Initial Exchange Offering Guide | What is Binance IEO?
An Initial exchange offering (IEO) is a round of funding that is hosted on a cryptocurrency exchange’s platform on behalf of a startup.
In the crypto economy, Initial coin offerings (ICOs) have become quite popular. Startups launching crypto-related projects have been floating ICOs left, right, and centre since the Bitcoin boom of 2017. This became so prevalent that it caught the eye of regulatory bodies in different jurisdictions. To counter the extreme scrutiny by regulators on ICOs, a new trend of Initial Exchange offerings (IEOs) is beginning to gather momentum.
What are IEOs (Initial Exchange Offerings)?
An Initial exchange offering (IEO) is a round of funding hosted on a cryptocurrency exchange’s platform on behalf of a startup. IEOs differ from ICOs in that exchanges float them on behalf of projects instead of the projects or companies themselves floating the funding rounds. This is an excellent way for a project to go around regulators' intense scrutiny and not have to worry about authorities or regulations.
How IEO works
The way this works is that exchanges play host to token sales initiated by various startups. The startups floating the tokens pay a listing charge, and a percentage of the tokens moved during the funding round. In exchange, the startup’s tokens are sold on the exchanges’ platform, and the coins listed after the financing round is over. The revenue gotten by the exchange as a result of selling a good percentage of the tokens on behalf of a startup; incentivizes it to conduct marketing operations on behalf of the startup.
With IEOs, there is a shift away from sending contributions to smart contracts. Instead, contributors sign up to exchange platforms where the IEOs are being conducted. The contributors then stack up coins in their wallets and use them to purchase company tokens.
IEOs VS ICOs
With so many ICOs enjoying success during the fundraising boom, one would wonder why some startups sort to make the switch to IEOs. The shift to IEOs is incentivized by several big pluses that are not there in ICOs. These include:
1. IEOs enable startups to leverage on a cryptocurrency exchange’s existing user base to get contributions for the funding round
2. IEOs have also deterred scam cases because users and potential scammers know that contributions can only be made through the exchange, which goes a long way to reassure contributors.
3. Listings of IEOs on exchanges where the founding rounds are conducted occur organically instead of having to lobby for a spot on an exchange’s listing like ICOs do.
4. IEOs save contributors from having to worry or research the startup since it being on an exchange means that the exchange has already done its due diligence on the startup.
Top exchanges and their IEOs
IEOs are beginning to get more and more love from various top exchanges by the day. Some of the hottest exchanges hosting IEOs include:
The Malta-based Binance exchange launched its own IEO platform known as Binance Launchpad, which has hosted substantial funding rounds. One such funding round involved BitTorrent, which raised $7.2 million inside a quarter of an hour. Another round of funding on the platform in the form of Fetch.AI raised $6 million in just 22 seconds.
Bittrex also dropped its own IEO platform, which hosted funding round for a RAID project back in March.
Bitmax also launched its platform known as the Bitmax Launchpad, which recently hosted a round of funding on behalf of a startup known as IOTW.
Huobi also launched its own IEO platform, Huobi prime, which has been famed for giving users early access to potentially lucrative crypto coins.
KuCoin has the KuCoin spotlight in place as its IEO platform. The platform is getting ready to host a new round of funding on behalf of a project known as COTI, which will take place on the 4th of June.
The OKEX exchange has the OKEx IEO as its IEO platform. The platform celebrated its one-second sold-out funding round last month in what was an unbelievable feat. The funding round done on behalf of Blockcloud closed in just a second.
Best performing IEOS
Some of the best performing IEOS include:
1. BitTorrent Token (BTT)
The launch of this IEO on Binance fueled the IEO craze all over the industry. The token has stabilized after a turbulent first month to give an ROI of 6.3.
2. Top Network
This token hosted on Huobi recovered from an initial dip to return 5.55x initial value though it is widely argued that the coin is yet to find its stable price.
OKEX’s Blockcloud token has performed quite remarkably, returning 4.7x its initial value after a strong rally from $0.03 to $0.047 inside a month.
How to get involved in an IEO
Getting involved in an IEO is an exciting and profitable venture if you do your due diligence. Getting involved can be difficult since they aren’t that many rounds of funding being floated. Getting involved in an IEO takes only three steps.
1. The first step is finding your IEO of choice and getting involved in it by finding out the exchange or exchanges hosting the funding round.
2. The second step is to sign up for the cryptocurrency exchange hosting the IOE after completing the verification process.
3. The final step is to find out the various cryptocurrencies used in the IEO. After figuring out that funding your account with a fair coin, all you can do next is to wait for the funding round to begin purchasing the tokens.
Will IEOs replace ICOs?
ICOs have been dominant throughout the 2017/18 fundraising craze. The problem with ICOs has been the presence of scam projects which have attracted a lot of attention from axe-wielding regulators. IEOs, on the other hand, are more trustworthy since reputable crypto exchanges co-sign them. IEOs could, therefore, potentially replace ICOs as the standard fundraising model for crypto startups.