The cryptocurrency technology professionals and startups that are highly creative keep inventing new crowdfunding processes. As a result, how the public invests in cryptocurrency and tokens also evolved. From 2017 to 2018, the investors saw different fundraising methodologies. These are Security Token Offerings (STOs), Initial Coin Offerings (ICOs), and Initial Exchange Offerings (IEOs).
Initial DEX Offering or IDO is an advanced successor of STOs, ICOs, and IEOs. IDO functions within a decentralized blockchain network that enables traders to trade digital assets like cryptocurrencies or crypto tokens.
The Basics of Initial DEX Offering or IDO
Initial DEX Offering is a crowdfunding method maintained in a decentralized and permissionless blockchain network.
You approach any IDO launchpad platform and list your token offerings on a decentralized liquidity exchange. The investor has the option to invest in tokens, and they can swap between stablecoins or crypto coins depending on the market momentum of IDOs. A practical example could be the liquidity pair of USDT/ETH.
Startups and new development project managers have chosen IDOs as the best vehicle to launch crypto tokens for fundraising. Investors like this method as it offers a fair trade opportunity with immediate liquidity at any price level.
The Process of Launching an Initial DEX Offering or IDO
The process of the IDO launch is effortless. Any project owner or startup can raise capital through this method. Here are the steps following which you can successfully launch IDO against your project:
- The project manager or IDO issuer needs to attract the public investors through IDO launchpad platforms like Polkastarter, Binance, Paid Ignition, TrustSwap, Duck DAO, etc.
- Investors can purchase crypto tokens before listing on the decentralized liquidity exchange if the IDO prospectus allows that.
- IDO gets listed on DEX, and the issuer can set token limits as various incremental price ranges.
- The issuer can also conduct an online open auction to sell crypto tokens depending on the demand-supply-driven approach.
- You can list your IDO on automated market maker (AMM) exchanges like Balancer and Uniswap.
- Traders can subsequently trade their holding in the secondary crypto exchanges for liquidity.
Principal Differences Between ICOs, IEOs, and IDOs
Raising funds for business growth or project operations is much easier in the crypto market than in the equity market. The Crypto market also practices high-level investor protection processes than the equity market.
It is possible due to the availability of many different ways for crowdfunding through ICOs, IEOs, and IDOs, and these processes differ from each other. The following table shows you a comprehensive comparison of the above three crypto crowdfunding methodologies:
|1. How Fundraising is Conducted||Crowdfund raising by issuing or selling crypto coins on a centralized exchange (CEX).||Raising capital by issuing coins or utility tokens through any blockchain platform.||Projects raise funds from investors by selling crypto tokens on a decentralized liquidity exchange (DEX).|
|2. Advertising and Marketing Operations||All of the marketing and advertising operations are handled by the CEX.||The issuer or the project manager or the startup needs to manage their own marketing and advertising.||The project team along with the DEX platform handles the marketing and advertising.|
|3. Trading Options and Liquidity Opportunities||Immediate trading and liquidity opportunities on the CEX however there are certain limits of tokens trading.||The issuer will transfer tokens to the investors after TGE. Upon listing on CEX, liquidity is immediate.||DEX provides an unlimited token stack. Trading and liquidity are immediate on any DEX.|
|4. Degree of Trust||Investors need to complete AML and KYC formalities.||There are certain trust concerns with some token issuers. It doesn’t always require AML/ KYC.||KYC and AML are not mandatory but vary with the token issuers.|
|5. Issuer and Investor Security||Secured through CEX. There are reports of banking information and identity theft.||Transactions take place on the ICO issuer’s platform so there could be security issues.||Anonymous transactions with the most advanced level Blockchain-based security.|
|6. Trading and Listing Fees||Exchanges collect certain fees from the token issuers.||Only exchange fee when ICO goes live on the CEX. No charge for trading as there are no brokers.||Issuer and trader need to pay gas for the smart contract facilitation.|
|7. Regulatory Authority||CEX regulates all transactions.||Regulation is uncertain. Varies with the country of origin.||Issuers list IDO on DEX so there is no regulation.|
|8. Screening of the Issuer||CEX screens the project or issuer before allowing crowdfunding.||There is no screening of the issuer.||The IDO launchpad platform conducts a complete screening of the issuer.|
The Pros and Cons of Initial DEX Offering or IDO
The followings are some benefits as well as issues of the IDO method for crowdfunding on the blockchain networks:
A. Pros of IDO
- Fundraising through IDO is an open and fair practice. Once the tokens go live on DEX through IDO, anyone can invest. They can later trade in secondary markets to book profits.
