Cryptocurrency analyst. Founder and editor at btcpeers.com
The current push for DeFi has not only changed the way we engage with our everyday financial needs but has also introduced new means of accessing, supporting, and investing in new projects. Tagged as Initial DEX Offerings (IDO), the possibility of bypassing restrictions when identifying and investing in projects has improved crypto funding. However, this does not mean that other models of crowdfunding have become redundant. For what is worth, Initial Exchange Offering (IEO) is still the go-to option for projects that prefer to capitalize on established launchpads and introduce a more diverse array of crypto products not necessarily restricted to the financial sector.
It goes without saying that despite the surge in the activities generated in the DEX market, centralized exchanges are still core components of the emerging crypto industry. This notion rests on the fact that digital asset exchanges provide regulated and trusted gateways to the crypto market, where investors can seamlessly engage in highly profitable funding schemes without having to worry too much about the security and integrity of featured projects. Hence, IEO will remain an integral contributor to the growing crypto landscape even as regulators continue to legitimize this variant of token sale mechanisms.
While exploring the relevance of IEO, I decided to seek the view of one of the stakeholders of the current IEO market in the person of Ned Kee, CEO of DigiFinex. It has used its growing status in the crypto industry to promote new projects and provide launch pads for growth acceleration.
During my interview with Ned Kee, we discussed the current state of funding in the crypto industry as well as the role of exchanges in proliferating the IEO model. Below is an excerpt from the interview.
Andrey Sergeenkov: What is your view on the current state of crowdfunding and the many models available to crypto startups?
Ned Kee: Cryptocurrency startups rely heavily on crowdfunding to raise seed capital. Common crowdfunding methods currently include ICO, IEO, STO, IWO, and the first Dex listing (IDO) launched on Uniswap. Among which ICO is still the most common practice in the market, for now there has been an estimation of nearly $30 billion USD raised from the adoption of smart contracts and ICO crowdfunding. With the booming development of DeFi this year, IDO has become one of the most popular crowdfunding methods for cryptocurrency startups.
However, the crowdfunding method selected by cryptocurrency start-ups is oftentimes closely inter-related to the regulations of the country in which it is located. So revision of crowdfunding regulatory regulations usually hold a closer connection with cryptocurrency start-ups. As time goes by, in order to meet the needs of market expansion, governments have been refining the regulatory requirements for crowdfunding.
For example, take the United States as one of the countries with the strictest regulation on cryptocurrencies, Securities and Exchange Commission (SEC) has revised its initial capital raising rules at the beginning of this month, to raise the bar on capital for crowdfunding regulations from 1.07 million USD to 5 million USD, simplified and improved the securities issuance exemption framework stipulated in the Securities Law, making the fundraising process more efficient. This may be beneficial to the issuance of security tokens (STO) too, meaning that cryptocurrency startups can directly crowdfund $5 million from investors through tokens, thereby reducing their dependence on risk capital.
Andrey Sergeenkov: How does IEO compare to IDO? Does the proliferation of IDO sideline or jeopardize the relevance of IEO?
Ned Kee: IEO (First CEX Exchange Issuance) refers to having the exchange as the company’s representative to inspect and plan the token issuance project, and adopts its own platform as a fundraising channel to initiate token subscription for users.
IDO (First DEX Exchange Issuance) refers to DeFi projects represented issuance or issue additional governance tokens. Like ICO and IEO, the ultimate goal of IDO is to achieve “O” (Offering). In addition, IDO has become a standard configuration with “liquid mining” in order to realize Offering. “DO” in IDO can be understood as mining, and mining means issuing.
Compared with IEO, IDO may be another better option for projects to cold boot. IDO can also accumulate popularity and attention in a short period of time, and use issued tokens at almost zero cost to reward DeFi with liquidity, and to rely on the market dynamics to automatically completing the anchoring and capturing of the Token value. It is also relatively fair to users, because everyone is basically at the same starting line when mining starts. It can be said that IDO has opened another token distribution model with lower threshold. IEOs are generally circulated and withdrawn in centralized exchanges (CEX). IDOs can complete the Token listing work through the market and realize circulation and withdrawal in DEX.
The expansion of IDO is closely related to the vigorous development of DeFi this year, and the popularity of DeFi is also intersected to the background of the world’s beginning into the era of negative interest rates. DeFi is helping to swift the focus on fiat currency to digital currency. The current DeFi lock-up funds have exceeded 12 billion USD. But looking from a macro point of view, the cryptocurrency industry is still in development. The relationship between IDO and IEO is not an all-or-nothing relationship, but a synergistic and complementary relationship between the two to jointly move the world towards a world in front of banknotes and traditional currency, co-construct an advanced and prosperous ecosystem for digital currency.
