Initial DEX Offering (IDO): The Definitive Guide
For a long time now, cryptocurrency has gained a strong foothold in various industries and financial markets. Needless to say that this technology seems to be on a mission of disrupting several industries, just as the internet did in its early days.
As the industry is gradually expanding its wings, it has brought an all-new set of investment opportunities with it. From trading coins, and investing in projects to liquidity pools, yield farming, and staking in cohorts, we’ve all come across these new strategies sprouting through the industry every now and then.
However, there’s growing momentum, notably in the area of business fundraising. The growing demand for cryptocurrency and blockchain technology is creating new opportunities in crowdfunding.
As the crypto sector has matured over time, several innovative fundraising approaches have come to light. What started with the ICO boom in 2021 and then the IEO boom is now centered on the IDO (Initial DEX Offering) – a new form of decentralized and permissionless mechanism for crowdfunding.
What is Crowdfunding?
Crowdfunding is a method of raising funds for a certain cause or project by asking a large number of people to donate money in small sums over a short period of time. Crowdfunding is done online, usually through social media and crowdfunding platforms, making it simple for supporters to share a cause or project with their social networks.
Businesses look for fundraising when they reach a certain stage of development to secure money and fund the next stage of development. This happens when a company requires more capital to scale quicker than what is currently available to them.
Fundraising in Crypto
Traditional crowdfunding tactics are not immune to crypto projects. Fundraising in crypto, however, has taken an entirely new form since the advent of Bitcoin in 2008.
As a result, if a crypto business is willing to grow more and enhance its development, it should be looking at raising funds.
However, suppose the business is either too early or too late in its development cycle. In that case, it may not be eligible for traditional financing methods such as initial public offerings (IPO) or obtaining a bank loan.
The crypto and blockchain ecosystem is giving new ways to raise funds that were previously unavailable. And Initial DEX Offering (IDO, for short) is one such way.
What is an IDO (Initial DEX Offering)?
IDO is a fail-safe solution for projects to raise funds for growth and development. It is a new type of permissionless crowdfunding technique that is opening up a new way for crypto projects to secure capital in the cryptosphere.
The IDO approach gained traction for several reasons:
- Crypto projects could raise funding in a decentralized manner.
- No middleman is required for the funding to happen.
- funding is done by using liquidity pools.
- Investors can book immediate profits.
It sure is a win-win for everyone, be it a project or an investor.
When a crypto project is launching an IDO, this implies the project is launching its native token or coin via a decentralized liquidity exchange.
How Did the IDO Model Come into the Picture?
IDO is the successor of other crypto fundraising models, such as Initial Public Offerings (IPOs), Initial Coin Offerings (ICOs), and Initial Exchange Offerings (IEOs). Let’s take a deeper look at each of these models:
Initial Public Offering (IPO)
An initial public offering (IPO) is a process where a privately owned business offers crypto assets of its business to the public in new allocation. The process permits a crypto company to raise capital from public investors, provided it complies with guidelines that compel it to increase its disclosures and transparency.
An initial public offering (IPO) is a vital step for any company. It is regarded as a regulatory milestone for businesses in the crypto space.
In order to launch an IPO, a crypto company needs to engage with investment banks, which are parties that analyze and evaluate associated risks in exchange for a fee, to launch their coins to the public. Underwriting is the strategy whereby an investment bank (the underwriter) serves as a representative between the public and the issuing firm to help the issuing company in selling its initial set of coins.
Initial Coin Offering (ICO)
When the cryptocurrency went mainstream in 2017, projects adopted this fundraising technique by selling a portion of their total crypto token supply to the public through initial coin offerings (ICOs).
By the end of 2017, ICOs had become an instant hit in the crypto industry, with investors raising an estimated $4.9 billion.
However, the popularity of ICOs had plummeted due to the increase of fraudulent businesses and Ponzi schemes.
In 2018, a new fundraising strategy known as the Initial Exchange Offering (IEO) emerged as an alternative.
