A DEX Initial Offering, or IDO for short, is a novel crowdfunding technique that allows cryptocurrency projects to launch their token or native currency through decentralized exchanges (DEXs). Successor to the infamous Initial Coin Offering (ICO) , the IDO is a foolproof way for projects to self-develop or raise funds for their growth and development.
What is an IDO (Initial DEX Offering)?
The IDO, or DEX Initial Offering, is an offering of cryptocurrencies (or tokens) that takes place on a decentralized exchange (DEX). However, unlike an ICO, where the tokens are sold before being listed on the exchange, in an IDO the tokens are immediately listed on the DEX through which they are released. This means that the project developers themselves no longer have to collect assets for the pools; and instead the pool is created on a DEX after the IDO is carried out through its own or a third party launchpad.
The ido token launchpad development model is gained popularity because cryptocurrency projects could raise funds through liquidity pools without intermediaries, and investors could benefit from instant token trading, which is essentially a win-win situation.
History of the Emergence of IDOs
The IDO model is the successor to the IPO, ICO, and IEO. Let’s take a closer look at these models:
What is an IPO (Initial Public Offering)?
For a long time, companies struggled to raise funds for their ambitious goals. Some of the most popular ways for a company to raise funds were through angel investors, venture capital firms, and eventually an initial public offering (IPO), in which a portion of the company’s total stock is sold. to the public.
What is an ICO (Initial Coin Offering)?
When the cryptocurrency industry became mainstream around 2017, projects emulated this technique by selling a portion of their total supply of crypto tokens to the public in ICOs. ICOs then became an instant hit in the cryptocurrency space, with investors jumping at the opportunity and raising an estimated $4.9 billion by the end of 2017. However, the rise in scam projects and Ponzi schemes led to a terrible drop in the popularity of ICOs. As a replacement in 2018, a new fundraising method called the Initial Exchange Offering (IEO) emerged.
What is an IEO (Initial Exchange Offering)?
An IEO was similar to an ICO but launched on a centralized exchange and came with a promise that the token would be listed on an exchange and investors would not be scammed. Furthermore, in IEOs cryptocurrency projects were carefully scrutinized and the barrier for projects to do an IEO was relatively high. As a result, this created a trust factor between investors and the larger cryptocurrency community. IEOs gave rise to some of the most popular blockchain projects today, such as Polygon and Elrond .
The Birth of the DEX Initial Offering (IDO)
However, in 2019, when DEXes entered the scene, many cryptocurrency projects were attracted by the decentralized nature of these exchanges. Thus, making them a better avenue to launch tokens and raise funds without the hassle of centralized exchanges.
This gave birth to the IDO concept, with the Raven protocol being the first project to launch an IDO. Next, IDO launchpad development also emerged, offering services tailored specifically to new projects to realize IDOs. This further fueled the popularity of IDOs as a fundraising method in the cryptocurrency space.
What are the Advantages of an IDO?
Although ICOs and IEOs gave rise to some of the most popular cryptocurrency projects, they come with their own set of problems. In the case of ICOs, the lack of control posed a threat to investors and made them vulnerable to huge losses. When it came to IEOs, centralization was a major concern, as CEXs are susceptible to theft and cyber scams .
In this context, IDOs are becoming the new darlings of the cryptocurrency market and have quite a few advantages compared to ICOs and IEOs.
To begin with, IDOs do not need any type of permission and hardly require a fee for the listing of the tokens on the DEX.
Since DEXs do not hold user funds, they are not susceptible to security breaches and investors can access the tokens through their secure wallets .
The tokens are immediately available for trading , eliminating the hassle of the waiting period.
Most DEX launch pads work with community governance . This means that it is a community and not a few central authorities that make the decision to list a project.
What are the Challenges of IDOs?
From mid-2019 to now, ido crypto launchpad service have become the most popular fundraising technique in the cryptocurrency space. But while they have some clear advantages, there are also some challenges.
Pump and Dump: Pump and dump is a fairly common problem for projects that emit IDOs. This is because, since token trading is available immediately, a group of people can buy a large number of tokens, thus causing an unprecedented increase in price, and then sell those tokens for huge profits. , resulting in a price drop.
There is no stable price: Again, since token trading is available immediately, token trading starts very quickly and only a few investors can get their hands on the token at the listed price.
conclusion
The challenges that an IDO brings cannot be ignored, but the benefits of IDOs outweigh these challenges, and IDO launchpads have been working to overcome these challenges in the near future. Considering the growth of DeFi and DEXs in recent years, it is safe to say that the future for IDOs is bright and DeFi projects are better positioned to benefit from IDOs compared to ICOs or IEOs.
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