The team must ensure that their project meets the launchpad’s requirements, including compatibility with the consensus mechanism and whitelisting. To attract investors, the project team must create compelling marketing collateral. This includes designing a visually appealing website https://www.xcritical.com/ showcasing the project’s unique selling points and providing information about the project’s team. It is crucial to understand how IDOs work to grasp the concept of DEXs. DEXs are decentralized liquidity exchanges that operate on blockchain networks. It’s often easier and cheaper for a small, less-known project to launch their token through a DEX than a large, centralized exchange.

How IDOs differ from IDO and IEO

Lastly, keep in mind that IDOs generally do not raise as much funding as their ICO counterparts. IDOs offer plenty of value to those who want to go through a DEX, but if large sums of money are the primary concern, an IDO isn’t the way to go. Therefore, when the first sale occurs, the price of the token will start to increase. Another drawback is that tokens are distributed disproportionately. This ensures that as many people as possible can participate, building projects’ communities with a strong group of early adopters. A core feature of Polkastarter is its use of fixed swap pools, setting a fixed price for token swaps what is an ido in crypto in order to cap individual participation in IDOs.

IV. What Sets IDO, IEO, and ICO Apart?

Additionally, most IDO projects use PoS (proof-of-stake) as their consensus mechanisms. Plus, it discourages token holders from selling their assets too quickly. A large part of the IDO focuses on the fact that the process involves a decentralized exchange as opposed to a centralized entity. If you’re unfamiliar with DEXs, think of them as decentralized liquidity platforms. Exchanges in IDOs and IEOs play the role of regulators that conduct the vetting of the projects as they don’t want to be responsible for working with scam projects.

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Conducting an IEO can provide startup projects with significant liquidity and market exposure, but they face centralization due to the rigorous listing requirements of CEXs. IDOs are the newest way for crypto projects to get their tokens out to the public, but just with ICOs, IEOs and STOs, improvements are still needed. With IDOs, though, a decentralized exchange means there is a lack of control mechanism. When it comes to fundraising, it’s important to have some form of control to remove token price changes or have KYC regulations, which are noted in ICOs, IEOs, and STOs.

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In addition, once an ICO is completed, an investor must wait until a project completes an agreement with either a crypto DEX or a centralized exchange before cryptos can be traded. Unfortunately, there are many shady projects out there that circumvent the approval process in order to access investors and raise funds quickly. This is true for many crypto crowd-raising methods, including ICO and IEOs (Initial Exchange Offerings). The 2017 Initial Coin Offering frenzy underscored blockchain’s potential to empower both individual investors and businesses looking to raise capital. To that end, Initial Exchange Offerings (IEOs) and Initial DEX Offerings (IDOs) were created to improve on past fundraising processes.

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As a result, investor confidence is boosted considerably, specifically for anyone who uses analytics to determine which projects to support. Large premine allocations, specifically to only a handful of individuals, are a huge red flag to investors. Not only will it put investors at ease, but performing regular audits also means the project won’t experience legal or regulatory issues in the future. These resources are often available on IDO launchpad platforms. The second is providing liquidity, locking liquidity pairs like ETH-POLS on the Uniswap DEX and BNB-POLS on PancakeSwap. Locking liquidity earns rewards in POLS tokens, such as the 40,000 POLS that Polkastarter is offering on PancakeSwap in May.

Where Are IDOs Headed in the Future?

James has been involved in the cryptocurrency markets since 2018. He is a sought-after crypto writer that has published works for many cryptocurrency exchanges, fintech platforms, financial publications and investment disruptors worldwide. James work has been featured on the comparison website Finder and Real Vision covering topics in finance, business and the global economy. Quant is a protocol that targets blockchain-to-blockchain and Web2-to-Web3 communication. In May 2018, the project launched QNT, the native coin of the protocol. An IDO is an Initial DEX Offering, where a “DEX” is a Decentralized Exchange.

How Can You Participate in an IDO?

This results in some fundamental differences in fundraising, vetting, and smart contract management. When DEXs became popular in 2019, many projects saw the opportunity to raise funds quickly in a decentralized manner. Like an ICO, individuals can invest either fiat or crypto in return for a proportion of new native coins or tokens.

IEO As Centralized Version Of IDO

Once a project is launched, investors can then trade the new coin or token directly on the DEX. IDO platforms were created shortly after and have become a popular crypto launchpad for organizing and managing IDOs. Instead of an offering being hosted by a crypto project, an initial exchange offering leverages the existing infrastructure of a crypto exchange to launch a new coin or token and raise money. For a project, one advantage of an initial exchange offering is that all technical details are handled by the exchange platform. With larger user bases, centralized exchanges can also offer an instant audience and a thorough vetting process.

That doesn’t mean they make for a good investment or a better one than an ICO. Before investing in a new token, you should make sure to do your own research. Decentralized exchanges tend to be a lot smaller than centralized exchanges, meaning that the traffic that a new project receives might be substantially smaller than the traffic on an IDO. Most DeFi projects have taken the IDO route, and there is scope for other projects to opt for IDO too.

Projects have the flexibility to customize things like token supply allocations and community outreach when listing on a DEX. This is because they have no centralized authority and operate in a peer-to-peer way. Decentralization is also enabled by IDOs in the sense that customers and potential project investors are always in control of their assets through self-custodial wallets. These successful projects demonstrate the potential of IDOs as a fundraising model.

• The team of crypto projects gets a part of the liquidity pool, and the remaining funds are used to offer liquidity to investors to trade.
• They are essential in the price discovery process of a new token.
• An Initial DEX Offering, or IDO in short, is a novel crowdfunding technique that allows crypto projects to launch their native token or coin via decentralized exchanges (DEXs).
• The IDO model enabled SushiSwap to distribute its tokens fairly, without favoritism towards insiders or early investors.
• As a result, there is a sense of trust between investors and the larger crypto community.
• A growing number of projects are simultaneously launching IDOs on multiple blockchain launchpads and releasing tokens on a combination of different smart contract platforms.

Furthermore, in IEOs, crypto projects were carefully scrutinized, and the roadblock for projects participating in an IEO was relatively high. As a result, there is a sense of trust between investors and the larger crypto community. IEOs gave birth to some of today’s most popular blockchain projects, such as Polygon and Elrond. When the crypto industry became mainstream in 2017, projects imitated this strategy by selling a portion of their overall crypto token supply to the public in ICOs.

This fundraising method has carried over into crypto as well, with tokens taking the place of stocks. Each project offers a set amount of tokens, broken up into different avenues like team payments, public use, and more. However, the process isn’t as simple as “sell coins, earn money.” There are various ways for crypto projects to raise funds, which we’ll get into right now. A token offering is a fundraising method where a project or startup supplies a new cryptocurrency for sale.