Blockchain entrepreneurs looking to raise capital through token sales are still navigating through a difficult regulatory landscape. Different countries still view cryptocurrencies and blockchain quite differently and finding the right location to capture the most investors is tricky.
ICOs have been an undoubtedly positive force for blockchain, giving exposure and capital to projects that have pushed the industry forward. Even so, they have been known to have issues with transparency and security, putting them at odds with regulators.
However, crypto exchanges are improving on the original model with the initial exchange offering (IEO). By managing the token sales for projects, exchanges provide greater compliance, and give investors trust that projects are likelier to succeed thanks to extensive due diligence. With more exchanges joining the growing trend, IEOs may be a major influence for crypto adoption.
Exchanges Pave The Way Ahead With IEOs
In typical blockchain fashion, IEOs are a largely bootstrapped yet functional way to add transparency to the original ICO model. A cryptocurrency exchange shoulders responsibility for vaulting all obstacles in the way of young blockchain projects. Regulations are just one aspect of this battle, as independent ICOs must carefully monitor their marketing language and advertising (the expectation of profit might alter a token’s asset classification). Additionally, they must create and manage an issuing smart contract, host the crowd sale successfully, identify destinations for listing the new token, and then finally manage their growing economy while pushing past technology milestones.
As changing trends make this process more difficult to undertake successfully, exchanges have leveraged their role as the primary beneficiary of crypto’s bull markets to use their capital and extensive reach to upgrade the fundraising model. IEOs issue tokens directly to a captive audience (exchange members) using their own user wallets and list the token on the exchange itself for instant liquidity.