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IEO landscape: 3 reasons why IEOs are going to take off


IEO landscape

If you’re familiar with the blockchain and crypto space, then Initial Coin Offerings should strike a chord with you. But have you heard of Initial Exchange Offerings (IEOs)? Don’t beat yourself up if you haven’t because it’s a fairly new trend and could be thought of as an improved version of an ICO, that brings a significant level of benchmarking to the crypto space.

But why is benchmarking blockchain projects important? The blockchain and crypto space has always had a low barrier of entry to it, which meant that anyone with an idea, a white paper and a website could launch their own Initial Coin Offering to kickstart their project. This is not an inherently bad quality as without it projects like Ethereum and NEO would not exist, but at the same time it also managed to attract many bad actors to space, which cost investors at least $100 million.

Therefore benchmarking ICOs should be the next progressive step in the crypto space to help investors differentiate the superior projects from the mediocre ones. So how does Initial Exchange Offerings help in Benchmarking projects? To understand that, we need to dive into what an IEO is and take a look at some classic examples.

 

Initial Exchange Offering

The most significant difference between an IEO & a traditional ICO, is the fact that the token launch is led by a registered and fairly significant crypto exchange. For example, if a project decides to raise funds through an Initial Exchange Offering, it would first hash out the terms and conditions with the crypto exchange of choice, and then come to agreement on various token sale elements (such as what should the price per token? Or what should be the contribution limit per person be?) before the actual sale takes place.

Now comes the important part, once the Initial Exchange Offering starts, investors who are interested in the project will buy the project tokens from a registered and often reputable crypto exchange instead of buying it from a project developer that they knew very little about prior to the sale being announced.

It’s important to note that crypto exchanges, especially the reputable ones, don’t just allow any project to launch an IEO and often have rigorous review processes to check if projects adhere to their standards. For example, some of the factors crypto exchange Binance looks into while launching an IEO include a relatively mature project development stage, readiness for large scale adoption and a strong and commitment of the team among other parameters. The impact Initial Exchange Offerings could bring to the blockchain and crypto space becomes more evident now, doesn’t it?

Since we’ve briefly looked into what an IEO is and how it differs from an ICO, lets me break down the reasons why the number of IEO’s are going to increase in the future.

 

Reason one: Investors get access to more authentic projects

As exchanges facilitate an Initial Exchange Offering for a project, it can be expected that the top exchanges will ordain some level of benchmarking to the crypto space. This is because for crypto exchanges like Binance, which is among the largest crypto trading platforms in the world, have their reputation and customer base to lose if an IEO turned out to be scam. Therefore investors can trust exchanges to strictly adhere to their project standards to make sure that only projects worth launching are presented to their user base.

For investors this could mean that projects launched on these top exchanges are relatively safer investments when compared to regular projects that launch ICOs. But investors should know that this does not mean that projects launched by exchanges can’t fail or be a scam, they could. The point is, the chances of them turning out so are significantly less.

In the wake of the numerous fraud projects in the crypto space, investors quickly flocked to projects with relatively higher authenticity, which can be observed each time a new IEO comes up on Binance Launchpad. As the token sale is often completed within a few minutes.  

 

Reason two: Startups get a better deal

Ironically for a blockchain startup, entrusting a third party firm to launch their own fundraising program instead of launching one themselves, seems to be the best move to make right now.

IEO’s can help startups in three ways-

  • Saving money on marketing

    Consider this, there are over 5000 ICOs and 350 plus STOs in the blockchain and crypto space currently, and an overwhelming majority of these fundraising programs took place in the last two years alone.

    For a startup looking to raise a fair of capital, they would need to stand out against this huge crowd and this is usually achieved by spend a crazy amount of money on marketing the fund raising program to reach the right audience. On top of this, startups often hire famous professionals in the blockchain and crypto space like developers and CEO’s as advisors to the startups to instill confidence into investors.


  • Listing on an exchange becomes a natural step

    The number of ICOs getting listed on exchanges have tapered in the past few months, dropping to as low as 1% during the month of February and this could be because of the extensive and cumbersome process behind listing an ICO. For a project that launched an IEO through an exchange, this step becomes easy as they already meet up to the standards required by that particular exchange. On top of this, exchanges often charge startups $1-3 million for just simply listing their token on their exchange, which can be saved.

  • Startups can leverage the in-house professionals exchanges provide

    The top exchanges like Binance often employ talented developers, business analysts and security specialists among other in-house professionals, which can be leveraged by startups, thus eliminating the need to employ their own specialists.

  • Project tokens are in great demand

    Most likely because of the benefits IEO’s bring to investors, as discussed earlier, project tokens launched by exchanges are in high demand. For example, the two recent projects launched by Binance, Bittorrent and Fetch.AI concluded in a matter of minutes, raising $7million and $15 million respectively.

 

Reason three: Exchanges rake in profits

For exchanges launching interesting projects on their platforms, means more traders flock to their platform to buy the project tokens, more traders on their platforms means exchanges can generate more profits on each transactions. But with exchanges like Binance which encourage their users to use their own native BNB token to buy project token on their platform.



IEO landscape

Source

 

As more traders use the exchange’s in-house crypto token the value of that token increases dramatically. This trend can be clearly observed when analysing the price chart of Binance Coin for this quarter. The price (USD) of BNB coin has witnessed an impressive 180% growth and is among the noteworthy altcoins for this quarter.

In retrospect Binance was the only exchange to facilitate IEO’s but recently top exchanges such as OKEx, Huobi and bittrex have announced plans to do the same on their respective platforms, most likely to emulate the success of Binance Launchpad had garnered.

But perhaps the important question we should be asking ourselves is " What are the ramification of IEO's in the crypto landscape?". We can expect the best exchanges to adhere to high benchmarking standards. But what about the other exchanges with smaller trading volumes? Moreover, the initial ethos of  ICOs was to raise funds raised directly from the people but IEO seem to be swaying way from this ethos. So while IEO's seems to be next sequential step in the crypto space but is it the right one to take?

 

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