The Rise and Rise of IEOs
J. R. Willette launched the first ICO “Mastercoin” in 2013, and since then more than 5000 ICOs and ITOs have graced the world with their presence. Mastercoin was founded on Willette’s Avante Garde business model, described explicitly in his first pitches,
“I have an amazing idea, a room full of talented, awesome people, and I think you should get a part of this by just dropping some coin into my wallet.”
This model, which pivoted on the trustworthiness of the development team kickstarted a revolutionary way of crowdfunding; aka ICOs and ITOs. With the widespread ICO fever, what ensued was a slew of blockchain projects raising more than hundreds of millions through funding from a crypt0-enthusiastic public.
However, as more and more capital made its way into the ITO market, scams and frauds followed in its wake.
Since the ICO model offered no tangible asset to the fundraising contributors and didn’t involve vetting by a third party, it left a huge room for exploitation, as seen in the case of OneCoin and Bitconnect. These fraudulent projects have become one of the biggest reasons for the ICO fervor to die down among the crypto-lovers.
Following such disheartening demerits of the ICO landscape, crypto leaders started looking for greener pastures with greater authenticity, spawning the next phenomenon-IEOs.
Unearthing the Concept of IEOs
As its name sounds, an Initial Exchange Offering (IEO) pivots on having one or more exchanges acting as the counter-party. The project developers mint their tokens and send to the specific exchanges, which in turn, offer the tokens for sale to users of the exchange.
What makes the concept significantly different from that of an ICO is the eligibility criteria for a participant.
In an Initial Token or Coin offering, any contributor can buy tokens by sending funds to the smart contract address of the project creator. On the contrary, an IEO requires the participant to register on the specific hosting exchange and buy tokens by sending funds on that exchange’s account.
Owing to its significantly different model, IEOs are being hailed as the better cousin of ICOs and ITOs within the crypto-funding family. Let’s check out the reasons below:
Why is the Grass Greener on the IEO Side?
In spite of the phenomenal success of many blockchain projects, crypto investors have become wary of the ICO model. Weighed down by the plethora of unregulated scam projects, everybody is now inclined towards a system supported by a trustworthy central authority.
With IEOs, the cryptocurrency exchanges function as these bona fide, reliable, third-party authorities. Moreover, as this model draws inspiration from the model of security trading, with both needing a central reputable platform, many merits that were lacking in the ICO model have come to fore with IEOs
- Easier Participation
The participation process is simple and easier for an IEO. All participants need to do is register and create an account on the hosting exchange platform, fund their exchange wallet and purchase the tokens when they go live. Unlike ICOs, an IEO requires no complicated step like sending funds on a project’s smart contract or other technical processes.
- Enhanced Security and Confidence
Since in the case of IEOs the reputation of the exchanges is at risk, they ensure to carry out proper due diligence before approving a project. Post a thorough KYC and AML verification, the domain experts from the exchange scrutinize the project and only select excellent campaigns that pass their bar for quality.
Therefore, contributors can be more confident about the security and quality of the smart contracts of an IEO project, as exchanges are highly unlikely to vouch for fraudulent attempts or petty scams.
The recent case of Bittrex threw light on such practices of exchanges to choose user profits over personal gains.
Bittrex is a famed Malta-based crypto exchange that intended to launch its first IEO for the RAID project, a blockchain gaming data startup on March 15, 2019.
However, it came as a shock when they announced the cancellation of the token sale a day before the intended date. This cancellation came in the wake of the discovery that the RAID team had ended their partnership with OP.GG, an e-gaming data analytics company that was a big investor of their project.
This instance set a crystal clear example that for exchanges, project excellence trumps all.
- Lower Price Manipulation
High price fluctuations due to early contributors selling-off for a quick profit in the later stages is frequently observed in ICOs. In the case of IEOs, since the process is more regulated, with rules like specific token cap per investor, price manipulations are largely controlled.
How Token Issuers Benefit from Exchanges?
- Valuable Business Assistance
Some startups that run an IEO prefer to use the consulting and advisory services from their hosting exchanges, rather than hiring their in-house experts. Exchanges usually staff an impressive team of experienced business strategists, software designers, security specialists, engineers, lawyers, and other domain experts.
Therefore, blockchain startups get the chance to utilize the expert services from these exchanges and channel all their focus on their products. However, it comes with a downside. The service fee charged by these exchanges is usually found on the higher end, which is in addition to their listing fee.
- Access to an Extensive User Base
The easy opportunity to capitalize on a large user base is one of the most vital advantages for an entrepreneur. ICO and ITO creators need elaborate and complicated marketing tactics to reach their customers, which in turn generate substantial costs. In the case of IEOs, exchanges already support a large user base, in turn creating greater liquidity, which ITO creators can leverage.
Some inspiring examples have been set by projects like Fetch.AI and BitTorrent, which achieved astounding success after conducting their IEO. For instance, BitTorrent’s token BTT grew by almost 40% in 24 hours, after they started their IEO on Binance, the exchange with the largest global user base.
Along the course of their adoption, IEOs have picked up a lot of names, ranging from “An Improved ICO”, “A Matured ICO”, “A Mutated ICO” to an “Evolved ICO”.
Whatever names they earn, thanks to the authenticity and trust factor associated with the exchanges, an indisputable fact remains; IEOs pose greater benefits and lesser risks to both contributors and the project team.
Therefore, with the tide turning towards lower risk platforms, it would be wise for projects to learn to sail using the IEO system and amp up the credibility of their projects.
Levolution Joins the IEO Bandwagon
Buoyed by the undeniable advantages that an IEO presents, Levolution, an innovative utility token virtual incubator, has also started its IEO on the Coineal Platform.
Realizing the challenges that plague ITO creators, from finding trusted partners to developing secure platforms for operation, Levolution strives to create an all-in-one platform for blockchain entrepreneurs. By enabling the creation of smart contracts, providing experienced, reputable service providers and giving access to a colossal network of contributors, Levolution aims to drive the success of all its ITO campaigns.
After surpassing its soft cap in the ITO round, Levolution has initiated its IEO on the reputable Coineal Exchange, hailed as one of the topmost exchanges on Coinmarketcap with $13Bn Monthly Volume.
While boosting the authenticity and liquidity of the LEVL token, Coineal will enable Levolution to spread its vision to far more customers, owing to the monumental 2 Million user base of Coineal. Moreover, to make the most of the Coineal community, Levolution is offering attractive bonuses, including a 10% participation bonus and a 5% referral bonus to its participants.
The avail these bonuses, interested users should register on the Coineal Exchange and buy the LEVL tokens before April 2, 2019. Once the IEO ends on this date, the tokens with the bonuses will be immediately distributed to the participants.
To know more about this innovative virtual incubator and earn these lucrative bonuses, click here.