what is ido crypto

It is a permissionless, crowdfunding platform for launching new crypto tokens in the DeFi space.

This can be compared to an IPO (Initial Public Offering) in share markets. You must be familiar with the traditional way of trading shares of various companies on stock exchanges. In such equity markets, IPOs are used for raising funds. The investors get company shares in return. In an IDO, instead of the company shares, you get their crypto tokens.

In an IDO, new crypto coins or tokens are launched using a decentralized liquidity exchange.

Now let me explain a bit more about that mechanism.

IDO and Liquidity Exchanges

Unlike liquidity exchanges, regular decentralized exchanges rely on order books to execute trades.

What is ido crypto

Pre-mines exist due to an issuance system that favors project founders over community members that become involved.

What are the advantages of a crypto IDO?

If we compare an initial DEX offering to initial exchange offerings (IEO) and initial coin offering (ICO), the former has many obvious advantages that we’re going to see here.

Raising funds for a project via an IEO or ICO, the project must pay the exchange fees and wait for it to receive approval by the exchange before receiving approval. But with IDOs, any project doesn’t have to pay the enormous fees. And doesn’t need anyone’s permission as the system is a completely decentralized offering.

So compared to IEOs and ICOs, IDOs can provide immediate access to liquidity and trading, rather than having to go through an initial waiting period.

Ico cryptocurrency

ICOs face a lot of challenges ranging from hackers, and whales to human error. Third parties were sometimes able to manipulate them. There were plenty of scams and rug pulls. All this led to the rise of other fundraising models such as security token offerings (STO) and initial exchange offerings (IEO).

But as of now, Initial DEX offerings (IDOs) have emerged as the best crowdfunding model.

Let’s check what IDOs are, as well as, the pros and cons of IDO.

  • What is IDO?
  • IDO and Liquidity Exchanges
  • Advantages of IDOs
  • Disadvantages of IDOs
  • Closing Thoughts

What is IDO?

Initial DEX offering (IDO) is a method of raising funds for cryptocurrency projects.

What is ido in crypto currency

And when it comes to fundraising, it’s always crucial to have some form of control to remove token price changes or have KYC regulations, which exist in STOs, ICOs, and IEOs.

While the concept behind crypto is always to open more opportunities in the world of finance by making it decentralized and IDO’s are one step closer to making this a reality, who can say if a new project is going to be the next best thing or worst thing that could ever happen? And it’s very difficult to know if a particular coin is worth X amount.

Some improvements we should focus on

An improvement that we should focus on right now is scalability. As for now, only decentralized finance or DeFi projects have managed to raise money through IDOs. However, this doesn’t mean that other projects within the crypto space can’t use this method of crowdfunding.

Whats is ido in crypto

Since exchanges have a reputation to uphold, they’re likely to audit a project and ensure its legitimacy. If deemed legitimate, an exchange will hold a token pre-sale. Investors can buy and hold the token for a set period of time but cannot trade it until the event ends.

Imagine having a product to sell, but you’re having a hard time convincing potential customers of its worth.
So you hire a popular distributor, like Amazon, to examine your offering and validate its existence while auditing its pros and cons. If Amazon likes it, they’ll list your product to its massive audience of users, allowing some to pre-order it ahead of time.

What is ido means in crypto

Initial DEX offering or IDO is a new fundraising model that offers better liquidity of crypto assets, faster, open, and fair trading. IDO model is the successor of fundraising models such as ICO, STO, and IEO.

Before we learn about IDO crypto, let’s brush up on our knowledge of the fundraising concept via token sales. If a company wants to raise funds to build new products or expand its business, it has multiple options.
The traditional option is to go for financial loans or investments from banks and VCs.

However, since the success of cryptocurrencies – Bitcoin and Ethereum more companies had used them as an instrument for raising funds via token sales. Here companies create crypto tokens and issue them to the general public in exchange for Bitcoin, Ethereum, other major cryptocurrencies, and fiat currencies.

The ido crypto

STO complies with the government regulations, whereas in the latter, regulations are yet to be framed.

If you are planning to launch a token offering, make sure to consult with a reliable blockchain development company to do a feasibility analysis to check whether your business needs a token offering or not.

Read more: How to choose the right Blockchain as a Service provider?

How does an IDO work?

An IDO uses the decentralized exchange to facilitate the token sale. A crypto project provides tokens to the DEX and users commit their funds through the platform, and then the final distribution and transfer are done by DEX.

What does ido crypto mean

This automated process occurs through the smart contracts on the blockchain.

The rules of the IDO follow standard methods.

  1. They accept a project to run on an IDO after the vetting process, and once they offer a supply of tokens for a fixed price, the users can lock their funds in return for these tokens.

  2. You need to complete marketing tasks to join the investor whitelist, or you can provide your wallet address.

  3. Some funds are raised to create a liquidity pool, and the rest are given to the team. Investors trade the token after the TGE, and usually, the liquidity is locked for a certain period.

  4. At the TGE, tokens are transferred to the user, and then the liquidity provider is opened for trading.

Read More: Understanding ICO token models.

Ico blockchain

And in 2014, Ethereum raised money with a token sale and managed to raise 3,700 BTC only in its first 12 hours, which was equivalent to $2.3 million.

Meanwhile, the first IEO happened on April 17, 2019, with the launch on the Idax, BitForex, Bit-Z, and Bit-M exchanges. Whereas in June 2019, Raven Protocol launched the first-ever IDO, which they listed on Binance DEX.

IDOs are able to offer better and more immediate liquidity at every price level thanks to its mechanics. This means that IDOs are a great solution for many new projects.
And also startups that want to launch a token and access immediate funds.

Unlike fundraising methods above, IDOs are typically fairer when it comes to launching a new cryptocurrency project by dodging pre-mines.

What is ido and ico in crypto

And the most common and widely used option to raise funds is, to seek financial loans or investments from banks.

isn’t it?

Just like that, in the crypto industry, to raise funds for their projects, many blockchain companies create their crypto tokens and release them to the masses in exchange for some other famous tokens like bitcoin, Ethereum, fantom, and many more.

This process is called fundraising.

One such method to raise funds is called ICO, which was used in 2017.

ICO or initial coin offering is an approach to raise funds from investors through a crowdfunding mechanism.

In 2017 it has generated a lot of hype into the crypto industry.

What is ico and ido in cryptocurrency

What is an IDO?Key Takeaways:— An Initial Dex Offering is the next step in cryptocurrency fundraising. The process provides financial freedom for both the investor and the project developers.

— IDOs put the responsibility of due diligence in the hands of investors, which increases risk but also the potential reward.

— If you’re looking for new crypto projects, IDOs represent the future of fundraising.

Want to learn about crypto fundraising? let’s explore what is an IDO.

Are you getting tired of all the confusing cryptocurrency terms? First there’s an ICO, which is a fundraising method quite similar to an IPO. Then there’s STO, IEO, and now IDO. If you’re trying to keep up with project-centric crypto developments, these complex terms can get ahead of you.

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