Andrey Sergeenkov: Like the majority of players in the exchange market, DigiFinex has its in-house launch pad called Apollo. Can you tell us more about this service?
Ned Kee: The DigiFinex Apollo Project is a platform that provides one-stop listing services for high-quality projects around the world on DigiFinex, especially for our very own token DFT. In addition to helping high-quality projects to raise funds, the Apollo project places emphasis on helping projects to carry out integrated marketing and assist projects to garner attention and promote the brand in a short period of time. On the whole, the Apollo project aims to incubate high-quality projects through DigiFinex’s resources, and contribute to build a more holistic cryptocurrency industry ecology.
Andrey Sergeenkov: Since the launch of Apollo, how many projects have benefitted from DigiFinex’s IEO services, and what is the success rate so far?
Ned Kee: At present, we have successfully launched sixteen projects, and each project has achieved the predetermined fund-raising target. More importantly, we have helped the Apollo project to acquire a large number of users and to invest, and at the same time obtained a massive amount of Media exposures, earning a good reputation for the project and sped up the process of objectives actualization.
Andrey Sergeenkov: What are the criteria used to handpick crypto startups?
Ned Kee: DigiFinex only selects high-quality blockchain projects to cooperate. At the same time, we pay great attention to security and hence we have a relatively strict review process. For projects that apply for listing on DigiFinex, our team will first consider the background of the project team, the number and activity of community users, on-chain data, application data, project planning, private placement and circulation, media reports, and whether there has been negative news, etc. to evaluate if the project is qualified, and meets all the criteria in order to be selected.
As for the quality of the project, there are several areas where we look at: 1. Whether applying blockchain technology could solve the pain points in the market; 2. Whether the progress of the project is open and transparent, and if the plan has a positive route to follow to; 3. The overall number of the community and average daily activity; 4. The background, technical capability and innovation of the project team members.
We are committed to providing customers with a “fair and transparent” trading environment. All projects that are qualified with our standards will be monitored through our real-time risk control system to keep aware of the project’s market performance. Furthermore, we have a strict delisting mechanism that prohibits projects, any individual or institution’s control behavior, and jointly maintains the ecological balance of the global digital asset market; we have strong media resources and community foundations that can complement the project. Among them, DigiFinex AMA, as a well-known live interview column in the industry, has had th opportunity to interview with many big names in the field, including Roger from BCH, CEO of Simplex, and CEO of Australian Securities Exchange etc.
Andrey Sergeenkov: DigiFinex recently partnered with HollyGold as the latest beneficiary of its advanced suites of IEO services. Can you tell us more about this project?
Ned Kee: Of course. DigiFinex’s ongoing Apollo 16th project, Hollygold (HGOLD), is a technology company invested and founded by the famous Hollywood film investment financier Kevin Robl and Taiwanese blockchain godfather Dior Wu. HollyGold is also the strategic partner Base FX and Production Capital, renowned production houses in Hollywood. HollyGold (HGOLD) team members and Hollywood film industry professional consultants have co-produced up to 1,600 films, including Oscar and Emmy award-winning films and many blockbusters. Through its co-founder Kevin Robl, Base’s vice president Poli Liang, HollyGold has imported a great amount of Hollywood resources, and signed cooperation agreements with a number of film companies on investment, post-production, copyright, circulation, application scenarios, exhibitions and different kinds of activities, embarked on a bright future of many potential cooperation.
Dior Wu, the founder of HollyGold, is a believer and practitioner of chain reform. He has invented digital currency encryption cards and smart vending machines dedicated for this industry, and applied patented technology to the HGOLD project. The establishment of HGOLD is to utilize blockchain technology to get deeply involved in the production and distribution of the film industry, so to transform the Hollywood film ecology and solve the problems in the industry. HGOLD is a multi-purpose digital currency designed for the film and television ecosystem. The sale of HGOLD encryption cards through vending machines lowers the investment threshold for ordinary people, and helps them to attain the opportunity to participate in the production and distribution of Hollywood movies with a simple gesture, co-share the benefits brought by investment from these productions.
Recently, HollyGold has participated in the production of 12 upcoming Hollywood blockbusters, including ” Willy’s Wonderland ” starring Nicholas Cage, the animated feature film “Lord of the West”, and “Recharge”, whose executive producers are no one but Keanu Reeves, and the screenwriter of the “Fast & Furious” series. In addition, HollyGold has become a sponsor of TCL Chinese Theater in Hollywood and Sugar Factory, a local landmark restaurant in Hollywood.
