IDO’s inception dates back to 2019 and it is a reformed version of Initial Coin Offering or ICO. Basically, it is a way to raise funds for crypto projects by using decentralized crypto exchanges. Initial DEX Offering is rightly called the distant cousin of ICO! In an IDO, tokens are first listed on the platform and then made accessible for sale. In ICO, the token listing is done after selling them. It is a faster and cheaper way of issuing and distributing tokens due to its lower compliance needs. As we read through this lesson, we will know the different facets of IDOs.
Open and fair fundraising is fostered by an IDO model.DEXs provide immediate token liquidity to IDOs for operating smoothly.IDOs have seen some improvements in scalability in comparison with ICO and IEO.Awareness is required about IDOs in order to educate the investors about being a part of the IDOs safely.
1. What is a token offering? A basic guide
A token offering is an exciting opportunity for traders in a crypto arena. To get a chance of buying a token at its launch price could be very rewarding. Token offering is a method where fundraising is done for a project or a startup. These projects supply a new cryptocurrency for sale. Crowdfunding methods might vary from using a centralized exchange or a decentralized exchange. Investors purchase these coins for utility or speculation. For instance, coins can be used for farming, staking or paying for transactions. In this lesson, we will learn about decentralized exchanges being used for token sales or offerings.
2. What is an initial DEX offering?
An IDO is a token offering done on a decentralized exchange. Liquidity pools are a crucial part of an IDO as they create liquidity post-sale. An IDO lets the users lock funds in exchange for new tokens during the token generation phase. These raised funds are added with the new token to an LP before being given back later to the project.
IDOs give us a cheaper and simpler solution to distribute the tokens. IDOs are facing updates with time and providing upgraded models like Initial Farm Offering (IFO). To enter an IDO, one requires a digital wallet and some crypto to pay the transaction fees. Token offerings involve high risk, therefore, it is always advised to do the research before entering into the game.
2.1. Where can we find IDOs
The most ideal place to find an IDO is from the projects themselves. One might get involved in the project community by following it closely on social media platforms. DEXs like PanCake Swap or DODO could be checked regularly for upcoming IDOs. CoinMarketCap also has updated lists of token offerings on its platform. The IDOs could be widely searched on the internet. Good research helps in winning the game!
3. Crypto IDOs: how do they function?
IDOs use decentralized exchanges for token sale. A project provides its tokens to the DEX. Users commit their funds through the chosen platform and then the DEX finishes the final distribution. Smart contracts facilitate these processes smoothly.
The common methods of the stages of an IDO are:
- After a vetting procedure, a project is approved to run an IDO on a DEX. The users lock the funds in return for the tokens supplied. Investors get the tokens during the token generation event, TGE.
- There is an investor whitelist with a set of marketing tasks one has to complete to join it.
- A part of the funds raised is utilised to create a liquidity pool with the project’s tokens. The remaining is given to the team. Investors are allowed to trade the tokens after the TGE.
- At the TGE, tokens are transverse to the user and the LP opens for trading.
This is how IDOs function normally!
4. ICOs Vs. IDOs Vs. IEOs
|Fundraising||The project is responsible for investor’s funds||Decentralized exchange looks after investor’s funds||Centralized exchange handles investor’s funds|
|Smart contracts||The project creates and runs smart contracts||DEX creates and runs the smart contracts||CEX is responsible for creating and running smart contracts|
|Vetting||The project runs the sale on its own, no vetting is there||DEX vets the project||CEX vets the project|
|Token Listing||The project finds an exchange for listing||LPs open on DEX||Exchange lists the tokens|
5. Risks: Things to keep in mind while working with an IDO
Some of the risks involved while working with an IDO shall be considered! The problems mainly arise due to the decentralized and anonymous nature of an IDO:
- No KYC or AML: Investors and projects are secure only when a few formal checks are done. The safety measures like KYC or AML make sure to avoid the laundering of illegal funds and evasion of economic sanctions. It might not be legal in some countries to participate in an IDO if the token is a security.
- Less diligence of projects: It is simpler for an unknown or less reputed project to function through unregulated IDOs rather than IEOs with regulations.
6. How to be an IDO Pro: Your Ultimate Guide
Here’s your step-by-step guide to being an IDO pro. Follow these simple measures to keep yourself safe and get the most out of an IDO:
- Always use a verified link to subscribe to an IDO as scammers might take advantage of the pre-hype of an IDO and make fake pages for subscription. Don’t click on scam links.
- Use a renowned DEX Launchpad like PancakeSwap and many more!
- Research well! That’s the ultimate key to avoiding mishaps while working with an IDO.
- Read the terms beforehand! One should properly understand a project before getting involved in it.
- Invest what you can afford to lose as these sales are very volatile! Do not get carried away and invest more than you should.
By following some easy ways, you can be on the top of your IDO progress chart!
7. Real-time IDO launchpads
A large number of IDO launchpads are functional in the current scenario! They assist the upcoming crypto projects to raise funds most profitably and credibly. Some of the widely known launchpads are:
- DAO Maker
- Red Kite
8. Future of IDOs
With so many advantages of IDOs, like,
- No requirement to directly dealing with a project and trusting their smart contract due to the reliable IDOs with a record of successful sales.
- Immediate liquidity provided post-sale
- No KYC or AML processes to sign-up make them open for all users
- A Great deal of Affordability and accessibility
- Anti-whale measures prevent a single buyer from buying a large sum of tokens!
IDOs are expected to see some changes in the near future. With the need for KYC implementation for the safety of the investors and the projects, IDOs have earned some good responses worldwide already. We might witness some transformation in the IDO dynamics but they are surely going to stay for long!
9. Final thoughts
The ease of use, affordability and accessibility by all have made IDOs very popular! They have been adopted as a standard fundraising model for many upcoming projects. Token offering has become a separate entity itself! To conclude, it is very important to take part in a trusted IDO and select the right project. For this, nothing tops the chart more than a good, old-fashioned way of researching in the crypto world!
One needs to connect the wallet to the decentralized exchange where IDO is taking place in order to be a part of an IDO.
The IDO platforms have been considered great in terms of returns. Investors are required to sell at the peak of their respective tokens’ price to avail maximum profit.
IDOs do not require KYC or AML verifications for making it easier for all to participate.