The ICO’s heyday in 2017 saw various digital assets emerge only to crash in 2018 thanks to the bearish crypto market. ICOs raised billions of dollars in a relatively short time and brought the crypto market cap to over $800 billion before it fizzled out.
As the ICO candle was burning out, several other fundraising models took center stage. For instance, there are Security Token Sales (STOs), but Initial Exchange Offerings (IEOs) have awakened serious investor interest.
With that in mind, and since terminology and convoluted meanings remain a tricky business in crypto space, BTCManager will look at the concept of IEOs in further detail. As blockchain fundraising mechanisms mature and metamorphose, and crypto projects choose IEOs over ICOs, this essential guide will help interested parties understand the difference by breaking down each process.
What is an Initial Exchange Offering (IEO)?
An Initial Exchange Offering is a new but less-well-known crowdfunding strategy for blockchain-based projects. Whereas in an ICO it is the business of the developer to ensure the smart contract is correct and that everything goes as planned, in the IEO model a third-party, such as a cryptocurrency exchange, executes the same commitments.
The IEO model enables crypto projects to fundraise directly on cryptocurrency exchanges which may be the reason they have become a buzzword recently.
The main difference with ICOs is that IEOs don’t hold token sales that are open to the general public. This means that only active users of the particular exchange can participate as opposed to ICOs where just about anyone can buy coins by sending funds to the host’s address.
For anyone to enter a token sale, they must have an account with the exchange that’s hosting the sale.