Cryptocurrency Initial Exchange Offering has emerged as a safer and more promising alternative to haphazard token sales. Collaboration of cryptocurrency startups and trading platforms made it possible to more effectively search for investors and build an understandable and controlled advertising policy for blockchain projects.
Why are IEOs held, what are their key features and what are the prospects for such projects? In this material, we will try to briefly and easily answer these questions.
Before you understand what IEO is, you need to understand how new digital currencies get into circulation. Until 2018, their developers were looking for investors on their own. In response to their contributions, issuers sent project tokens to investors.
The first example of a token sale was ICO (Initial Coin Offering) startups. However, they could not guarantee the safety of investors' investments. For this reason, in 2018, they were replaced by exchange crowdsales.
So, IEO is a format for putting a cryptocurrency into circulation, which takes place on a certain cryptocurrency exchange, which is an authoritative guarantor and sponsor of the token sale.
First of all, the trading platform assesses the investment attractiveness of the project. If the crypto exchange and the issuer of digital coins consider cooperation within the IEO to be mutually beneficial, the cryptocurrency is listed, for which the developers pay a certain fee to the platform.
After the coins go to the exchange, investors get the opportunity to exchange them for other assets. In this case, the trading floor provides the new currency with a wide audience of potential investors and liquidity.
IEO has opened up new opportunities for cryptocurrency issuers and traders who have a chance to immediately experience new coins in trading. On the other hand, every listing crypto exchange has opened up a new way to profit from collaborating with startups. Thus, the following useful features of exchange offers are distinguished.
By conducting IEO of cryptocurrencies, the exchange acts as a guarantor of the prospects of investing in a project, which increases the confidence in it from interested parties. In addition, it increases the viability of the new cryptocurrency and allows for its real assessment in the market environment rather quickly. However, IEO has a number of drawbacks.
When a cryptocurrency enters a trading platform, the latter is responsible for the asset's trading potential. This applies directly to the reputation of the exchange, so platforms often announce very high prices for listing coins to their issuers. The threshold for entering the exchange environment for crypto projects is quite high, so not every group of developers can afford to conduct an initial exchange offer.
In order to invest in an IEO project, it is enough to register on the crypto exchange where it is held. However, before becoming a member, you should carefully check all the information about the cryptocurrency developers.
Since IEO is associated with great risks for all sides of the project, the crypto industry is developing new formats for token sales. However, the initial exchange offering is still the most reliable cryptocurrency investment option among available one. Therefore, many reputable trading platforms are actively considering continuing cooperation with issuers of new coins.
Token sales within the IEO, in general, can be assessed as more successful in comparison with ICO projects. The sponsorship of exchanges has significantly increased confidence in cryptocurrency projects, as can be judged by the investment success of such developments as Gatechain Token and BitTorrent. However, the IEO format obviously requires reforming and updating in accordance with the new realities of the cryptocurrency industry.