ICO vs IEO: Why would exchanges want to list new projects?
With an exciting idea in an innovative mind, new products are potentially born. For every new unique cryptocurrency project, the crypto space expands. Over the years, plenty of new projects have emerged to offer solutions to real-world issues through products built on decentralized and distributed networks.
Bringing a replacement cryptocurrency project to life sounds easier than it could really get. With an average of over five hundred (500) new cryptocurrency projects emerging yearly and aiming for prominence in the crypto space; survival is a struggle. This struggle is even more intense for infant projects. While a feasible idea and a practical use-case are paramount to the survival and success of latest and existing projects, a few of other factors also matter a lot.
Background - Fundraising
In our capitalist world, financing the method of bringing new ideas to life follows the due process of law of fundraising and looking for start-up investors. Successful fundraising not only generates enough funds for new projects but also generates the initial set of believers who have faith in the ambitions of the project founders and the potentials of the thought they need invested in. Fundraising thus goes beyond gaining financial buoyancy to push a new idea.
For cryptocurrency projects; Public Initial Coin Offering (ICO) and Initial Exchange Offering (IEO) presents fundraising opportunities. Prior to the arrival of IEO, public Initial coin offering has been the principal means of fundraising for brand spanking new projects.
Thanks to Ethereum’s smart contract technology and other blockchains with similar features, new projects generate a cryptographic token. To raise funds for the development of this project, project founders offer a percentage of its total token supply to investors at a presumably low price in exchange for funds. Through Public Initial Coin Offering, project founders directly sell these tokens to investors.
ICO Scams Became Common
However, thanks to series of infamous events; public ICOs, marred by scams, contract breaches, and project failures became unreliable for investors. For project founders, fundraising through public Initial Coin Offering (ICO) has also grown tedious. A project’s success in raising funds via Public ICO solely depends on its ability to properly market its idea to the general cryptocurrency community and possibly, the larger world outside it. This would take special marketing skills… and a bit of luck.
In the absence of prominent affiliates or partners, new projects face the hurdle of creating assurance for intending investors and proving beyond doubt, the feasibility of their theories and the importance of the utility they hope to create. Even when properly done, public ICOs hasn’t been very efficient for project founders. New projects still face the challenge of pushing their product to the market after a successful Public ICO. Public ICOs leave new projects at bare. Most new projects struggle despite having conducted a successful ICO and raised tangible funds. A good percentage of new projects have also failed to survive this struggle while many more have been limited in their potentials. Either way, this spells grave loses for initial investors. These struggles led to an outbreak of ICO scams.
IEOs
Initial Exchange Offerings (IEOs) have grown since then as an alternative to Public ICO which continues to be riddled by its shortcomings.
An Initial Exchange Offering is basically a form of ICO conducted by cryptocurrency exchanges. To conduct an IEO, new projects partner with exchanges to oversee its token sale. In contrast to public ICOs, this exchange provides a platform for the token sale and contributes to the marketing of the new project as well as its token sale. Depending on the agreement between the two parties, the exchange could handle the majority of the token sale workload. This lessens the burden of fundraising for the project founder(s).
IEOs solve numerous fundraising issues. In addition to the aforementioned, partnering with a reputable exchange further assures investors of the legitimacy of the new project. With the reputation of the exchange at stake, it is very unlikely that it would partner with shady new projects for fundraising. Exchanges via IEO simplify token offering and fundraising programs for new projects.
Applying certain cautions and regulations, exchanges also make this process safer for investors who are also their customers. This project will be immediately listed on the exchange on completion of the IEO. The project’s life in the crypto space gets off in a stylish fashion. IEO is thought to salvage the fundraising process in cryptocurrency. ‘Exit scams’ by projects who conducted an IEO is a rare story.
However, it’s never all shades of good. IEO, despite being a masterpiece also has its own shortcomings. In contrast to Public ICOs where projects are free to sell their token to any buyer; token sale one exchanges (IEO) are only open to traders on the specific exchange. Depending on the universality of the exchange and user regulations, the token purchase is limited to a certain set of people. For exchanges whose services are not available in certain geographical locations, investors in such locations will be unable to participate in the initial token sale. Exchanges introduce another level of centralization to initial token sale and fundraising programs. This centralization also improves investor security, but still, its limitation is tangible.
Benefits for Exchanges with Offering IEOs
IEO projects find it relatively easier getting listed on exchanges than public ICO projects. But why would exchanges consider listing new projects?
Regardless of the fundraising process, the listing process for every project is basically the same. Some reservations might exist where the project has a special relationship with the exchange. Apart from situations like this, considerations for listings is a uniform process for most exchanges.
A project’s reputation speaks for it. A good project is on the trajectory for spontaneous success - most times. The relationship between exchanges and projects listed on its platform is mutual. A shady project dampens the reputation of an exchange. Reputable exchanges are clever to refute approaches by shady projects. Transparency is a vital feature considered in the process of the token listing process.
A project which satisfies this criterion is further assessed for its fundamentals and vulnerability to regulations. Security tokens might face hardship in listing on exchanges due to regulations that bind them.
Market viability and userbase is also considered. However, for a project which satisfies the criteria mentioned earlier, the chances of getting accepted by exchanges grow higher and are expected to gain more userbase and grow in market performance with time.
IEO projects find it easier to get listed on other exchanges mainly because they already satisfied these criteria before their fundraising proposal was accepted by their parent exchange.
Concluding Thoughts
It is worth mentioning that Bityard will also want to launch BYD in the near future. They'll put the user's account safety to be their first priority and that's why it took them so long not to publish ICO and IEO yet.
Got a token/coin to list? Bityard is a new generation cryptocurrency exchange with exciting features and a large userbase.
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