Since the beginning, fundraising has been a popular activity. They are especially useful for Blockchain projects because they can kick-start the ecosystem in a simple way. Blockchain ICOs have been responsible for raising funds since 2017. ICO Data shows that around $6.2 billion was raised in 2017 for 875 ICO projects. In fact, cryptocurrency prices hit their peak in December 2017 and January 2018. The market capitalization for all digital assets was over $800 billion.
What is Initial Coin Offer ICO?
A crowdfunding strategy that allows a startup or enterprise to offer tokens or crypto coins to investors is called an initial coin offering. The assets are paid for by the investors in cryptocurrencies or fiat currency. Investors buy these digital tokens with the intention that their prices will rise in the future.
These startups that want to create an ICO use ICO Script or ICO Software to instantly launch their initial coin offering. This is called Initial Coin Offering.
The best part about the ICO is the low investment requirement. Experts believe there are many similarities between ICOs and stock market IPOs. ICOs do not have assets to support them. They are therefore not considered traditional securities.
What is an ICO?
- In the beginning, the startup or enterprise would prepare an ICO Whitepaper before releasing them.
- The next step is token creation or development by the expert team.
- The token issuer will issue digital coins and tokens on their own ICO platform.
- These digital assets can be sold to the public to raise funds.
The Advantages of ICOs:
- This strategy allows anyone to invest in the Initial Coin Offering. To get started, you don't have to be a very well-funded investor.
- ICO's installation is much simpler than other popular fundraising models.
- Consider the time it takes to launch Initial Coin Offering. The liquidity is high.
- There is no government intrusion.
The disadvantages of ICOs:
- There is limited security and the possibility of fraud and scams.
- Initial Coin Offerings (ICO) is not a good choice for long-term investments.
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What is Initial Exchange Offering IEO?
Initial Exchange Offerings (ICOs) have been the preferred method of fundraising for enterprises. Similar to ICOs, but with a significant difference:
Unlike ICOs, which are created and launched by enterprises or startups, IEOs can be launched via the cryptocurrency trading platforms listing. IEO is also not available to the general public. Participants in IEO must remain users of the crypto exchange.
ICOs allow contributors to purchase ICO tokens for sale by sending funds to a specific address. It is required that users or contributors purchase the token using exchange accounts in the case of IEOs. In an IEO, the exchange acts as the administrator.
The requirements of the exchange for initiating an Initial Exchange Offering must be met by the project team. Crypto exchange software protects investors and contributors.
While many claims that the exchange will work with the project to defraud customers, the truth is that the trading platform's credibility could be at risk. The exchange is putting its reputation at risk by participating in IEO projects.
What does IEO do?
- After completing the KYC verification, the token issuer will need to first open a special account for cryptocurrency trading.
- You can promote ICO tokens to more investors if there are enough investors interested.
- Finally, investors will pay for tokens and have their tokens credited to their accounts.
The Pros of Initial Exchange Offers IEO:
- Startups and token issuers are not required to invest additional effort or funds in the exchange.
- Since the cryptocurrency trading platform is responsible for raising money, IEOs are a well-known part of the fundraising strategy.
- Participants in IEO will be able to complete their KYC and AML processes through the exchange.
- Smart contracts are not funded by investors. They transfer the funds to the appropriate accounts.
Cons of Initial Exchange Offering IEO:
- The crypto trading platforms will be less controlled by investors.
- They are not Security tokens like other utility tokens. These tokens are not backed by real assets.
- IBCGroup also reported that IEO projects are more attractive to exchanges because they attract new investors and allow them to deposit new funds. Exchanges can also make a profit by adding new tokens on their lists.
Comparison: ICO vs IEO:
Here is the complete comparison of ICO IEO.
DEFINITION
- Initial Coin Offering is a term that refers to launching new products or services in the crypto market. This is similar to Initial Public Offer.
- IEO stands for Initial Exchange Offering. This is where companies sell tokens directly to individual participants, without offering an ICO.
WORKING
- ICO issues digital coins and crypto coins in return for investments. These coins are then sold on the market at a discount to increase the price.
- The coins can be exchanged for cryptocurrencies using IEO.
TARGET Audience
- Participation in ICOs is open to all.
- Only registered users can take part in the exchange.
TOKEN SALE LOCATION
- The Token issuer website hosts the token sale.
- The token sale takes place on the crypto trading platform.
EXCHANGE
- The exchange listing is not available immediately. Each exchange will negotiate the fees for listing.
- Here, Exchange Listing is Immediate and is included in IEO Fees
COUNTERPARTY
- The developer team is involved with ICO development.
- The counterparty is the crypto trading platform.
MARKETING
- Marketing to individual investors is the responsibility of token investors.
- The token/coin will be marketed by the cryptocurrency exchange. But, issuers are also allowed to perform.
PROS OF ICO
- Cost
- Simple Installation Process.
- Lesser Government Intervention.
- More Liquidity.
PROS OF IEO
- The exchange is open to investors.
- A trusted platform that prevents fraud.
- The Marketing budget of issuers doesn't have to be large.
CONS of ICO
- This is not a good choice for long-term investors.
- The cryptocurrency industry is full of scams.
CONS of IEO
- Liquidity is lower than in other countries.
- The tokens and funds are sent directly to the exchanges. There are risks of losing money because most exchanges are centralized.
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Which is the best ICO or IEO?
In 2018, we saw a boom in Initial Coin Offerings. Despite the fact that there are many ICO projects that are scams, they remain alive. The startups would be able to raise funds with the help of regulations and new updates.
Initial Exchange offerings, on the other side, are a very beneficial strategy in the crypto industry. IEOs provide a lot of trust among investors because crypto exchanges facilitate and host the crowdfunding process.
Both of these strategies will likely increase in the coming years, as ICOs evolve and IEOs become more prevalent in the environment.
