One of the crowdfunding methods that crypto projects use is IDO (Initial DEX Offering). In this guide, we will explain everything you need to know about IDOs and how to take part in them.
Besides IDO, there are other methods of raising funds in crypto. They include Initial Game Offering, Initial Exchange Offering, and Initial Coin Offering. Let’s explain each in detail.
Initial Coin Offering (ICO)
Crypto projects using an ICO to raise funds usually conduct the fundraising on their websites. But before the coins are offered to the public, projects publish whitepapers explaining their purpose and how they intend to achieve their respective goals. This enables investors to evaluate the projects before participating in ICOs.
The negative side of ICOs is that most of them are scams, and this is largely attributed to the lack of proper regulations. Nonetheless, the crypto world has seen successful ICOs over the past years. Among them is Ethereum. The project offered ETH at $0.31 during an ICO back in 2014. The token is valued at $1,678 as of August 2023.
Initial Exchange Offering (IEO)
This fundraising method is applied on a centralized crypto exchange. First, project owners apply for their tokens to be listed on a reputable exchange to win investors’ trust. The trading platform then thoroughly vet those projects before listing the tokens. Once approved, investors can buy the listed tokens to help the projects raise funds.
Initial Game Offering (IGO)
IGOs happen on launchpads such as Gamefi and Gamestarter. This fundraising method is used by NFT gaming projects. Anyone willing to participate in an IGO must be ready to lock their funds on a particular launchpad for a predefined period.
What’s an Initial DEX Offering?
Crypto projects using IDOs to raise funds do it through decentralized exchanges. This is how it works:
Project owners let interested investors lock their money into smart contracts before the projects release their native tokens. After these tokens are created, they are first distributed to the investors before being listed on a DEX.
To participate in an IDO, you need to join a whitelist via a social media platform or website. There are several projects that have achieved success using this fundraising technique. For instance, Battle Infinity IDO investors posted profits of 700% when the project’s native token launched.
So how do you monitor upcoming IDOs? Visit platforms like CoinGecko and CoinMarketCap to check out a list of expected Initial DEX Offerings.
What Makes IDOs Special?
Accessibility: Anyone can participate in an IDO since there are no restrictions on the amount of funds to be locked in smart contracts. Additionally, the project owners do not request personal information from investors. Therefore, no one gets locked out because they do not meet certain KYC requirements.
Security: Unlike Initial Exchange Offerings, where investors must send funds to their centralized exchange accounts, IDOs allow investors to have control over their funds by letting them retain private keys.
Advantages of IDOs
Fair fundraising: IDOs are beneficial to both investors and project owners. Here is how: Investors buy tokens at discounted prices during an IDO and stand to make huge profits when those tokens get listed on a DEX. On the other hand, developers are able to raise funds from a wide pool of investors to ensure their projects are successful.
Fast trading: You can start trading your tokens obtained from an IDO immediately after they are listed on a decentralized exchange.
Disadvantages of an IDO
Fraud risks: The lack of a vetting process has positive and negative effects. The downside is that any project raising money through an IDO could be a scam that might never launch its native token.
No guarantees: Before participating in an IDO, keep in mind that there is no guarantee the token’s price will increase when it launches on a DEX. So always invest what you’re ready to lose.
Conclusion
IDOs offer an opportunity for people to invest early in projects with the potential to grow. But before investing, ensure you do your homework on those projects.
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