant investors preferring other fundraising routes today.