IEOs are a fundraising system for startups and have evolved from their ancestors, ICOs. Trading system IEO, Initial Exchange Offering, uses a cryptocurrency exchange as a middleman, rather than trading directly with the investor. As a startup, you hand over the newly created tokens to a crypto exchange, and the investor has to collaborate with the crypto exchange so as to complete the trade. This secures both the startup and the investor who are involved in this practice.
How It Works: Trading System IEO
1. The startup lists the newly created tokens (or coins) on some crypto exchange’s IEO platform.
2. The exchange charges a percentage for this listing.
3. The exchange opens the IEO for sale.
4. Interested investors can buy these tokens from the exchange by paying for some other cryptocurrency or entering a legal tender.
5. The exchange charges the startup a commission based on the number of tokens sold.
6. Depending upon the incentives, the exchange helps to market the token issuer’s tokens.
Why to Use the Trading System IEO
IEO is fast replacing ICO because of the many aspects it offers as stated below.
1. Reputation: In an IEO, it is the exchange that is responsible for the exact delivery of the legal tender or the cryptocurrency that has been promised by the investor. Now, say that it is some project delivery, and the investor happens to be a fraud or is unable to deliver as promised, the exchange’s reputation will come at stake. So the exchange usually performs due diligence before putting up anything as an IEO.
2. Marketing: It makes the fund raising process easy for a startup, as it taps both the existing customer base of an exchange and also capitalizes on the reputation of the exchange at the same time. Marketing is a major challenge in fundraising for any new startup and the process has been eased out with IEOs.
3. Security: It is very easy to fraud an independent firm or company, especially when it is a startup. Per contra, it is extremely difficult, kind of impossible to scam a reputed and long established cryptocurrency exchange. This practice is more secure and safe for startups.
4. Convenient: As in traditional systems like an ICO, the startups were required to create their own listings and make their own sales. However, launching IEOs on an exchange platform is much easier and hassle free. You just have to create your account on an exchange that offers an IEO platform, and everything follows.
The trading system IEO is a new phenomenon and definitely, it is growing fast. However being new, it is advisable to hire expert consulting firms like executium.com while planning an IEO so that they can handle the process in a better manner. Although dependency upon firms like executium.com is more in the case of ICOs, it is not altogether not required for IEOs. Even the IEO trading system in cryptocurrency can benefit while you roll out your newly created tokens.