The new trend of Initial Coin offerings (IEO) in 2019 and how it will take crypto back to the moon!
After the whirlwind journey of ICO’s, the year 2019 saw new trends in the crypto sphere. IEO or Initial Coin Offerings have been on an uprise, since the beginning of the current year.
If you have been through the roller coaster ride of ICO’s, then you know that IEO’s are the next big thing in the crypto industry. As the crypto current is shifting towards the new era of IEO- here are some of the things that you must know today!
Why is the Crypto Sphere Shifting Towards Initial Exchange Offerings (IEO) in 2019
The years 2017-18 gave rise to almost 4000 ICO’s in the crypto sphere. But, like the dot-com bubble, the ICO bubble also met the same fate. The year 2017-18 witnessed almost 4000 ICO’s in its making. These ICOS’s collectively raised close to $20 billion dollars from crowdfunding and venture capitalists. However, these promising ICO’s failed either due to strict government regulations or were a poor attempt to scam people for their money. After the crypto’s ICO bloodbath, rates of new coins, as well as promotional funds allocated to ICO’s, have been declined drastically. The ICO industry, with its scams, lost people’s money, and trust.
Following this massive spiral, ICO’s have become a thing of the past. The crypto industry has shifted winds towards a new mechanism of IEO’s. According to this blockchain and crypto report, in the first quarter of 2019, IEO projects raised $1.63 billion more as compared to other tokenized blockchain platforms. The beginning of 2019 marked an increasing shift towards one of the fastest capital funding platform of IEO’s.
What is an Initial Exchange Offering (IEO)?
Initial Exchange Offerings or IEO is a method of raising funds for startups through a cryptocurrency exchange platform. This latest concept revolves around the cryptocurrency exchanges. An exchange hosts IEO on its platform for the company, who seeks to raise funds for its blockchain project. In return, the exchange takes a percentage of the token sold by the company.
The crypto exchange manages as well as administers the IEO in order to raise capital. The capital for the startup company is raised through the newly issued tokens (of the startup). The coin issuer or the startup has to pay fees or tokens to the exchange for hosting it on the crypto platform.
Advantages of Initial Coin Offering (IEO)
IEO’s are significantly different than the Initial Coin Offering (ICO) mechanism. As compared to ICO’s, they offer major benefits to investors as well as the startup, hence creating a win-win situation. Let’s take a look at some of the advantages of IEO as compared to ICO’s
High Level of Security
ICO’s banished their own reputation when thousands of them disappeared after scamming the investors. In contrast, IEO’s offer a relatively high level of security to counter such scams. As the IEO’s are hosted on the exchange platform itself, the user data is managed by the cryptocurrency exchange itself. Rather than random startup companies gaining access to the funds of users, it remains safely (again relatively) in the hands of the exchange platform.
Furthermore, the IEO’s offer ease to the users, who directly engage with the crypto exchange. The user of the exchange does not have to go through the tedious process of KYC/ AML again, as the exchange already has all the needed information.
Safety of Funds
Another key feature that takes IEO a notch above ICO is the safety and security of funds. As a crypto exchange hosts IEO, it will never allow any poor startup to conduct on its platform. Further, this also ensures better security because the exchange will thoroughly screen the project and verify the startup. Additionally, any possibility of a scam would subsequently also tarnish the exchange’s reputation.
Moreover, this further ensures that exchange will turn down and drop the IEO if anything seems suspicious.
Comfort to Genuine Startups
Another fundamental advantage of IEO is that it benefits to all the involved parties, including blockchain startups. Exchanges help in making the whole process of crowd funding very smooth and secure for investors as well as startups.
It assists the startup by lending a hand in marketing and listing the tokens, which was a painful and tedious procedure in ICO. In the ICO model, startups used to spend as much as 20% of funding in marketing the project. In contrast, an IEO can help in saving the huge pile of money needed for advertising. As the exchange advertises the startup on its own platform, the company can spend the marketing funds for improving the project.
The whole cryptocurrency sphere is at a very nascent stage. However, it is a fact that the industry is gaining adoption with major organizations (Facebook) leading the charge, efficient mechanisms such as IEO gaining movement, and rising popularity of concepts such as stable coins and Central Digital Cryptocurrencies. Ultimately, the crypto sphere is shifting towards better and safer systems. Are you on it?