- Any project manager or startup can issue tokens through IDO and start fundraising. The issuer doesn’t have to go through any permission from the DEX platform.
- IDO offers immediate liquidity to the investors.
- IDO enables the issuers to distribute tokens among the public efficiently and elevate financial inclusion.
- IDO facilitates the instant trading of tokens. As an investor, you need to seek early entry before the IDO and then book profit on the day of the IDO launch.
- IDO launch, fundraising, smart contract, token distribution, and token trading charges are negligible than any other crowdfunding method.
- As IDO involves smart contracts, hence your identity and banking information are safe.
- Hackers will not target these platforms as DEX doesn’t store any money.
- Screening of the project or startup that issues IDO makes sure that the investor’s money is in good and capable hands.
B. Cons of IDO
- There is no control mechanism of the IDO issuance or investments on tokens.
- A small pool of random investors can only enjoy the initial listed price of the tokens.
- Token pricing manipulation in an unfair way is possible in IDO proceedings.
- No KYC and AML registration means no regulation of how money is flowing in the system.
- Scammers could take advantage of the easy IDO proceedings to raise funds and then disappear from the system.
Examples of Some Successful IDO Launches
Market analysis of successful IDOs will help you to prepare for your crowd fundraising project. Followings are some of the latest successful IDOs:
1. Don-Key IDO (14 MAY 2021 to 14 MAY 2021)
Don-key Finance is a well-known name when you think about generating rewards from cryptocurrency holdings, or yield farming. The IDO price was $ 0.120, and since listing, this token has gained an ROI of USD: 2.05x (+104.8%).
2. MakiSwap IDO (30 APR 2021 to 2 MAY 2021)
MakiSwap is aiming at creating a Decentralized Finance Development (DeFi) platform along with yield farming. The IDO price was $ 0.06, and since listing, this token has gained an ROI of USD: 3.24x (+223.6%).
3. TeraBlock IDO (11 MAY 2021 to 11 MAY 2021)
TeraBlock is a well-known crypto-asset trading automation exchange. It employs machine learning technology to provide a bespoke trade experience to its users. The IDO price was $ 0.05, and since listing, this token has gained an ROI of USD: 0.82x (-18.2%). It has so far raised $ 400,000 through crowdfunding.
Examples of IDO Launchpad Platforms
TrustSwap is a Binance owned Ethereum wallet. They also provide a platform for IDO launches, and the most recent ones were dFund, YIELDLY, LedgerScore, Tokenplace, and Carbon. You will need to sign up for TrustSwap wallet if you want to participate in IDO trading. Its mobile apps are compatible with WalletConnect, and therefore you can Uniswap using this app.
Polkastarter attracted a significant number of investors through its convincing historical ROI data. Many traders claim that the platform assures you a return within the range of 30 to 100 times your initial investment. If you hold the POLS token from this platform, then you get a greater chance of getting newly listed IDO tokens.
Paid Ignition started their IDO on the Polkastarter platform. However, due to specific security breaches, their crypto token pricing fell. Binance announced a significant investment in its projects, and since then, Paid Ignition is another successful crypto launchpad. You can follow Paid Ignition’s social media channels to stay updated on IDOs announced on this platform.
4. Duck DAO
Duck DAO is a decentralized autonomous organization offering IDO launchpads to projects and startups that want to crowdfund anonymously. It has successfully hosted many IDO launches recently like AMPNET, KEYTANGO, CASH.TECH, LEPRICON, POLKAFOUNDRY, and LABS. You can follow their Twitter handle to know future IDO launches.
How Dappros Can Help You With IDO Development
Since 2018, Dappros has been delivering blockchain-based software platform solutions to businesses. It has multiple blockchain-based technology products like Dappros Platform, TracyChain, Notary Bot, CrystalBank, CryptoSLA, and Asterama. Dappros consider DeFi as the biggest disruptor of the future of financing. Dappros is one of the leading service providers to help you crowdfunding through IDO proceedings.