In this article, we introduce the concept of IEOs (Initial exchange offering) and the difference between IEO, STO, and ICO. We should note that IEOs can currently generate huge profits with almost no risk. No risk as all IEOs have occurred since February 2019. Every investor should do their research and assess their risk in an IEO.
ICO and IEO
Is the time for ICOs over? Many investors who want to invest in startups continue to ask this question. To answer this question, let’s first examine how initial coin offerings have performed in the past.
Here’s an example: To have $ 3 million capital available, a startup would need to collect “only” 4,000 Ethereum coins in January 2018. Today, however, the same company would need to receive 21,500 Ethereum coins to achieve the same amount of capital. It shows how the volatility of cryptocurrencies affects.
At the same time, the time taken to raise funds has also increased significantly. In the first quarter of 2018, an average of 30 days was sufficient. Today, on the other hand, it takes an average of two months for a company to cover its capital needs with an initial coin offering.
The decline in initial coin offerings started with the general market downturn in May 2018. ICO-funded startups lacked the means to meet their roadmaps and develop them on time. At the same time, many have decided to wait until the market stabilizes again. However, it lost a lot of trust in the community. Also, ICO regulations were strict in the United States and other countries. It is why we have advised against investing in ICOs when comparing cryptos for many months.
STO – Security Token Offerings
As ICOs no longer had the old charisma, investors turned to other options. STOs “Security Token Offerings” was presented as lucrative.
It is a problem with a specific type of sharing token. Buyers acquire “security” shares (stored on the respective blockchain) at the issuing startup.
However, STOs for the past six months have struggled to find capable and certified crypto exchanges to offer them. Some Stock exchanges, such as Coinbase and ZBX, are currently in the certification process. At this time, however, there is still no duly authorized platform to offer STO.
We should note that STOs look very interesting in theory. In practice, however, there is still no functional market for this product.
What is IEOs (initial exchange offer)
Initial exchange offers are token sales through a crypto exchange. The developers of a project create the tokens and pass them to the respective crypto exchange. They then sell them to individual stakeholders.
This approach has many advantages.
In this way, the startup can build on the respective crypto exchange’s large user base from the start.
It makes marketing more comfortable and more specific.
At the same time, the company enjoys customers’ essential trust as it operates under the name of what is arguably the best-known crypto exchange.
The crypto exchange takes care of all customer verification requirements and token activation. It saves startup costs, which have more funds for the actual project.
The current state of IEOs
IEOs only increased their speed when the crypto trading platform BitMEX offered them. The first IEOs were the ANKR cloud computing project and the FET protocol.
Crypto exchange Binance now also runs one IEO per month. It is done via the internal platform, the “Launchpad”. You can only pay for the tokens there with the native currency of Binance BNB.
It is still wholly uncertain whether initial coin offerings will recover in the future after full regulation. The security token offerings are in the starting blocks. It is also possible to know if they will take off or not.
The initial exchange offers are already underway and are very successful. Therefore, it is to be hoped that they will be the medium of choice with which young companies raise their funds in the future.