IEO – New Round of ICO Evolution? How to Make Cryptocurrency Investments More Transparent
The majority of projects launching ICOs were accused of fraud. It led to the emergence of a new, more advanced method for raising cryptocurrency investments – IEO.
Analyzing all the cryptocurrency projects launching ICOs in 2018, Satis Group LLC concluded the following: 80% of analyzed projects were fraudulent, while only 8% of them got to the listing on cryptocurrency exchanges.
However, there were some major and successful projects such as EOS ($185 million), Status ($108 million), and Filecoin ($257 million).
Well, do new forms of investment have a potential? The article reveals why ICO has become so popular, as well as examines its mistakes and explains how to correct them using IEO.
What is IEO?
IEO (Initial Exchange Offering) is a new approach to crypto banking that gradually catches traders’ attention worldwide. This phenomenon appeared in 2018.
This system provides another type of exchanging where an exchange serves as an intermediary between projects and participants.
The IEO trend was initiated by Binance launching its IEO platform called Binance Launchpad. In early 2019, BitTorrent carried out the first IEO on that platform, raising $7.2 million in 15 minutes. Currently, many people engaged in the crypto world see the potential in this system and encourage others to join it.
The table gives key differences between ICO and IEO projects
The two-sided system allows to fully control the token operating process, which is a crucial aspect for crypto traders due to the bitter experience of ICO projects. IEO projects can offer the following:
enhanced security for users;
higher transparency of transactions (in comparison with previous approaches);
a fairer system that can be beneficial even for newcomers;
a more reliable banking system.
Security is a serious challenge in the cryptocurrency world. ICOs are opened and closed in the blink of an eye after people begin to realize that they are deceived, but IEOs try to solve the problem.
As a crowdsale is conducted on an exchange platform, counterparties inspect each project desiring to launch the IEO. Exchanges do this to keep a solid reputation, thoroughly checking token issuers.
At the same time, token issuers should not worry about crowdsale security because the exchange controls IEO smart contracts. The KYC/AML process is also accomplished by the exchange, as the majority of service providers create KYC/AML for their customers immediately after setting up accounts.
Examples of IEO projects
All of these advantages have made IEO projects quite popular. According to the study of CoinGecko, 72 startups have successfully launched Initial Exchange Offerings for the second quarter of 2019, while five of them have managed to obtain $10 million. In total, projects raised approximately $262 million using IEOs on various platforms.
The most successful ones include WaykiChain ($18.5 million), Lambda ($16.4 million), Blockcloud ($15 million), and Top Network ($15 million).
It is a new basic system of Blockchain 3.0. The project can build and develop new business models in the betting sector. Blockchain will make all bets on WaykiBetting be generally available for search. Besides, WaykiBetting can boast the lowest operating expenditures, applying the blockchain-based decentralization structure: after the game outcome, a smart contract will automatically allocate pay-offs in accordance with the published results.
WaykiChain contains network features specific to Blockchain 3.0. Therefore, a project can design a global decentralized platform for app development that supports various options.
Lambda blockchain is a blockchain-based cloud for data storage. The project is aimed at issues that competitors fail to solve: impossibility to change static files stored on the cloud (cloud storage) and impossibility to search for information in files. Lambda is going to eliminate these aspects using the comprehensive functionality of DApps.
The Lambda technology is also noteworthy for the fact that developers can use the project code and change it in compliance with the Apache license. The platform allows to deploy private networks. In this case, a public chain is applied for automatic audit and pure data storage.
Blockcloud is an innovative block IoT infrastructure connecting all points of human life. Blockcloud helps to design an open, true, fair, and stimulating system of IoT condition data, ensuring that this information can be safely distributed in authorized nodes.
Blockcloud is still under development. The launch of the test network is scheduled for the second quarter of 2019, while the release of the motherboard is scheduled for the second quarter of 2020.
Top Network provides blockchain-based cloud communications. It is the world’s first decentralized open communication network based on Blockchain 4.0 technology.
Moreover, the project is going to create a decentralized open communication network to provide transmission of voice calls, message passage, live streaming, VPN service, IoT data exchange, CDN service, cloud storage, and other services.
Risks of investing in IEO projects
However, such a system has certain nuances:
launching the project’s IEO is expensive. Initially, organizers cover expenses for a marketing campaign, which is not cheap enjoyment (sums of money frequently exceed $100,000). Surely, conventional ICOs also require expenditures, but now organizers will have to pay to exchanges as well because not a single platform with an excellent reputation and a large number of users will place projects for free;
exchanges also take on a real risk. Placing a certain project, trading platforms guarantee its reliability and viability, as a group of analysts examines startup prior to this. If the project fails, the exchange risks to lose customers believing in the IEO promoted by it and lose funds;
to participate in the IEO, potential investors should pass verification, which many of them will dislike.
Nevertheless, IEO is returning the interest in crypto banking. Do IEOs have a potential for replacing ICOs as the primary fund raising in the blockchain environment? It is still unknown, but there are some improvements as of today.