What is an Initial Exchange Offering (IEO)?
IEO (Initial Exchange Offerings)is just like an ICO but it is run and managed through an exchange ( ‘launchpad’ or ‘IEO Platforms’) as the intermediary party conducting the sale on behalf of the project or developers team.
For Initial Exchange Offerings IEO, Launching Platform (IEO exchange) will acts as middle man between projects (Development Teams) and contributors (Investors).
Initial Exchange Offerings (IEOs) are trending since beginning of 2019 — seen as improvement from the traditional Initial Coin Offerings (ICO). While these IEOs do offer some noticeable advantages over traditional ICOs offerings, they still have to go a long way before investors start trusting these launch platforms or IEO exchanges who have emerged as prominent players in the ‘Cryptocurrency Ecosystem’.
Following the rise of ICOs back in 2017 and then their popularity drop by end of 2018, many questions have risen in this crypto crowdfunding domain. Now investors are more concern about the regulatory bodies and regulations that control and monitor these activities. In years to come this will affect future of the Initial Coin or Exchange offerings and whole concept of Crypto crowdfunding.
Unfortunately, the ease of raising funds during the altcoin bonanza of late 2017 led to nearly 75% + of ICOs being identified as scams. As a result of this, regulators got involved and although they took their time to formulate standard regulations and guidelines, finally some clear outlines and regulations on tokens sale and their legal status are there.Investors now have enough information to get a clear picture about business models and legal status of these Crypto launches and offerings.
Now it may makes anyone think, why should a team or a project seek to conduct their fundraising from IEO vs ICO?. In our opinion there are several advantages to the approach of conducting fund raising activity with an IEO as compared to traditional ICO offerings. There is always a huge potential for Launch Teams as they can tap into the existing user base of the exchange. These users can contribute for the IEO. It also helps to prevent “Token Sale War” between participant, i.e most of these exchanges are not decentralised .
This can also stop and make it more difficult for scammers and other fraudsters to manipulate the market or to Launch Fake offerings, as they know that they can only buy and sell the tokens from the launching exchange only.
This IEO Launch Process if carried out properly can function as a vote of confidence from the exchange, sponsor or other Launching Platform. They have to conduct their own due diligence on the developer’s project as its their Platform reputation that's at stake too.
In past these exchanges have seen profits mostly from trading fees alone, and it is a difficult market as they are always facing increasing competition for users and commission rates charged by their competitors. How ever with these IEOs now exchangers can reap some of the benefits when they facilitate an IEOs . There is always an IEO listing fees. This can vary quite significantly between exchanges depending on their market reach and existing user base.
For IEO Crypto Exchanges, there can also be influx of new users seeking to participate in an IEO and their deposits that come along. Some of these new users may eventually become loyal users of the exchange. We predict that soon many crypto exchanges will be running Launch Platforms to attract new startups for conducting their IEOs. An IEO marketing campaign will be also a promoting exchange on long term.
In short IEO bring ease of management, a solid investor base and good reputation of Launching Platforms with them for Projects, while offering a due neutral diligence process and risk assessment exercise conducted on porporsed investment by their own trusted exchangers.
From investor perspective as now there are 2 stakeholders on other side of deal hence , the risk is always mitigated.