Recap of the AMA Live: https://blog.digifinex.io/2020/11/06/
Andrey Sergeenkov: I believe that this project is the latest attempt to introduce crypto to the buzzing scene of the film and entertainment industry in America. How is HollyGold different from the previous attempts to achieve this?
Ned Kee: Before the establishment of HollyGold, there have been other projects attempting to adopt movie themes as the background of the proposed tokens, but there were no successful cases. However, since HOLLYGOLD was founded, there were huge Hollywood resources to support it with its global influence. Therefore, HollyGold has formed a global consensus that is unmatched; and COVID-19 has also brought in a new lifestyle that made room for HGOLD to start out.
The advantage of HollyGold lies in having BASE special effects post-production company as their most significant strategic partner, as well as TCL Chinese Theater. With the promotion from Hollywood stars and influencers, a strong Hollywood film consultant team, and the support of well-known Hollywood companies, such as Wolfe Air, Sugar Factory, etc., these related companies could all use HGOLD for commercial transactions in the future. All the resources mentioned above are exclusive to HollyGold, which is why it will not be easily replaced, let alone be surpassed.
On the other hand, HollyGold could adopt Dior’s blockchain patented technology to carry out unlimited cross-border cooperation with various industries. They have successfully used HollyGold to purchase the famous Balloon Dog artwork by modern artist Jeff Koons. In the authoritative global film database IMDb, it can be found that HollyGold has invested in five Hollywood movies till now including “Willy’s Wonderland”, “In Harm’s Way”, “Lord of the West”, “Wish Dragon 2” and “Recharge”.
One of HollyGold’s important partners, the Hollywood professional tracking photography company Wolfe Air, has promised to use HollyGold as a payment currency for aircraft rental. Moreover, The global Marvel Animation Exhibition to be held next year has confirmed to only adopt HollyGold as the transactional currency for purchasing commercial goods. We can see that HollyGold has created a blue ocean of digital currency for film and television, and in this blue ocean, there will only be HollyGold.
Andrey Sergeenkov: How can investors capitalize on this opportunity, and what are the rewards packaged for active participants of the ongoing funding campaign?
Ned Kee: The total supply of HollyGold is 1 billion, and the market circulation is constant 100 million. The private sale price is 3.2 USDT, and all of them are locked up. The current market circulation is 0, and the subscription price of this IEO is in between 2 USDT and 2.7 USDT. So that participate could get the greatest discount in our token sale.
As we mentioned before, in addition to the five Hollywood movies we have invested in, we have also recently invested in the post-production for special effects of the box office guaranteed film series – Fast and Furious 9 and 007. HollyGold is a movie entertainment investment company, on top of movies, we are gradually getting our hands on more sectors such as pop music/TV series/anime/…all global cross-border entertainment films and television fields. For example, the Asian Marvel Comics and Animation Expo in 2021 has begun in preparation stages, cooperating in the music brands of the famous Spring Wave Music and Art Festival in Asia have been signed too, and we will also collaborate with world-class Influencers to film for promotion. All of these incredible international cooperation will only limit using HollyGold as the official currency.
Andrey Sergeenkov: Recent news reveals that the Securities Commission in Malaysia has moved to introduce guidelines and regulate IEOs. Do you expect other regulators to do the same?
Ned Kee: According to SCM, the regulatory rules on IEO are designed to promote “responsible innovation in the field of digital assets while managing emerging risks and safeguarding the interests of issuers and investors”.
Since you could say the digital currency industry is a newborn baby, everything is still at an experiential stage. The Securities Commission of Malaysia has issued an IEO regulatory guidelines. I think this is a good policy for both exchanges and investors, and will also serve as an example to promote the sound development of the entire digital currency industry. On the one hand, the government has approved the issuance of digital currency through legislation and has established norms for the digital currency industry; on the other hand, it can better protect the interests of issuers and investors, and could effectively prevent illegal and criminal activities such as money laundering through cryptocurrency. I am very much looking forward to other countries to issuing similar policies as soon as possible.
Andrey Sergeenkov: What are the implications of a more regulated IEO market?
Ned Kee: The issuance of digital currency can provide another way for early-stage entrepreneurs to raise funds. The IEO market is subject to stricter supervision, which shows that in order to meet the needs of the continuous development of the financial market, governments of various countries have been introducing regulatory policies to restrict the issuance and participants of IEOs, with the intention to guide it towards compliance. The implementation of compliance policies may stimulate more small and medium-sized companies and WeChat companies to try to raise seed funding through this method. On the whole, it is beneficial to the healthy and sustainable development of the digital currency industry.
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