Trading 101: What is an IEO?
In this article, we will explore the basics of Initial Exchange Offering and how they make fundraising more effective.
The world of cryptocurrency has been rapidly evolving over the past few years, with new technologies and fundraising methods constantly emerging. One such method is the Initial Exchange Offering (IEO), which has gained popularity as an alternative to the traditional Initial Coin Offering (ICO). IEOs have the potential to revolutionize the way that startups and established companies raise funds in the crypto world.
Getting Started: The Basics of Initial Exchange Offering
Initial Exchange Offering was introduced early in 2019 and has since become a wildly popular way to launch new crypto projects. The concept of an IEO builds upon earlier forms of Initial Coin Offering (ICO) that emerged as a popular way for startups to raise funds in the blockchain industry. ICO was popular in the crypto industry during 2017–2018; however, the ICO market was largely unregulated, and as a result, many investors lost money on fraudulent projects. IEO was introduced as a response to these challenges.
What is an IEO?
An Initial Exchange Offering (IEO) is exactly what it sounds like: a fundraising event where a new cryptocurrency project is launched and listed on an exchange. Investors can purchase the new token using the exchange's platform rather than sending funds directly to the project's team. In other words, the cryptocurrency exchange will play the role of go-between for the project and the investor.
Due diligence is performed by the exchange in an IEO to make sure the project is legitimate and meets certain standards. Since the exchanges' reputation is on the line with every IEO they decide to offer, it stands to reason that blockchain projects receive a thorough evaluation of their proposals as their white papers are examined and their funding campaigns are promoted.
Before getting the go-ahead from the IEO, each project must be qualified for the following criteria:
- Project Viability: The first and most important qualification criterion for an IEO is the viability of the project. It indicates that the project has a practical and viable solution that addresses a real-world issue or meets a market need. Projects with innovative and unique ideas are preferred, and they must have a comprehensive business plan that outlines their revenue streams and target market.
- Compliance: Regulatory compliance is a must for any blockchain project. Before participating in an IEO, projects must ensure that they comply with all applicable regulations in the operating jurisdictions. Exchanges have a responsibility to ensure that blockchain projects adhere to regulations.
- Technical Quality: The technical quality of a project is a significant factor in its IEO qualification. Projects should have a working product, or at least an MVP (Minimum Viable Product) that has undergone proper testing and security audits. The codebase should be open-source and available for public review. Additionally, the project should have a robust and dependable blockchain infrastructure capable of handling a high volume of transactions.
- Market Potential: Market potential refers to the size of the target market, the competition, and the potential for revenue generation. Projects with a large addressable market are generally more likely to succeed in an IEO. In addition, the team should be able to demonstrate how their project has a competitive advantage over existing solutions.
- Team Experience: The team's experience and expertise are essential factors in the IEO qualification process. A strong team with a diverse skill set and experience in their relevant fields is more likely to develop a successful project. The team should have a well-defined project vision and strategy, and each member should have a specific role and responsibility.
How an IEO works
IEOs typically involve several steps. First, a cryptocurrency project will approach an exchange and propose an IEO. The exchange will then conduct a due diligence process, which may include reviewing the project's white paper, examining the team's credentials, and assessing the project's potential for success.
When the project is green-lit, the exchange will set a date for the IEO and list the new token on its platform. Investors who are interested in the project need to go through the KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures of the exchange before gaining full access to the project sale.
During an IEO, there may be more than one token sale. Typically, the ﬁrst round is reserved for early investors, who may be able to purchase tokens at a discount. As the rounds progress, the price of the token may increase.
How IEO Makes Fundraising More Efficient
- Immediate Liquidity: Investors can buy and sell IEO tokens on the exchange immediately after the IEO is completed, providing immediate liquidity.
- Increased Credibility: To give investors the peace of mind they need to participate in the IEO, the hosting exchange performs its own due diligence on the project, which is not always easy to come by in the unregulated ICO market.
- Access to a Large User Base: IEO platforms have a large investor user base, enabling projects to reach a wider audience and quickly raise capital.
- Reduced Risk for Investors: Tokens are usually held in escrow by the exchange hosting the IEO until the project reaches certain milestones or achieves its goals. This lessens the chances that investors will be scammed or that the project won't deliver as promised.
Bitget is Back: Get Ready for the Restart of IEOs!
The wait is over! Bitget is back with more exciting IEOs on Bitget Launchpad, offering users a chance to invest in the next big digital currency. Launched in January 2022, Bitget Launchpad is the platform for launching new crypto projects and airdrops. Bitget has a successful track record in hosting IEOs, with numerous campaigns generating significant investor interest.
In March 2022, we successfully hosted the IEO of Bot Planet. The IEO was met with great interest and enthusiasm from investors, with 6,250,000 BOT tokens selling out quickly due to high demand from eager investors.
The decision to restart IEOs on the Bitget Launchpad platform is a positive sign for the cryptocurrency market, as it shows that the industry is adapting to the changing regulatory landscape and finding new ways to thrive. Bitget's experience in hosting successful IEOs with over 8 million registered users from 100+ regions will provide a valuable platform for new and exciting projects to gain exposure to potential investors.
For more details on Bitget Launchpad, please refer to What is Bitget Launchpad?
Initial Exchange Offering is a popular way for new cryptocurrency projects to raise funds and gain exposure. They offer several advantages, such as a reduced risk of fraud and exposure to a large number of potential investors. To get the most out of Bitget's IEOs, it is important to do your research, set realistic goals, and diversify your portfolio.
Don't wait any longer! Secure your Bitget account today and be the first in line for the highly anticipated restart of IEOs!
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