Blockchain-based fundraising has dramatically changed the way entrepreneurs and business can collect capital to power their endeavors. This medium is constantly evolving and the latest solution in this long line of fundraising tools is Initial Exchange Offering or simply known as IEO.
What is IEO?
An IEO is a relatively new trend that employs cryptocurrency exchanges to raise funds on behalf of an entrepreneur or startup. By listing exclusively on an exchange, a startup can harness the popularity and reach of the platform to promote their token.
Advantages of IEO
There are several merits for startups to use IEO for raising funds for their project. They are listed below:
Trust factor: Exchanges organize rigorous examinations to ensure the different project comply with different regulations before listing them on their platform.
Token Security: Entrepreneurs do not have to worry about the security of their token as it is provided by the exchange.
Simplified Marketing: Publicizing the project and reaching investors is organized by the exchange platform.
How IEO is different from ICO?
IEOs are often confused with ICOs. The two help entrepreneurs raise funds in distinct ways and these differences have been listed in the table below:
| Initial Exchange Offering (IEO) | (ICO) Initial Coin Offering |
|---|---|
| The tokens are listed and promoted by the host exchange. | The tokens are usually listed on the issuer’s website and burden of marketing the project is with the entrepreneur. |
| The exchange takes a lot of effort to ensure that the featured tokens comply with different regulations and legislations. | It is not mandatory for the coin issuer to comply with regulations. |
| The startup does not have to worry about the marketing of the token. The exchange will promote the token on the entrepreneur’s behalf. | The issuer is tasked with organizing and overseeing the entire marketing process of the token. |
| The risk of facing geographical limitations and other issues is lowered because the exchange conducts in-depth scrutiny. | Given the number of scams associated with this medium, many countries have banned the launch of ICOs. |
| The entrepreneur can list the token only on one exchange. | The issuer can list the tokens on multiple exchanges if required. |
Is IEO the next big thing?
Given the multiple advantages that IEOs posses, many pundits believe that this fundraiser medium will quickly replace ICOs. In fact, many entrepreneurs prefer to launch their projects using this medium. Meanwhile, the first quarter of 2019 witnessed a surge in the number of Initial Exchange Offering projects getting listed on different exchanges.