Initial Exchange Offering (IEO) is a type of token sale which is provided by the cryptocurrency exchange. IEO is controlled and managed by the exchange on behalf of the startup. Its aim is fundraising.
Initial Exchange Offering
Since the token sale is provided by a cryptocurrency exchange, the token issuer should pay for token listing sold during the IEO. It allows tokens to be listed on the exchange just after the IEO ending. Since the exchange has a profit of sold token, it’s quite in its interest to help with marketing and advertising.
Before the token sale on the IEO exchange platform, both the exchange team and the token project team must sign an agreement. The exchange platform conducts a thorough analysis of the project to make sure that the project is authentic. When the exchange is finally acquainted with the project and decide on IEO, it announces the date of the IEO and the fixed cost of the token. If the exchange has its own token, then the project owners need to buy local currency in order to apply for IEO.
Exchanges supporting IEO function
Recently, a lot of exchanges began to introduce the function of IEO. One of the first was the Binance exchange, which launched its Binance Launchpad platform. IEO token from BitTorrent was launched on this exchange in January 2019, which brought more than $7 million in 15 minutes, however, its price has dropped significantly since the end of the IEO. The next IEO on Binance Launchpad was Fetch.AI project, which managed to attract $6 million in 22 seconds.
Seeing the success of IEO, following Binance, the following exchanges announced their intention to implement the platform for IEO: Bittrex (Bittrex International IEO), BitMax (BitMax Launchpad), Huobi (Huobi Prime), KuCoin (KuCoin Spotlight) and OKEx (OKEx IEO). ICObench also added IEO.
IEO vs ICO
- In the case of IEO, scam is almost impossible, since the token can only be purchased from the exchange.
- In IEO, the exchange acts as a guarantee of the quality of tokens. This fact attracts investors.
- The transition to the listing of the exchange after the end of IEO is an excellent prospect for startups.
- Previously, in order for ICO projects to reach users, extensive marketing and expensive advertising were required. But since IEO is held on exchanges with a large user base, the project team will reduce marketing costs, while encompassing more users.
How to participate in IEO
When the user finds IEO, in which he wants to invest his money, he needs to find the exchange that represents this IEO and register on it. Then you have to go through KYC (Know Your Customer) to verify your identity. After the registration has been completely done, all that remains is to deposit funds into your account on the stock exchange and wait for the start of the token sale.