Initial coin offerings have been losing their appeal over the past few years. Instead, many crypto projects and investors opt for initial exchange offering (IEO) events. Check out the explanation below to find out what the difference between these two fundraising approaches is!
What Is An Initial Exchange Offering?
In simple terms, an initial exchange offering is an event during which a crypto startup can raise funds through a trading platform. Thus, an IEO is the blockchain industry equivalent of an initial public offering (IPO), where the crypto exchange undertakes the same role as an investment bank would.
What You Need To Know About Initial Exchange Offerings
You may have noticed that the initial exchange offering definition is very similar to that of an initial coin offering, yet there is a critical distinction between the two. During an ICO, tokens are sold by the issuing company on the project’s website, while in the case of IEO, the sales are held through an exchange platform.
One of the major initial exchange offering advantages is enhanced transparency and trustworthiness. The fact that such token sales are hosted by reputable cryptocurrency exchanges that conduct their own due diligence means that the chances of fraud and scams are rather low.
The pros of the initial exchange offering events don’t end there. Token issuers get to benefit from the exchange’s client base and attract greater investor interest than they typically would have with an ICO. However, it’s important to remember that in return for boosted visibility and security, IEOs can mean high costs for startups.
From the investors’ perspective, an initial exchange offering process is usually extremely convenient. This is because users don’t have to deal with multiple wallets scattered across different blockchains. Instead, they only need an account on the exchange and some funds to participate.
What’s more, with IEOs, the tokens are typically available for trade within a week, while with ICOs most of them don’t even get to an exchange.
