The methods for raising capital and distributing tokens in the cryptocurrency space have evolved over time. It began with an Initial Coin Offering (ICO), progressed to an Initial Exchange Offering (IEO), and has now arrived at a more preferred method known as an Initial DEX offering (IDO). On Binance DEX, the first-ever IDO was planned for Raven Protocol. It was created to facilitate quick trading, immediate liquidity, and open and fair fundraising. It was, however, unable to deliver on its promises. According to the investors, the token sale was over in seconds, leaving no time for average traders to purchase any tokens. As a result, equitable distribution was not achieved. All of this resulted in the creation of IDO launchpads.
What are the Benefits of an IDO?
• Simple procedure
Holding on to IEO on an exchange is undoubtedly a time-consuming process. However, launchpads have made the process easier. As a result, many projects have been able to raise funds and fuel their development efforts.
• Instant cash in
The biggest advantage of IDOs is that the token is listed immediately. As a result, investors can cash out their investments during the early price discovery phase.
• A transparent procedure
The entire procedure takes place on-chain. Chainlink’s systems life VRF is also used to run the lottery. As a result, participants can trust the process and verify the token contracts.
• Promising incentives
To keep liquidity high, the projects offer staking rewards to users immediately following the IDO. As a result, users earn rewards and become LPs (liquidity providers).
There is traceability because everything happens on-chain, and everyone can verify the token contracts in advance (if they are public, of course).
Disadvantages of an IDO
• Scam possibilities
Because of the popularity of the Initial DEX Offering, many fabricated projects are attempting to capitalize on the process.
• There is fierce competition.
The rate of participation is extremely high, and the supply of coins is extremely limited. As a result, few participants are able to obtain the tokens.
What factors contribute to an IDO’s success?
In the last two years, IDO development has progressed well. Innovative launchpads have been created, and an IDO development company is charting the course to success. The following are the primary reasons why some launchpads have been extremely successful:
• Starting IDOs with very small initial market capitalizations
In 2017, Initial Coin Offering (ICO) became a frenzy. Many projects that held ICOs, on the other hand, flooded the market with their tokens. With demand still building, supply was much higher, resulting in a price crash for tokens of some very promising projects. IDOs can address this by issuing a few million tokens. As a result, the IDO process raises fewer funds than the ICO and IEO processes, but it protects the project tokens from losing value.
Surprisingly, in an IDO, all team tokens, private sale investor tokens, and public tokens have a vesting period. All of this is necessary to prevent token holders from rushing to sell their tokens at a profit during the price discovery period when demand remains high.
• IDOs with multiple chains
Blockchain interoperability is currently one of the most sought-after features. In addition, due to Ethereum gas issues, projects are simultaneously launching ERC-20 and BEP-20 tokens. Thus, supporting multi-chain IDOs appears to be a significant benefit during IDO development.
• Provide traders with a guaranteed allocation.
Most launchpads have their own native token, which they can use to their advantage. Participants can be guaranteed allocation to a specific Initial DEX Offering if they hold their native tokens. This also saves launchpads from having to organize lottery events.
Some launchpads, such as Ignition, have a tiered setup. Participants who hold more native tokens have a better chance of receiving IDO allocation.
IDO development is currently popular. With the way the token distribution model is being democratized, IDOs are likely to remain the preferred method of raising funds for projects in the future. Suffescom Solutions provide IDO development services, from token creation and launch to marketing.