What is Initial Exchange Offering (IEO)? Benefits of IEO

Initial Exchange Offering (IEO) is a hot term in the cryptocurrency world today. Because IEO is not only a new form of capital raising but also a sign that the cryptocurrency market is becoming more mature and professional.

So what is IEO and why is it so popular? Let’s learn more about IEO and the benefits it brings with AZCoin.

What is Initial Exchange Offering (IEO)?

IEO (Initial Exchange Offering) is a form of fundraising carried out through cryptocurrency exchanges. Instead of organizing fundraising themselves like ICO, projects will cooperate with reputable exchanges to sell their tokens to the investor community on the exchange’s platform.

How Initial Exchange Offering works

Initial Exchange Offering work by leveraging the reputation of a cryptocurrency exchange to conduct a token sale. Here are the main steps in the IEO process:

• Selecting an exchange: The startup partners with a cryptocurrency exchange to host the Initial Exchange Offering. The exchange will be the platform for the token sale and manage the process.
• Project due diligence: The exchange conducts a thorough due diligence on the project, including the development team, technology, legality, and viability. This step is crucial to ensure the credibility and reputation of the project.
• Token listing agreement: After the project passes the due diligence process, the exchange and the project sign an agreement on the terms and conditions of the Initial Exchange Offering, including the token price, total supply, and fundraising target.
• Token Sale: The exchange sets a token sale date and opens the opportunity for registered investors on its platform to purchase tokens using cryptocurrency or exchange tokens.
• Investor Verification: To participate in an IEO, investors need to complete a KYC process and comply with AML regulations. This helps ensure that only qualified investors can participate.
• Token allocation: After the sale, tokens will be distributed to investors’ accounts on the exchange. These tokens can be held or traded on the exchange.
• Post-IEO Trading: Tokens can be traded on the exchange’s secondary market after distribution and the price of the token is determined by supply and demand in the market.

Benefits of Initial Exchange Offering

Initial Exchange Offering brings many benefits to both projects and investors such as:

• Enhanced reputation: Being listed on a reputable exchange helps increase investor confidence in the project.
• Fast and efficient fundraising process: The exchange has a system and infrastructure in place to conduct the fundraising process, saving time and costs for the project.
• Minimize the risk of fraud: Exchanges often thoroughly check projects before accepting to organize Initial Exchange Offering, helping to minimize risks for investors.
• Increase liquidity for tokens: Listing on an exchange helps increase liquidity for tokens, facilitating transactions and project development.
• Access to exchange support services: Projects can access exchange support services such as marketing, legal advice, helping the project develop faster.
• Limit “Gas War”: Token purchases take place on a centralized exchange, helping to avoid unhealthy competition among investors.

Limitations of IOE

IEOs also have some limitations that you should consider:

• High costs: Listing fees for IEOs can be very expensive, sometimes up to 20 BTC, and exchanges may demand a percentage of the tokens sold.
• Exchange dependence: Projects must rely on exchanges to reach investors, which can limit their freedom to promote and develop the project.
• Market risk: If the crypto market goes badly, the value of IEO tokens will also be affected.
• High competition: There are many crypto projects participating in IEOs, making it difficult for investors to choose.

How to invest in Initial Exchange Offering

To participate in an Initial Exchange Offering, you need to take some basic steps:

• Research the project: Read the whitepaper carefully, learn about the development team, technology and goals of the project. Make sure the project has potential and no signs of fraud.
• Choose a exchange: Register an account on a reputable exchange that organizes Initial Exchange Offering and complete the identity verification procedures.
• Deposit money into your account: Check the cryptocurrency used in the IEO (usually the exchange’s token or stablecoin such as USDT, USDC) and deposit the required amount into your account.
• Participate in the IEO: When the Initial Exchange Offering opens for sale, log in to your account, make a token purchase transaction according to the exchange’s instructions.
• Follow the project: After purchasing tokens, follow the project’s development and decide on your investment strategy, which can be long-term holding or selling when the price increases.

Experience in minimizing risks when participating in IEO

To minimize the risks when participating in IEO, you can apply the following measures:

• Choose a reputable exchange: Participate in IEO on large and reputable exchanges such as Binance, Huobi or KuCoin. These exchanges often have a strict vetting process for projects.
• Diversify your investment: Do not invest all your money in a single project. Allocate capital to many different projects to minimize risks.
• Follow market information: Regularly update market news and trends to be able to make timely investment decisions.
• Use security tools: Protect your account by using two-factor authentication and other security measures.
• Consult an expert: If possible, consult with experts or people who have experience in this field.

The Future of IEO

The future of IEOs is predicted to see many significant changes and developments. Below are some specific predictions:

• Strong growth: According to CryptoViet prediction, the number of IEOs could increase to 500 projects per year by 2025.
• Market value: A report from KuCoin predicts that the total market value of IEO projects could reach $10 billion by 2026.
• Integration with DeFi: Binance Academy predicts that about 30% of IEO projects will integrate DeFi features by 2025.
• Stricter regulations: Experts from Trader Knowledge believe that there will be an increase in the application of legal regulations, with about 70% of IEO projects having to comply with new regulations by 2024.

These figures are for reference only and may change depending on market conditions and other factors. For updated information on exchanges and investment opportunities, please refer to AZcoin – best crypto exchange 2024.

Conclusion

Hopefully, the knowledge that AZcoin shared above helps you better understand IEOs and the benefits that this fundraising method brings. If you are considering participating in IEOs, make sure to do thorough research and choose reputable exchanges to maximize your chances of success.