A spotlight on crypto fundraising models - IDO
When new crypto projects prepare to launch, they have to choose a way to get investors to put money into the project. Fundraising is a popular feature of crypto projects and there are many of them. It started with Initial Coin Offering (ICO). Over time, many other models like Initial Exchange Offering came around. Today, Initial Decentralized Exchange Offering (IDO) has become a more popular model for the right reasons.
It is not surprising to see many crypto teams choose IDO as their fundraising model today. Decentralization is now a key talking point in every crypto space. Decentralized projects give users soveriegn ownership of their identity and digital assets. Thus, DEFI and other aspects of decentralization are taking over the space. IDO is just another aspect of the drive towards everything decentralization.
IDO - an overview
IDOs happen in a decentralized trading platform. The D stands for Decentralized Exchange (DEX) platform. So with IDOs, the project raise funds and investors purchase the tokens to be launched through a DEX. In effect, using a DEX eliminates all the many challenges associated with centralized exchanges and those of new crypto projects.
Basically, it is easy to do token launch through the IDO model. The project owners submit the tokens to a DEX. Investors are then asked to come and buy the new tokens to be listed using a preferred crypto like BNB, BTC or ETH. After the token purchases are completed, the DEX distributes the new tokens to everyone that participated and release the funds raised to the project owners. IDO's present a more secure, streamlined and user-centered approach to fund raising. Consider the following benefits.
IDO - solving the many challenges of crypto projects
There are many challenges that arise when other fundraising models like ICO are used. The popularity of IDOs today owes it to the successful overcoming of these challenges. Consider some of them:
- Making project owners rich first: Other fundraising models often favor the project owners and early investors. Usually with ICO and other models, the project team like the founder and other members have the opportunity to purchase the tokens first before the public is invited to participate. With such methods, there is an unfair advantage granted to the team by allowing them to have the tokens first. That does not happen in IDO.
When IDOs are launched, there are no minting of tokens for the founders or teams. Instead, everyone is invited to purchase the tokens at the same time. Hence an IDO gives a fair opportunity for all to invest in the project and purchase the tokens at the same time.
- Overcoming centralization: With IEO and ICO, there are many issues that arise because these platforms are owned and controlled by someone. There are rules here and there. Before the project is accepted to be listed, they have to reach the minimum requirements set by the exchange platform. Most new projects often struggle to reach the requirements and they are turned away.
Obtaining the approval of a popular exchange like Binance is very difficult. Hence, great projects might be stopped before they have any chance to compete. Other issues includes payments that must be made for launching through the exchange. Ownership and security of user data are also other challenges. And signing up, plus KYC procedures are all challenges that make ICO and IEO difficult.
With IDO, there are no rules and requirements to be met before listing. The community provides the liquidity which is needed to do a successful listing. Of course, no one is required to first sign up with the exchange or do KYCs. Decentralized exchange platforms allow users from everywhere to participate without first going through sign up protocols.
- Security and Availability of funds: With other models, someone else is in charge of the funds. The new tokens purchased are stored in a centralized wallet which is vulnerable to hacking and other security breaches. Sometimes, a new token launched through IEO or ICO lacks the liquidity needed to facilitate trading immediately after. These are challenges not seen in IDOs.
When it comes to liquidity, participants in the IDO provide the liquidity needed to do trading post launch. This makes it possible to have a vibrant market for the new token after the fundraising campaign. In addition, there users have their newly purchased tokens in their web3 wallets with IDO. The funds are readily available and secured by the user. There is thus more security of funds and liquidity with IDOs than other fundraising models.
Token launches for 2024
CoinMarket cap makes a calendar of tokens to be launched and their fundraising models. You can get this detail by frequently checking their ICO calendar. Check out the link below to see it:
Conclusion
Before deciding to join any token launch event, do your own research. Among the many things to consider, think about the fundraising model. Is it an ICO or IDO. You are to make a choice in this matter. But the popularity and success of many IDO projects lends credence to the fact that IDOs are much more preferred now and other methods.
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