If you’ve ever been interested in fundraising your startup, you’ve probably heard of an Initial Exchange Offering, or IEO. IEOs are becoming more popular than ICOs and are considered the next stage in the evolution. However, the concept hasn’t crawled out of its crib yet, and many people are confused about its reliability and benefits. Today, we’ve decided to have a closer look into this matter and present you with a thorough list of pros and cons for Initial Exchange Offerings.
What is an IEO?
An Initial Exchange Offering, similarly to an ICO, is a crypto transaction between developers and investors. However, IEOs are conducted on an exchange platform where it acts as a third-party on behalf of start-ups. But does a middleman mean more confusion, a longer process, and less reliability? Quite the contrary, actually.
Project developers send their tokens to an exchange platform of their choice. The IEO then does the donkey work—raising funds. This step is particularly beneficial for investors as they are presented with only solid offers, and this way, they avoid scams and frauds, which is a big issue with ICO.
Once the token gets approved by the exchange platform, it requires a developer to pay a listing fee and a percentage from the sale. That being done, the token is listed on the platform and visible to investors, who can pay for the ones they’re interested in. The entire transaction takes place on the platform, which ensures high security and a smoother process.
As a matter of fact, all three parties benefit from Initial Exchange Offerings. The developer gets listed and has access to various investors; investors are presented with reliable, scam- and fraud-free projects; and the platform itself gets a percentage of sales and is paid a listing fee by developers.