ICOs are so 2017. IEOs are so 2019.
What the heck is an IEO?
(Other than making you sound a bit like a fool reciting all of the vowels in the alphabet) IEO stands for Initial Exchange Offering and it is an occasion when crypto exchanges to issue tokens to investors instead of project teams issuing tokens directly to investors (ICO). These exchanges then collect funds from those investors on behalf of the respective project. The exchanges get paid a percentage of the total fund raised.
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Why do these now exist?
We can’t deny the utter lack of trust after SO MANY scams and many failed projects.
No longer are investors willing to blindly throw money at a vague idea. Now they want to invest in projects that have at least passed through some sort of approval process via these exchanges.
The exchanges act as a filter, choosing to offer IEOs for projects they have researched and believe to have the best chance for success.
This is what we call self-regulation. The free market is a beautiful thing.
Let’s not forget that the exchanges aren’t completely unbiased in this situation.
They are ultimately a third party that will get a cut from the profits and will no doubt see an increase in users and brand recognition.
However, lending their name to these new offerings is at least one way to ensure they do their best to limit their exposure (and ultimately the investors exposure) to scammy and or destined to fail projects.
This helps the team behind the new project as well by letting the exchanges deal with the KYC requirements and actual fundraising. Not to mention the fact that this sets that new token up nicely to be listed on the exchange immediately after the offering is complete.
All this sounds perfect but remember who the investors and project teams are relying on. A centralized exchange.
IEOs are convenient with the tradeoff being that you have to trust the exchange running the IEO.
- You have to trust that the exchange is promoting a legitimate project.
- You have to trust that the exchange will distribute the tokens to you.
- You have to trust that the exchange uses appropriate security protocols for all of the funds.
- Not to mention the fact that depending on which exchange the project chooses to work with, you may be unable to participate.
IEOs are a very new concept and we will need to be vigilant and pay attention to how different limitations and regulations spring up.
The exchange Bittrex International was looking to dip its toe into the IEO pool an host an IEO for a project called Raid, but hours before it was set to begin they called it off, siting “…significant changes in the business status of Raid.”
If this event was organized as and ICO instead, do you think Raid would have called it off? Or even announced to their potential investors of the sudden changes and risk a failed coin offering? I think not.
Some might see this event as Bittrex promoting an uncertain project but there is something to be said for them calling it off.
Again, IEOs are very new. There’s no telling how many exchanges will want to take part or what that participation will even look like.
It’s my opinion that IEOs aren’t going to see the kind of rapid bubble type of hype that the ICOs of 2016 and 2017 brought us.
This is what regulation does, whether it be self imposed or governmental, regulation takes away the volatility and calms the waters a bit.
Some might call it boring, but like it or not, this is what happens.
With all of that being said, I think it’s interesting to see how this space is evolving. Different teams, different companies learning how to work together and utilize each others’ strengths and it’s all happening in this free market that is this cryptocurrency space.
Additional Reading/Links:
More on IEOs
Bittrex International Calls it off