Last year marked the turn of the crypto fundraising landscape with the steady decline of ICOs, ushering in initial exchange offerings. Better known as IEOs, this new model of fundraising is overseen by crypto exchanges through launchpads where users are allowed to purchase tokens directly using funds that are stored in their exchange wallets.
The incredible thing about IEOs is that tokens offered through this mode are immediately listed on exchanges. Binance, one of the leading crypto exchanges in the world, pioneered this mode of fundraising in 2017; however, it didn’t take off until 2019 after they launched their launchpad platform, which was dedicated to supporting at least one good project every month.
True to their word, Binance has managed to help over 13 projects hold successful IEOs on its platform.
Other exchanges like Bittrex, KuCoin, Huobi, CoinBene, Liquid, Globiance, ProBit, and many more have jumped on the bandwagon with launchpads of their own and have launched several IEOs. The rising number of platforms supporting IEOs in 2020 means ICOs are slowly becoming a thing of the past.
Some of the reasons prompting crypto exchanges to offer IEOs include the need to boost liquidity, the need to provide their users additional value by allowing them to fundraise various projects, and the quick realization that IEOs are replacing ICOs as the preferred mode of fundraising.
Why Offer IEO Over ICOs
IEOs boasts several advantages over ICOs, including the fact that they can be trusted. This is because platforms offering IEOs conduct their due diligence by screening every project that seeks to fundraise on its platform; therefore, investors don’t have to worry about the legitimacy of the projects.
IEOs offer security and protection to both the investor and the token issuer since the platforms handle the KYC and the AML process. Additionally, projects are assured of getting their tokens listed quickly, and this makes the process easy for project issuers.
Requirements To Offer An IEO
With projects that meet the necessary requirements to offer an IEO guaranteed to raise funds easily and quickly, being well prepared for the fundraising cant be taken for granted. Platforms offering IEOs have rigorous demands, and its best for any project to ensure it stands the best chance to qualify for one. After analyzing many past successful IEOs, we have identified a few factors that are key if a project is to be eligible for an IEO.
These include; having a robust business model that is backed by a strong team. ICOs were able to thrive due to the lack of scrutiny from qualified sources. When it comes to exchanges and other platforms offering IEOs, they are more discerning and cannot support projects that lack solid business models. These platforms must see a clear path to success for your project, and for that to happen, you need to have a capable team to execute the plan.
Another critical factor is having a product that solves a real problem. The product could be already existing before the IEO is held or could be in development like it has been the case with some of the projects we have seen so far.
Also, it’s vital to set a low hard cap. With the death of ICOs imminent, gone are the days when projects could aim to raise tens of millions of dollars through token sales. A low hard cap of around $5 million can be more attainable.
Another factor is creating a large and active community base. An IEO helps expose a project to new users; however, if a project is to stand a chance with the IEO hosting platforms, it should be able to generate enough public interest on its own. One thing you need to know about exchanges is they are highly unlikely to support projects that haven’t built themselves a large and active community of users.
Other factors include the assurance that the token on offer is not a security token, and this needs to come from a trusted legal company. Also, a white paper that addresses the financial model of the project, also known as tokenomics. The use cases of the product, its potential market, and its competitors.
Factors To Consider When Choosing An IEO Platform
The platform’s reputation – credibility and reputation are two of the most important factors when choosing a place to launch an IEO. Since these exchanges conduct due diligence on projects, you need to be able to trust them completely.
- Ease of use – the process of participating in an IEO should be as frictionless as possible.
- Security and stability – these platforms should be robust and secure since they attract many investors from different backgrounds.
- Liquidity – a great IEO platform should offer projects with an abundance of investors to trade on its token.
3 Top Platforms To Offer An IEO
Binance pioneered IEOs in 2017 and since then has supported over 13 projects through it’s launchpad. Right now, it represents one of the best token launch platforms’ around thanks to use of leading technology (the ability to process over 1,400,000 orders per second) and multiple high-level partnerships that bring masses of investors for every token sale. Thus, liquidity isn’t a problem for this platform.
Due to the vast number of investors available on the exchange, the platform uses a lottery method to offer everyone a chance to participate in IEOs. In most cases, users have to purchase BNB to participate.
Launched in 2018, Globiance is another top IEO platform that offers projects with all the necessary tools to raise funds on its platform through an IEO. The platform provides a high liquidity market, excellent exposure to projects, and token listing opportunity on a leading exchange. If you plan to launch your IEO through this platform, you should be prepared since the exchange thoroughly checks if projects meet the required criteria before being listed.
Also, Globiance offers financial services for both professional and personal customers.
It’s one of the few platforms that offer a global approach with integrated individual bank accounts for each client. The platform focuses on excellent user experience when it comes to buying and selling tokens as they are allowed to withdraw fiat to their integrated account instantly. It also boasts excellent and responsive customer support that is always available to help.
On the platform, IEO tokens can be purchased using GBEX, the native token of the exchange.
This launchpad belongs to OKEx and supports quality blockchain projects.
The platform boasts all the necessary features of a top-notch IEO platform, including high liquidity, exposure to projects, and token listing opportunity.
To avoid oversubscription, OKEx introduced a subscription plus allotment approach. It consists of a 30-minute subscription window before an IEO takes place, and once the maximum limit is reached, it closes. The allotment part dictates that investors should hold a minimum of 500 OKB tokens for at least seven days or at least 3500 OKB before the token sale.
Tips For Offering An IEO
It’s vital to understand that IEOs are for projects that seek to launch utility tokens. Utility tokens are simply units of account for the network where they are issued on.
Since the number of the tokens is fixed, as the network grows, so does the utility of the token. The demand of the tokens grows as the size of the network and the number of transactions grows.
Utility tokens offer the holders of the token the right to use the network. Also, they allow them to take advantage of the network through voting. But it’s key these tokens fail the Howey test otherwise they would qualify for security tokens.