Years 2017 and 2018 were known as the years of ICO, when billions of dollars were raised using this mechanism. From there IEO gradually took up, and now financial investors call it is “the new ICO is an IEO”. This article tries to understand how this transition took place and what are the similarities and the differences between these two.
How is: The New ICO is an IEO
ICO refers to initial coin offering, which was used by entrepreneurs who wanted to launch new cryptocurrencies, so as to raise funds for their own projects. The project team used to create a cryptocurrency and then work towards marketing and promotion to get the attention of the public so that they invest in it. However, with the entry of an IEO, many things changed. The main target is the same: that is, to raise funds for a startup. Nevertheless, with an IEO, the project team collaborates with one or more cryptocurrency exchanges, and then launches its new token over there in a preview sale/ crowdsale. As such it saves a lot of time, money and effort that would otherwise be required in the marketing of this new token. Besides this main advantage of an IEO over an ICO, there are a few more differences as well which we try to cover in the following sections. But this is the main reason as to why It is called, the new ICO is an IEO, as it basically is the same idea, just a bit more programmed and updated to better suit the stakeholders involved.
Spammers: The New ICO is an IEO
It was beyond doubt that the years 2017 and 2018 saw project teams all across the globe try and find ways to enter cryptocurrency via ICOs and raise a lot of money. But this also invited unwanted spammers and money launderers, who in the name of gainful investments swindled a lot of money from ICOs. This was another reason for the launch of IEO, that is, initial exchange offerings. It was earlier denoted as ICO 2.0 when launched in about January 2019, and later IEO was developed out of it.
Transitioning: The New ICO is an IEO
In an ICO, the project team was required to mainly create white paper and a website or a mobile app, to interest the public in the offer, and tokens were allocated via smart contracts. This model had many problems, especially from the point of view of financial security and this ultimately led to loss of trust from an investor’s point of view. With an IEO, the project team was to only create tokens, and the exchange itself did all the verification and the scrutiny regarding the viability of the proposal, a great way to secure its investors. Next, the exchange also conducts KYC and AMLs on the prospective buyers, so that is an add on security feature for the project team as well. This led to the removal of a lot of cyber hacks, money duping and regulation loopholes. The IEO is open to public unlike the ICO, which are well verified much in advance.