IEOs (Initial Exchange Offerings) are extremely popular in the world of cryptocurrencies. They were introduced as a replacement for ICO, which has been scrutinized by government regulatory bodies for having security problems. Some countries have banned them from avoiding their risky nature.

What is an IEO?

An Initial Exchange Offering is when a cryptocurrency exchange acts as a third-party intermediary between companies seeking crowdfunding and investors looking for new projects and start-ups. The IEO is a medium of cryptocurrency sales and manages the exchange of new cryptos to already existing currencies such as Bitcoin or Ethereum.

ICOs allow projects to run the fundraising themselves, but IEOs list new cryptocurrencies on their exchange on behalf of their creators and invite investors to buy them. New projects and investors must register at the Initial Exchange Offering platform, where a screening process is carried out to identify fraudulent activity or threats. The IEO analyzes the project’s whitepaper and then charges the project creators an initial listing fee and offers a proportion of tokens that can be listed on the exchange.

After that, the IEO lists its tokens on the platform, which allows investors to buy them and raise funds. Once the coins are sold, the IEOs list the coins on their platform.

What’s beneficial about using an Initial Exchange Offering?

What is great about IEOs is the fact that they’re trustworthy and secure. Unlike ICOs, IEOs are conducted in a controlled environment and run a background check to verify the projects before they accept them on their platform and issue a sale. IEOs will conduct a detailed analysis and inquire about substantial information from the project’s creators.

They will also do a thorough KYC (Know-Your-Client) procedure to prevent fraudsters from joining their platform as sham investors. Through these processes, IEOs have gained trust and confidence from both the companies conducting projects and investors.

And besides extensive security, IEOs are open to all exchange users, which means investors that normally would not be eligible to participate in such a sale can do so. They also offer significant token liquidity because once the IEO ends, its tokens can immediately be traded on an exchange. Furthermore, the exchange provides the token exposure to its existing user base, which saves the organization responsible for the project a lot of money of marketing.  The company can focus on its project and not worry about scams and extortion.

Are there any negatives of using IEOs?

Despite its secure network, IEO requires the capital generation and may cost a lot of money. While it certainly is a premium investment, due to the security, regulation, and marketing offered, not all companies can afford this, unfortunately. Also, the process of registering an IEO is not as easy as registering an ICO – the project must fulfill specific eligibility requirements.

Another downside is that most popular IEOs are only limited to an exchange userbase which limits its exposure a bit. Furthermore, some countries have banned IEOS entirely, such as:

  • Afghanistan
  • Albania
  • Bosnia and Herzegovina
  • Burundi
  • Canada
  • Central Africa
  • Congo
  • Cote d’Ivoire
  • Ethiopia
  • Guinea-Bissau
  • Iran
  • Iraq
  • Lebanon
  • Liberia
  • Libya
  • Macedonia
  • Mainland China
  • Malaysia
  • Myanmar
  • New Zealand
  • North Korea
  • Serbia
  • Somalia
  • South Sudan
  • Sri Lanka
  • Sudan
  • Syria
  • Thailand
  • Belarus
  • Guinea
  • Trinidad and Tobago
  • Tunisia
  • Uganda
  • Ukraine
  • The United States
  • Venezuela
  • Yemen
  • Zimbabwe

What platforms accept IEOs, and how does a project get approved?

For an IEO to be accepted on a cryptocurrency exchange’s platform, it needs to fulfill certain criteria. Some of the requirements are:

  • A sensible business model with significant potential
  • Cryptocurrency token
  • Strong team working on the project
  • Minimal viable product (MVP)
  • Website for marketing purposes
  • Interest from investors (optional)
  • Hard cap

Once a project has fulfilled the necessary criteria, they will need to find an exchange that accepts IEOs such as Binance Launchpad, KuCoin Spotlight, Probit, etc. Upon registration, the company supporting the project will need to submit various details such as the founder’s personal information (name, email, etc.) and extensive details on the project’s purpose, its token, etc. Needless to say, the process is quite time-consuming and complicated, which is why most companies hire a specialist to assist with the registration.

Following the registration, the project will be reviewed by the exchange team, who check if the project matches certain regulatory criteria. It’s important to provide thorough details on the project to avoid rejection. Finally, once approved, the token will be listed on the exchange for a small upfront fee.

The future of IEOs

Initial exchange offerings certainly offer significant potential that ICOs never could. Despite that, establishing a ‘perfect’ crowdfunding mechanism is not easy, and there are still many disadvantages associated with IEOs. Despite that, in the everchanging world of cryptocurrencies, this seems like a fundamentally essential tool to help incorporate cryptos into everyday life.