IEO refers to initial exchange offering. It is one the latest phenomenon of crypto capital, and on the lips of almost each and every big entrepreneur. The years 2017 and 2018 witnessed huge benefits with initial coin offerings, that is, ICO, but IEO, launched early of 2019, have been even more promising. So let is develop an understanding of what an IEO is, and how can one go about it.
IEOs or initial exchange offerings are a ways to build up capital for startup project teams, so that they can implement their ideas. They work differently on different exchanges depending how they got planned, but generically all are the same, and all behave the same in their most basic manners. Put in the simplest terms, it is like the exchange creating a platform for the project teams, to come together and sell their ideas to crypto investors who fall into the category of early adapters in terms of technology or innovation.
How Does an IEO Work
From a developers’ point of view, the developer rolls out crypto tokens, which he puts on a crowdsale on some cryptocurrency exchange without listing the digital currency on that exchange. The exchange takes care of all the marketing and selling formalities. In return, the developers’ pay a listing fee and the outstanding commission, and they get to pitch their idea to all the existing user base of that particular exchange without much hassle. It is then up to the investors, or the buyers (who are on that exchange already) if they would like to invest into that idea. Whosoever does, inturn becomes a promising mechanism of startup funding for the IEO project team.
Regarding the operational formalities, the project team has to prepare their documents and white papers as per the exchange requirements. They basically try to portray and showcase the entire roadmap of their new innovation. If the exchange approves, both the idea and the party involved, it does all the verification of the project team and what has been demonstrated in the roadmap. Once through, they complete the KYC formalities, and enter into a legal contractual agreement with the project team to roll out the IEO. It is the exchange that mostly proposes a suitable date for the token sale, and a price that it must be sold for, and then both the parties come to a mutual conclusion. Also the project team specifies as to what would be the mechanism for it to raise funds, meaning that what form of money it would like to sell its new tokens for. This is usually some pre-existing cryptocurrency that is compatible with that particular exchange.
Why are IEOs so popular
The main factor that is making IEOs a success and so popular, is that the investors are able to better trust the project team, because of the third party involved, that is the exchange. They mostly are already dealing with the exchange, so they are not only already comfortable with the operational steps that are required to buy or sell something on that exchange, but they also know that there is someone trustworthy involved in this transaction.