ICOs in China in late 2017 banned crypto startups in the country and compelled them to find an alternative to raise funds for their projects. As a result, projects started to explore the new trend of Initial Exchange Offerings (IEOs). This new approach allowed the startups to raise funds without fear of authorities or laws.
Let’s understand the term “Initial Exchange Offering” in more depth, how it works, what benefits does it offer and how to launch a successful IEO.
What is an IEO (Initial Exchange Offering)?
As the name implies, IEO (Initial Exchange Offering) is performed on the cryptocurrency exchange platform instead of the issuer’s platform. Though both IEOs and ICOs are techniques of crowdfunding, token issuers are responsible for ICOs while IEO is managed by an exchange platform on behalf of the startup looking to raise funds.
Since the token sale is conducted on the crypto exchange platform, token issuers need to to pay the fees for listing along with a percentage of sold tokens at the time of IEO.
In return, the tokens can be sold on the exchange platforms and listed once the IEO is over.
The exchanges are incentivized to assist the token issuer in marketing activities by gaining a percentage of sold tokens by the startup. Contributions of IEO participants are not sent to the smart contracts like that of ICO. Rather, users have to create an account on the crypto exchange platform where the token sale for IEO is performed.
Launching IEOs on Exchanges
Many crypto exchange platforms have started to adopt IEOs and allow their listing. One of the first exchanges that supported IEO was Binance.
Binance launched a new platform focused on IEO, Binance Launchpad. BitTorrent started a token sale on Binance Launchpad and made $7.2 million within 15 minutes. Selling all tokens within 15 minutes is an exciting approach that any crypto startup could dream of. The second IEO, Fetch.AI hit the better crowdsale hard cap by raising $6 million in only 22 seconds.
After the Binance Launchpad gained success, many other exchange platforms also announced the launch of their IEO platforms. Some of the other popular IEO platforms are Bitmax Launchpad, OK Jumpstart, Bittrex IEO, Huobi Prime and KuCoin Spotlight.
ICO takes place on a specific blockchain platform, for example, Ethereum, where the developers build the smart contracts and investors, transfer crypto assets to the smart contracts in exchange for tokens. However, in IEO, developers send tokens to the exchange, which then sells them to the users on the platform at a specific price.
IEO involves the middle man and centralized authority in the form of an exchange platform. This reintroduction of centralization brought trust among the investors willing to invest in crypto assets securely.
Ensure that the exchange platforms can eliminate scam IEO projects. One of the great examples of this scenario is the RAID IEO case. Bittrex recently announced the cancellation of the RAID IEO project, just a few hours before the token sale. The reason for the cancellation the termination of RAID’s partnership with a company that was about to raise $6 million for them.
Bittrex mentioned that RAID’s partnership was a crucial part of the project and when the exchange got to know about this event, they planned to terminate the token sale.
So, raising funds via exchange platforms bring trust among both the investors and the company looking to raise funds.
In Initial Exchange Offering, it is the responsibility of the cryptocurrency exchange platform to list the token once the token sale is over. Also, it is the end goal of every startup at the time of coin offering to list tokens on major exchange platforms. Getting listed on the reputed exchange can bring liquidity and credibility to the project and increase the value of a token.
Since the tokens have to be listed on the exchanges in IEO, it also encourages marketing operations.
Ease of use
Token issuing startups can benefit from the process of launching IEOs. Token issuers can avail advantages of the exchange’s vast customer base to get more contributions to projects.
In IEO, token issuers don’t have to worry about AML/KYC process of the users. Exchange platforms use their own standards for AML/KYC of the IEO participants.
Exchange platforms have an organized legal structure which protects startups from any regulatory consequences. It will save money for young startups to look out for legal resources.
Renowned exchanges also provide legal advice, clarity and a legal team to help young startups move ahead with compliances and regulations.
As discussed above, exchanges have been closing the token sale in just a few minutes and some cases, within a few seconds. The speed of IEO exchange platforms is far better than any other platform or network for crowdfunding.
Once it is clear what is Initial Exchange Offering (IEO) and why should you initiate an IEO project, it is essential to understand its launch process.
How to launch an IEO successfully?
To bring success to your IEO project, make sure you follow a step-by-step launch process.
We have divided the launch process of Initial Exchange Offering into four stages:
First of all, it is crucial for an IEO project before you go ahead for the listing of your token. The first step is to come up with an idea and make sure it is feasible.
Get aware of the market requirements and understand if you have enough budget to launch an IEO. Planning for a project based on understanding and experience will help you raise more funds. The project should look legitimate so that you can list on the exchange platform.
Once the preparation is done, look out for a strong team of partners and advisors. Building a strong team may help you gain more investors to the project. Make sure your team has relevant experience in this field.
In IEO, you need to launch the project on the exchange platform; therefore, it is crucial to have some development or progress underway so that exchanges can list your project without any questions. For example, BitTorrent had 100 million users before they initiated their IEO project.
In this stage, you first need to choose the exchange platform you want to work with. Make sure you check out their approach to selection criteria so that you have everything ready in advance to prevent failure.
Once you select the exchange platform, it is now time to start drafting the whitepaper, which serves as a proposal document for investors. From the project’s objective to the analysis of market, development strategy, tokenomics and roadmap, make sure you include everything required in that document.
Though the token is launched on the exchange platform, it is essential for a project to have a marketing website where users can know about the brand and more information about the project.
After you are ready with the whitepaper and website, you should look forward to the development of tokens.
While developing tokens, ensure that you have a maximum funding requirement. Decide a proper hard cap for funding to ensure that the goal is practical and tangible. After tokens are minted successfully, the next step is listing them on the decided exchange platform.
Once you pass the exchange platform’s selection criterion and due diligence checks, tokens are listed successfully on the platform.
Once the token sale is over and the exchanges list your tokens, it is a time to market the project and outreach targeted audience to gain the traction.
You can promote the project by running marketing activities such as Social Media Marketing, Press Release and Outreach, SEO and Content Marketing and Commenting on Related Forums.
Are you looking to launch an IEO? If yes, contact our team today and we can help you through every stage of the IEO launch process. At LeewayHertz, we have a team of IEO experts who have a strategic partnership with reputed IEO exchange platforms and can provide you with all services required to launch an IEO project.