What is an Initial Exchange Offering (IEO) & How is it Different from an ICO?

ICO is a fundraising method that allows crypto projects to initiate crowdfunding, without any regulatory interference. It basically enables projects to showcase the future potential of their offering and raise funds to actually develop the offering. In this blog post, we will understand the concept of Initial Exchange Offering (IEO), and take a look at how it is different from an ICO.

What is Initial Exchange Offering (IEO)?

An IEO is quite similar to an ICO, in terms of the purpose. Both IEO and ICO are fundraising mechanisms. However, as the name suggests, an IEO is executed by a cryptocurrency exchange.

ICO allows crypto projects to raise funds independently. IEO, on the other hand also enables the same, but the process is administered by a cryptocurrency exchange. In that case, interested investors can buy the tokens by paying directly from their exchange wallets.

The Working Mechanism of an IEO

The working mechanism of an IEO is extremely simple. It is considered to be much more secure and safe than ICOs. The idea of IEO gained traction after several ICOs across the world started scamming people. This raised major questions if people should participate in ICOs conducted by independent crypto projects. In that context, IEOs are much more secured, as they are constantly overseen by a cryptocurrency exchange.

As mentioned earlier, investors can directly pay for tokens via their exchange wallets. However, one might not have an account in the IEO-hosting exchange. In that case, they need to create an account on that particular exchange to get access to their crypto wallet. Once done, they can participate in any IEO hosted by that exchange.

An IEO offers certain benefits to projects or token issuers who are looking to raise funds. To start, projects are required to pay a listing fee to the exchange. In return, the exchange lists their coin on its platform where people can come and buy. In this way, projects get access to a large pool of potential buyers, which would have otherwise been difficult. An IEO allows projects to tap into an already existing audience base without spending marketing dollars.

IEOs offer another prominent advantage. Exchanges keep the tokens listed even after the IEO is over. Potential buyers can buy these listed tokens from the exchange at any point in time. In the case of an ICO, projects are required to individually contact cryptocurrency exchanges to list their tokens. This can be a tedious process.

Security is one of the most important aspects when it comes to any fundraising campaign. IEOs are quite useful in that context as well. Projects are not required to monitor this aspect. The host exchange takes care of the KYC/AML of all IEO participants.

Some Major IEO-Hosting Exchanges

What is an Initial Exchange Offering (IEO) & How is it Different from an ICO?

Several exchanges host IEOs for crypto projects. The most prominent ones include:

  • Binance Launchpad
  • Bittrex
  • BitMax
  • Huobi
  • KuCoin
  • OKEx

Ending Note

The ICO method of fundraising gained huge traction throughout 2017. However, with an increasing number of scams and frauds, the concept started to fade away. Investors were hardly willing to invest in ICO projects. The emergence of IEO has somewhat restored the integrity of fundraising in the cryptocurrency space. It offers convenience, safety, and security for both investors as well as fundraisers.

Please feel free to share your queries and feedback regarding this topic and we will be glad to address those.

By admin