What is an IEO?

The number of projects in the blockchain and cryptocurrency space is increasing on a daily basis. With the development of new DeFi protocols and concepts like NFTs and Metaverse, there is a surge in the number of companies taking their ideas on-chain. Every platform requires proper funding to keep the team supported and for marketing and proper operation. Also, funds are needed to keep the developers and community members engaged. Instead of depending on donations from generous asset holders, the projects tend to raise funds externally through initial offerings. 

Getting funding from Venture Capitalists is one of the most common ways opted by developers that would often result in a little to no result and is also time-consuming. Keeping the pre-minted coins in treasury before the project launch is another way that would probably end up in criticism from the community. 
IEOs are the most recent, and fair approach to raising funds that have let projects deliver their vision seamlessly.

IEO Explained in simple terms

IEO stands for Initial Exchange Offering. As the name suggests, the projects raise funds through cryptocurrency exchange platforms. The project coins are listed in these IEO platforms from where the potential investors can buy the coins helping projects raise funds. IEOs allow investors to get early access to game-changing tokens before they are available in the market. 

Not everyone buys these initial offerings. The exchange has some whitelisting procedures including KYC to let investors buy these tokens. Similarly, the projects also need to undergo some screenings like smart contract audits to ensure their genuineness. Thus, IEOs create a win-win situation for both investors and projects.

The crypto exchanges that facilitate IEOs somehow put their reputation on the line for promoting these projects. So, they make sure that projects they onboard are not scams. Startups opting IEOs for raising funds should have a clear plan of action and vision, as the leading IEO platforms rigorously review the project's proposal.

How does IEO work?

Though blockchain and cryptocurrency are relatively new, there are a number of innovative ideas waiting to be nurtured and to acquire potential investors through IEO or ICO events. Raising funds through IEO is not easy as it holds some complicated procedures before the first penny can be raised.

The projects undergoing IEO have to meet certain requirements including but not limited to a robust business model, a potential use case, expert team members, and whitepaper. In short, the projects have to prove their commitment towards long-term success. 

Also, the projects need to determine if they would have a hard cap or soft cap in the IEO. Hardcap does not allow the projects to raise more than a certain amount of money. On the other hand, a soft cap sets an initial goal and is followed by allowing more investments. Choosing a proper IEO platform is yet another milestone for the projects that had to be done for a successful IEO. Each IEO platform has its own requirements, benefits, and potential drawbacks.

 Why IEO over ICO?

ICOs are conducted by projects themselves on their official websites. The investors had to send native crypto tokens like ETH or BTC to the smart contract addresses of projects with the hope that they would receive the tokens. ICOs can be risky as anyone with basic web development and smart contract skills can set up an ICO by putting up an attractive real-project-like look and promising roadmap.

IEOs are introduced to mitigate these risks. The projects need to prove themselves to get listed on the IEO platforms and also the investors are guaranteed the allocation of tokens they pay for. Thus, IEOs are more flexible and less risky to investors and they are allowed to exit their position anytime.
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Annamalai V

Author

An enthusiastic writer on the crypto and blockchain niche. Content strategist and whitepaper writer who has worked with a ton of leading projects in the cryptocurrency space. My passion to draft content will never get old.

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