One of the hottest news stories of the past week was the Fetch.AI project, which raised $6 million in 22 seconds at the Binance Exchange Public Offering (IEO). Previously, due to the very high level of activity, the same tools were used, and all BitTorrent tokens were sold for $7.2 million in 18 minutes.
What is IEO (Exchange Open Issue)? What is the main difference between it and the traditional ICO? You can find answers to these questions below.
Last year, ICO (the first token issue) was the most popular form of financing. I am not saying that the interest in ICO has completely disappeared, but compared with the end of 2017, the situation has changed dramatically. At that time, there were about 50-60 new ICO projects launched every day. Of course, not all ICOs. It is high quality and honest project.
According to a study by the Statis Group, about 80% of the ICO projects are scams, and fake projects attract one-tenth of all investment funds (of $1.9 billion in the $1.9 billion raised in 2017, to $36.40). Another downside is that the legislative framework in most countries has not improved and investors are still unable to prevent fraud.
But the demand for financing and investors has not disappeared, so today’s project has two options:
The private placement, where a project raises the required amount in a closed mode, requires a fairly high initial interest in the project. The best example of this is Telegram, which raises $850 million.
Exchange Public Offering (IEO) – The first exchange is issued, which refers to the use of the exchange as a fundraising platform to issue (sell) tokens to users of the exchange, and then the exchange will become the second generation of the token. The main trading market in the market.
What is IEO?
IEO is a token sale on the exchange. The key difference between IEOs and traditional ICOs or private placements is the use of exchanges as an intermediary. The exchange team conducts preliminary audits and technical verification of the project and its tokens, assesses the project’s attractiveness and potential for investment, and then announces the start of token sales on the exchange. Investors who wish to purchase tokens do not need to go through a smart contract (such as ICO), register on the exchange and immediately purchase tokens from their personal account.
Why does the project need this opportunity?
The main advantage of the tool for the project is that the exchange has a large number of existing customers who automatically become potential investors.
What benefits does it bring to investors?
For investors, in addition to being able to trust encrypted exchanges as a secure intermediary, the biggest advantage is that tokens are listed at the same time, and the exchange plays a role as a partner organization. Depending on the exchange involved, investors may have the opportunity to enter the project in fiat currency.
What are the benefits of IEO for trading?
The main advantage of the exchange is the influx of a large number of new users and their deposits. Some of these users may eventually become regular users of the exchange.
How is the token issued?
Token issuance follows the same principles as ICO, and precise conditions are determined for each individual project. For example, a developer may need a fixed price to sell tokens throughout the IEO process, or set a limit on the number of tokens for each investor. If they see a potential threat or the token is sold successfully, the exchange can adjust the hard/soft cap.
How to participate in IEO?
The rules for participating in the IEO may vary from exchange to exchange, but the basic steps for the user are the same.
How does the exchange choose a project?
This process is virtually identical to the traditional due diligence process for tokens after the ICO. As mentioned earlier, funding in the ICO does not guarantee the future success of the project in any way.
In most cases, the exchange judges the project based on the work done by the project team analyzes whether the idea is interesting, what stage the product is in, and what the prospects are. Other important aspects are the team and the project community.
It is also important to assess the market value and the vision of the project to carry out joint marketing activities (from the exchange of coin-operated airdrops to the special reputation of the media fed back by both parties).
Currently, only a few exchanges offer this service, including Binance, EXMO, GBE, and Okcoin. Bittrex recently announced that it will also host IEO, which creates Huobi Prime.
The most well-known and most discussed platform on the Internet is the Launchpad of the Binance Exchange, which completed the sale of bread ($6 million) and gifts ($3.4 million) in just a few seconds in 2017. In 2019, the BitTorrent project’s tokens sold out in 18 minutes, raising $7.2 million, while the Fetch.ai project raised $6 million in 22 seconds.
The EXMO cryptocurrency platform launched the IEO in February 2019, when it chose Paytomat (PTI coin) as its first collaborative project. The PTI token IEO is scheduled to be launched in early March.
The launch of the tool has attracted great interest from crypto market participants due to qualified audits and a high level of trust in crypto-exchange tokens (there has been no decoupling since the creation of EXMO).
Other additional “dividends” on the EXMO platform are fiat currencies (US Dollar, Euro, Ruble, TRY, UAH, PLN) and a number of available payment methods. The project can withdraw the token immediately after the IEO, and the investor can purchase the token for the Fiat fund.
The OK Group has invested more than $100 million to set up a venture capital fund to work closely with funds in the digital asset industry to raise funds for potential blockchain projects.
The risk of using this tool to purchase tokens is much lower than the risk of buying tokens in the ICO, as most of the ICO’s projects do not reach an agreement with the exchange for further listing – which is itself a big risk.
Unfortunately, no one is immune to hacker attacks and the possibility of tokens being delisted by exchanges, and poor project quality leads to asset price declines, but these are extreme.