Top ICO Launchpads:
Initial Exchange Offering (IEO)
After ICOs faded, the Initial Exchange Offering (IEO) became popular due to its lack of risk on the user’s end. An IEO sees projects launch their assets on an existing exchange rather than hosting fundraising. Exchanges are more inclined to evaluate a project and confirm its authenticity because they have a reputation to uphold. An exchange will hold a token pre-sale if it is deemed legitimate. Investors can purchase the token and hold it for a set period of time, but they will not be able to trade it until the event is over.
Furthermore, crypto projects were thoroughly analyzed in IEOs, and the barrier to participating in an IEO was very high.
Top IEO Launchpads:
The Emergence of Initial DEX Offering (IDO)
IDO (Initial DEX Offering) came into the picture in 2019.
An Initial DEX Offering is similar to an IEO but more flexible. Instead of using a traditional crypto exchange to raise funds, IDOs use a decentralized one. For investors, decentralization allows for rapid and fair trade and automatic liquidity for the enterprise. Developers don’t have to wait until the end of a pre-sale to get funding, as they would with an IEO.
The Raven Protocol became the first-ever project to launch an IDO.
We’ll talk about the popular IDO launchpads later in this blog.
Advantages of Using the IDO Model for Raising Funds
Due to their mechanics, which provide improved and immediate liquidity at all market levels, IDOs are a fantastic solution for new projects looking to launch a token and access immediate funding.
- Enhanced User Experience: By combining a secure wallet and trading platform support into a single interface, IDOs help consumers save time. They can also handle a variety of wallets, greatly improving the user experience.
- Fair Fundraising Technique: Companies, particularly startups, do not need a centralized exchange to start a fundraising event using the IDO fundraising technique. Furthermore, anyone can start or participate in an IDO.
- Instant Liquidity: DEXs enable IDOs with immediate token liquidity, allowing them to run smoothly and without any unexpected user interruptions. As a result, as soon as the project is released, investors will be able to trade the project token. When a project’s token gets immediate liquidity, its price normally climbs in tandem.
- Reduced Costs: When a project raises funding through an ICO or IEO, it often must first pay exchange fees and wait for the exchange to authorize the project before being listed. IDO-based projects don’t have to pay expensive fees and don’t require permission from anyone because they’re completely decentralized.
- Fast Trading: IDO coins are immediately tradeable. This enables investors to buy tokens as soon as they are available and then resale them at a higher price later.
4 Popular IDO Launchpads for Crypto Projects
Crypto launchpads, also known as Initial DEX Offering (IDO) platforms, specialize in the launch of new coins or crypto projects and the subsequent raising of liquidity.
Launchpads make cryptocurrency crowdfunding possible, which was previously only available to venture capitalists and other institutional investors.
Furthermore, when IDO projects acquire traction, the value of these coins may rise, providing gains to early contributors. Both developers and investors are encouraged to employ IDOs because of the mutual advantage.
Let’s take a look at some of the top IDOs currently available.
BSCPad, which focuses solely on the Binance Smart Chain, is an IDO platform that offers a variety of BSC companies that appeal to people looking to invest in a single platform. BSC Pad features investment rounds that allow you to participate in the launchpad with varying perks based on how much you contribute. BSCPad is a popular choice among retail investors.
The TrustPad is focused on making IDO available in a secure manner. TrustPad, which focuses mostly on the Binance Smart Chain but claims to support other chains, includes a variety of services for investors, including staking, farming, and pool participation. The launchpad also boasts four huge communities from around the world, indicating that they have a global presence for startups.
3. PAID Network
Many launchpads strive to stand out from one another based on their unique features and offerings. PAID Network has taken a completely different approach than the others by claiming to have the most exclusive set of projects in the crypto sector.
PAID Network is well-known for being one of the longer-running IDO launchpads on the list, with projects from the Ethereum and Binance Smart Chain ecosystems.
Not only this, but PAID Network also provides additional benefits to retail investors that own and stake their native tokens on their network.
UniLaunch has been a great success ever since it was launched.
IDOs have become a standard fundraising model for several new crypto projects in the market. In fact, their accessibility, affordability, and ease of use have won many hearts when it comes to fundraising.
You’re on the safer side when you’re taking part in a token sale via an IDO. However, picking the right projects is what determines your success in an IDO.
And that, my friend, requires thorough research about the project.
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