The ways to raise capital and distribute tokens in the crypto space have evolved over time. It started with Initial Coin Offering (ICO), then moved to Initial Exchange Offering (IEO), and has finally come to a more preferred method known as Initial DEX offering (IDO). The first-ever IDO was strategized for Raven Protocol on Binance DEX. It was designed to support fast trading, immediate liquidity, and open and fair fundraising. However, it was not able to deliver what it promised. According to the investors, the tokens sale was over within seconds and that left no chance for average traders to grab any tokens. Thus, fair distribution was not achieved. All this led to the development of IDO launchpads.
Why are traders flocking towards IDOs rather than IEOs now?
Advantages of an IDO
• Simple process
To hold on IEO on an exchange is undoubtedly a tedious process. However, launchpads have simplified the process. Because of this, many projects have been able to raise funds and fuel their development activities.
• Immediate cash in
With IDOs, the biggest advantage is that the token gets listed immediately. So, during the early price discovery phase itself, the investors can cash in their investments.
• Transparent process
The entire process happens on chain. Even the lottery is conducted with systems life VRF by Chainlink. As a result, the participants can verify the token contracts and trust the process.
• Promising incentivization
To maintain higher liquidity, the projects offer staking rewards to users immediately after the IDO. Because of this, the users become LPs (liquidity providers) and earn rewards.
Because everything happens on-chain, there’s traceability, and everyone can verify the token contracts in advance (if they are public, of course).
Disadvantages on an IDO
• Chances of scams
With the popularity of Initial DEX Offering, many fabricated projects are trying to take advantage of the process.
• Competition is high
The rate of participation is very high and the supply of coins is very low. As a result, not many participants are able to grab the tokens.
What ensures the success of an IDO?
IDO development has shaped up well in the last 2 years. Innovative launchpads have been developed and an IDO development company strategizes the way to success. Here are the main reasons why some launchpads have become extremely successful:
• Launching IDOs with very low initial market caps
Initial Coin Offering (ICO) turned out to be frenzy in 2017. However, many projects that conducted ICOs flooded the market with their tokens. With the demand still building up, the supply was much higher and this led to a price crash of tokens of some very promising projects. IDOs can fix this by offering just a few million tokens. Because of this, the IDO process relatively raises fewer funds in comparison to ICO and IEO but it protects the project tokens from losing value.
Interestingly, all the team tokens, private sale investor tokens, and public tokens have a vesting period planned in an IDO. All this is important to stop token holders to rush and sell their tokens in profit during the price discovery period when the demand stays high.
• Multi-chain IDOs
Blockchain interoperability is one of the most sought-after elements nowadays. Also, with Ethereum gas issues, projects are launching ERC-20 and BEP-20 tokens at the same time. Thus, supporting multi-chain IDOs seems to be a big plus during the IDO development.
• Offer traders a guaranteed allocation
Most of the launchpads have their own native token and this can be used to their advantage. They can offer guaranteed allocation to a certain Initial DEX Offering to participants by asking them to hold their native tokens. This also saves launchpads from the trouble of conducting lottery events.
Some of the launchpads like Ignition have a tiered setup. The participants with more native token holding enjoy higher chances of getting IDO allocation.
Wrapping it up
IDO development is in trend nowadays. With the way it’s democratizing the token distribution model, the chances are high that IDOs will always remain the preferred way of raising funds for projects.