Initial Exchange Offerings (IEOs) have stood out among the previously invented ways of publicly raising funds for blockchain projects. First it was the Initial Public Offering (IPO), then the Initial Coin Offering (ICO), and Security Token Offerings (STOs) and then the IEOs that has also roped in Initial DEX Offerings (IDOs).
ICOs ended up being shrouded by lots of scams due to a lack of proper regulations.
STOs did not become as successful as the ICOs because STO are governed by securities regulations and the regulations and restrictions set by the regulatory authorities like SEC are quite tough.
The ease with which ICOs operated attracted a lot of investors and but there was the issue of making the ICOs scam-proof. Developers had to come up with a way to make crowdfunding possible even in countries like China where ICOs are banned due to a lack of proper regulation formulas. That is what led to the invention of IEOs, which are run and managed by the crypto exchanges in conjunction with the development teams.
IEOs employ the same working principles as the ICOs and thus maintain the simplicity with which they are carried out. However, by using the crypto exchange Launchpad, they make it safer than the ICOs since the development team has to meet several requirements for their project to be listed on the exchange. Therefore, the issue of scams in IEOs is greatly minimized since they would keep the reputation of the crypto exchanges at risk.
Nevertheless, although the IEOs make it more interesting and safer for investors, the investors still carry the bulk of the risks; the project may pick or fail. The fact that a project gets funded through a crypto exchange Launchpad does not mean that the project will automatically become a success.
However, we cannot refute the fact that projects that have done their crowdfunding through IEOs have ended up hitting their target within a very short timeframe compared to the ICOs which take months and at times even end up missing their targets. We have seen projects hit their targets even in minutes.
In IEOs, the target investors seem to be guaranteed. The exchange users, of course, trust their exchange platform and tend to take up every opportunity that comes up on the exchange. Therefore, if the exchange lists an IEO, the users will be fighting to invest in it. But the question is; how sure are the investors that the project they invest in will succeed and become profitable.
Unfortunately, similar to the ICOs, IEOs are still not very reassuring. Investors can only hope and pray that the project team does its best to ensure that the project picks to give the tokens more value than the value at which they purchased them. In a way, they cannot be compared to the STOs, where the investor gets a share of ownership of the project.
At the moment IEOs seem to be carrying the day and developers can depend on them for raising funds. However, for investors, the rise and fall of ICOs should serve as a lesson. Investors should always ensure due diligence whenever they are choosing which project to invest in.
Indeed, scamming is greatly reduced in IEOs, but even genuine projects flop if they were not well planned. Investors should do thorough research about the projects before investing their money.
What does the future hold for IEOs?
One thing is for sure; cryptocurrency exchanges are here to stay. In an actual sense, we should expect to see more and more exchanges entering the market.
The other thing is that blockchain and cryptocurrency startups will continue to come up and they will of cause depend on the general public for funding since the banking sector could prove to be very costly for them. Blockchain startups cannot afford bank loans since the projects may not thrive as anticipated since they wholly depend on how the general public receives them.
From an expert’s view, IEOs will most definitely outstay the ICOs. Also, more countries are set to embrace IEOs compared to ICOs since they are offered through exchanges that are easily regulated by the regulatory bodies.
The other alternative that startups have to choose between is the Initial DEX offerings (IDOs), which in essence are similar to the IEOs. The only difference is that IDOs are conducted on decentralized exchanges (DEXes) while IEOs are done on centralized exchanges (CEXes).