The term IDO (Initial Dex Offering) is usually used when a new crypto asset is launched. IDO is a method of crowdfunding using crypto tokens through a decentralized exchange platform (DEX). During the IDO stage, a crypto project will offer initial investors to invest in a decentralized exchange in exchange for crypto coins. Application wise, IDO is not only used for raising funds for cryptocurrency assets but assets such as music albums and so forth. Usually, this crowdfunding process is carried out at the initial launch of a crypto project for example, the launch of a new coin through a decentralized liquidity exchange.
The difference between IDO and ICO, STO, IEO?
Crypto projects can offer initial investors to invest in their projects during the pre-sale period through IDO, ICO, STO and IEO. Although all four methods raise funds through crowdfunding, there are significant differences between each strategy. What are the differences?
- Initial Coin Offering (ICO)
In an ICO, investors can invest their money using cryptocurrencies such as Bitcoin, Ethereum, or using fiat money. What distinguishes ICO from IDO is the platform used. While IDO is conducted on a DEX platform, the ICO is usually executed before the crypto project is listed by an exchange. Therefore, ICOs usually have a higher risk of fraud because often the money that has been invested can be laundered by the developers. However, despite the risk, there have been some very successful ICO projects such as Ethereum. - Initial Exchange Offering (IEO)
Initial Exchange Offering (IEO) is very similar to IDO because token purchases at the crowdfunding stage are done through an intermediary or platform. The difference with IDO is that IEO uses an exchange platform while IDO uses a DEX. You also don’t have to pay any exchange transaction fees at IDO. Compared to an ICO, IEO is said to be safer because exchanges act as intermediaries which will do their due diligence before selling coins to the public, thereby minimizing the possibility of fraud. In addition, payments are made through the exchanges so that the developer of the coin cannot directly influence the sale and purchase of assets. - Security Token Offering (STO)
This crowdfunding process is very similar to an ICO, the main difference lies in the fact that STO represents an investment contract into an underlying investment asset, such as stocks, bonds, funds and real estate investment trusts (REIT) and is not a crypto coin. STO follows strict government regulations while IDO is not as strictly regulated.
Stages of IDO Process
There are several stages that need to be performed before a crypto project can conduct an IDO. First of all, the project must get decentralized approval within the DEX platform used. The project must have met several requirements and predetermined criteria. Only after the project has been given approval, sales can be made to the public. Buyers are able to buy tokens, however they will only receive them after the Token Generation Event (TGE). This event is held after the launch of IDO.
The Advantages of IDO
Here are the advantages of IDO compared to other crowdfunding methods:
- Fast processing: IDO can immediately provide users with trading and liquidity access.
- Better user experience: IDO can simplify the user experience by combining different types of wallets and trading platforms in one interface.
- The project founder is not involved in the sale: For ICOs, the project owner can set the direction of the sale in a way that is self-beneficial. For IDO, sales are managed by the exchange so investors can be assured that the sale is fairly and safely managed.
How to invest in an IDO
If you want to invest in an IDO, there are several things you need to do first, such as registering with a DEX and going through a series of identity verifications. Once you have completed this step, you might also have to perform some tasks based on the DEX’s requirement such as posting on social media for publication reasons. You must also be registered with the DEX and understand how to invest on the platform. Before investing in any IDO, it is important you do your own research (DYOR) on the IDO project to avoid being frauded. Make sure you know the background and the team who owns the project. With the few steps above, you are good to start investing in IDOs.
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