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An initial dex offering (IDX) is an alternative to an initial https://www.xcritical.com/ coin offering (ICO). The crypto market is becoming more and more decentralized each day. Centralized exchanges such as Coinbase and Binance still hold a monopoly over the market. Rather than the next upcoming IDO, the average crypto trader is still more interested in when these exchanges will list a specific token. Only a relatively small number of investors may have been able to get the token at its initial listing price. Some investors (known as whales) get hold of large amounts of tokens.
Advantages of IDOs Over Traditional Fundraising Methods
- Coin360 aids investors in making informed choices with real-time tracking and insights for over 4,500 cryptocurrencies.
- This happens when traders use a trading bot to buy a lot of tokens at their base value, then sell them quickly when the exchange rate has increased enough.
- Some control mechanism needs to be in place to reduce toke price variations until the fundraising is completed.
- Once an investor has found potential IDOs to join, it’s important to thoroughly vet them to find the best projects and avoid scams.
- You only need a wallet and funds to participate in the sale, and personal details aren’t required.
In their most popular shape and form, nowadays, initial DEX offerings are particularly similar to initial exchange offerings (IEOs) with a few key differences. The first-ever IDO to take place happened in June 2019 – Raven Protocol. The team behind the protocol chose to use Binance’s decentralized Proof of personhood exchange – the Binance DEX. They put up the token there at a specific price, and traders could buy it until the hard cap was reached. This is how the first few IDOs took place on the majority of platforms. Like everything that becomes too hyped too fast, the ICO bubble burst in 2018, but it didn’t take long for us to see a new model with a few key differences.
What distinguishes IDOs from ICOs?
A project goes to a launchpad, and if they meet their requirement, they are chosen to conduct an IDO. The process itself might vary from one launchpad to another, but the concept is always the same. This led what is an ido to the birth of IDO launchpad platforms – one of the hottest topics of late 2020 and 2021.
Why Do People Invest in Initial DEX Offerings?
In most cases, this happens on Uniswap as the predominant number of projects are still built on Ethereum, and their tokens are based on the ERC20 protocol standard. An IDO launchpad is a platform that enables users to participate in IDOs. The launchpad provides users with access to the IDO and the ability to lock in their funds in exchange for the project’s tokens. The launchpad also ensures that the IDO is conducted in a fair and transparent manner.
These platforms want to encourage trading in an IDO, regardless of whether a specific project has a lot of potential or not. Most DeFi projects have taken the IDO route, and there is scope for other projects to opt for IDO too. Also, because IDOs are still a new concept, many investors find it difficult to trust the process.
That’s where a nascent crypto project sells coins for its new blockchain or tokens to run on another one like Ethereum or BNB Chain. Securities and Exchange Commission chased after issuers for securities violations. Lots of ICOs were scams, too, with developers abandoning their projects after raising funds, never to be seen again.
One of the projects presented is innovative and has prospects to make an impact, but it needs funding to bring it to life. Instead of approaching investors or acquiring bank loans, the founder(s) offer a token to anyone who contributes. The token holders can utilize it to access perks or services once the project is complete. As more awareness builds around decentralized exchanges, we will see more and better versions of IDOs being launched. Although any project within the crypto world can utilize IDOs, only DeFi projects have actually raised money through this decentralized crowdfunding platform.
Any DEX that has its own coin, which is almost all of them, is present on the list. However, don’t forget that a large market capitalization doesn’t necessarily mean the DEX is reliable or trustworthy. You should use this information together with other fundamentals before choosing a DEX to use for an IDO. Investors and projects are protected when proper checks are completed. These measures help avoid the laundering of illegal funds and the evasion of economic sanctions. For example, it may not be legal to participate in IDOs in certain countries if the token is considered a security.
Developers aren’t waiting for a pre-sale’s end to access funds like with an IEO. IDOs provide fair fundraising, allowing individuals and businesses to participate without relying on private funding. They aim to enable fast trading of tokens, enhancing liquidity and allowing more people to access tokens in stable markets. DEXs operate on self-executing smart contracts, reducing costs and ensuring secure transactions. In its essence, an initial DEX offering is a successor to ICOs and IEOs in that it aims to raise money and bootstrap a project. However, unlike ICOs and IEOs where the tokens are sold prior to the listing, with IDOs, they are listed immediately on a decentralized exchange (DEX) – hence, the name.
This happens when traders use a trading bot to buy a lot of tokens at their base value, then sell them quickly when the exchange rate has increased enough. Many IDOs have measures to prevent investors from buying too many tokens. This ensures that the distribution of tokens is fair and that no one has too many tokens or too much control over the project.
The listing usually happens immediately after the IDO is completed, allowing them the flexibility to cash in on their investment quicker than it was with ICOs. However, to incentivize larger holders, launchpad platforms have also created tiers where the more of their tokens the user holds, the higher their allocation would be. This is why the prices of many tokens belonging to IDO launchpads have also increased in value substantially. With an IEO, it was the exchange vetting the project and conducting the token sale.
Looking back at the ICO (Initial Coin Offering) craze of 2017 on Ethereum (ETH), it wasn’t all entirely positive. Scams and rug pulls were widespread, and investors often suffered big losses. While it’s true that anyone can participate in an IDO, your chances of winning an allocation are pretty slim. You need to have a large number of launchpad tokens to make a reasonable investment and this can get quite expensive. Evidently, there were smart people who quickly caught on to this property of liquidity pairs as a great way to launch new crypto tokens. Projects launching new tokens are looking for ways to create maximum liquidity as quickly as possible since this is a key factor in the token’s survival chances.
Many projects now dox their development teams, meaning that they reveal the developers’ identities. This allows investors to research these individuals and find out what crypto projects they’ve worked on in the past. The most important thing an investor can do before joining any IDO is to read the project’s whitepaper. Every crypto project should have a well-developed whitepaper before listing on an exchange. First, ICOs are considered by many investors to be more fair than IDOs.
Both ICOs and IEOs have an initial waiting period before they get listed for trading. On the other hand, with IDO, you do not have to wait so long to cash in on your investment. Whether it’s a small project or a massive collaboration, anybody can organize an IDO.
Crypto presales are usually open to any investors and don’t have whitelisting requirements. All investors need to do to join an ICO is connect a crypto wallet. Centralized crypto exchanges typically conduct due diligence on projects before accepting them for an IEO.