What is IEO (Initial Exchange Offerings) in 2019?

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01 August 2019
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What is IEO (Initial Exchange Offerings) in 2019?

Introduction of the new tool on cryptocurrency exchanges widely perceived with enthusiasm and ICO failure doesn’t stop investors. It has been replaced by new and more reliable tool to trade tokens - IEO. Let the next consider, what it represents and which the extent of its reliability is. 

What is an IEO?

IEO is short for Initial Exchange Offering, which means start-up on exchange platform. It’s one of the ways to avoid investment in fraudulent and unattractive projects. There’s no guarantee of tokens profitability, but IEO exchanges are controlled more reliably than ICO. 

Important! An in-depth qualitative analysis is necessary to determine the outlook of investment. But often traders don’t have enough time for this.

There is a need for an intermediary in such circumstances, who will assume start-ups verification and risks clarification. Crypto exchanges have naturally served the role as initially included in this process. They are in a key position to audit, to assess perspectives and projects expert analysis. 

Thus, IEO is the instrument for a temporary transfer of tokens management from a start-up to an exchange, where trade starts. And the intermediary has a fund-raising on behalf of token issuers. When the process is completed, coins are going to the listing of the exchange platform. 

Waht Differences between IEO and ICO?

In 2018 investors’ confidence in ICO was so low as it had predicted quickly disappearing. Developers often didn’t have  enough time, persistence and knowledge for the launch of the well-functioning product. On this basis, fraudulent conditions have evolved and many took advantage.

19% of ICO start-ups have completely disappeared by the winter of 2018. Its websites and social media accounts were removed. Prices of 86% tokens have fallen in relation to the end date of  the session.

IEO is based on the other tokens’ sale scheme - the exchange platform assumes to filter unreliable investing projects.

Start-ups developers transfer tokens to an exchange, which, for its part, makelisting. Purchased tokens are easily converted into cryptocurrency. Exchanges filter unreliable projects and prevent the rush. There is a commission for the intermediation.

Интерфейс IEO платформы Binance

 

IEO advantages

IEO has advantages and disadvantages as any exchange trading tool and investor’s choice depends on its.

The benefits are:

1.A high-level of trust due to the exchange platform. Crowdsale exchanges allow viewing projects which are planned to launch on IEO website. Token issuers are carefully checked and questionable projects are filtered. 

There are examples when IEO of projects were denied before crowdsale starts. It happened when Bittrex (cryptocurrency exchange) canceled IEO for the RAID project because of OP.GG company withdrawal. According to the exchange experts view, this company served as a guarantee of the start-up's value. Its withdrawal has made the RAID project unreliable.     

  1. Guarantee of crowdsale security for tokens issuers. All the processes, including KYC/AML, are managed by an exchange, it also controls smart contract IEO. Participants are involved to the process after they had created user accounts on the platform.
  2. The ease and transparency of IEO launch on an exchange platform from start-ups’ side. By comparison, it is more difficult to launch ICO itself from the technical side. There is no need to pay apart for listing and commission from tokens.

As a result, marketing cost is decreasing for tokens issuers. At the same time, customer base of the cryptocurrenсy exchange becomes available. There is no need to take the time and costs for additional promoting of the project.  

  1. Tokens listing is automatically included in the deal. But its cost can be too high for a start-up. 

IEO disadvantages 

The IEO lifetime is long enough to identify its weaknesses. There are only 3 main downsides:

  1. The main disadvantage is high charges, especially for new projects - it is the flip side of the included listing. Adding a token in the currency exchange trading list might cost up to 20 BTC. However, there is also 10% commission from investors’ fund. 
  2. Risks for the cryptocurrency exchange, if the analysts’ projections were incorrect. In this case, financial losses and even damage to business reputation can occur. 
  3. Decreasing of anonymity level for investors. The KYC working scheme requires registration and account verification. 

IEO on the exchange platforms

For tokens trading IEO exchange has to launch a relevant platform. IEO Binance Launchpad had started the process first, then Bitmax Launchpad, KuCoin Spotlight, Huobi PrimeBittrex IEO and OK Jumpstart (OKEx) followed its.

  • Binance is the exchange, which was among the first to launch IEO in 2017. It has already 5 successful start-ups by 2019 with just 5 minutes fundraising. There were service failures because of the large number of visitors. As a result, the IEO Binance mechanism was redeveloped according to the lottery principle - to reduce the number of people admitted to the tendering.
  • Coineal is the new exchange created in April 2018 and initially focused on the most advanced developments. The exchange was among the leaders of cryptocurrency trades soon. Accounts from 30 countries, including Russia, are registered on this platform. There are 10 successful start-ups in its launching list. GTEX, ZeroBank and IPWeb among them.

Important! Coineal exchange launched Coineal Labs business incubator, which promotes start-ups development in legal and technical issues and marketing. The seed funding is provided, which means highrisk of financing at the early stage.

  • Bittrex. Despite the RAID start-up failure, the exchange was able to demonstrate reaction, intention to control tokens trade and crowdsale launching at all stages of IEO Bittrex. This perspective cryptocurrency trading platform expects to improve projects selection mechanism for investment.
  • OKEx. The exchange created JumpStart platform, which is based on the service subscription. Only holders of OKB exchange token can take advantage of the offer. There is the first successful token sale for Blockcloud company, promoting TCP/IP advanced architecture, on the OKEx platform.
  • Crypto exchange Huobi created Prime IEO-platform. But in the trade process of the first token it encountered the problem - the majority who wish to invest didn’t keep up to participate in trading. At that time the opportunity to engage in token sale was tied to HT exchange tokens of an investor. 
  • EXMO is the first Eastern Europe cryptocurrency exchange, introducing IEO. There was still only one crowdsale, but it was quite successful. The exchange is already considering another start-up and will announce crowdsale time later.  

IEO participatory mechanism 

From the list of cryptocurrency exchanges, IEO crowdsales aren’t so often. The search starts with the selection of interesting IEO. Next step is to know what exchanges are planned crowdsale to be placed on. Then there is a need to clarity exchange conditions and  register on the platform after the KYC/AML verification processes. 

Currencies used for IEO participation are bought beforehand. You need to know, that some exchanges impose additional requirements to tokensales participants, for example, a certain technical level or availability of exchange tokens. Then you should wait for IEO beginning and move rapidly - because there is no time to think at this stage.It would be better to select currency pairs  beforehand.

Important! As the experience, a crowdsale may last about 5 minutes. 

Should we expect another boom that would be similar to the ICO in 2017-2018? There is a different model attracting investors, and exchanges serve as  regulators. On the one side, increased confidence level draws bidders, and the number of people wishing to participate is increasing. On the other side - they filter unreliable projects and there is no doubt in growth of popularity of IEO. 

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