The initial currency offers, better known as ICO, were once the favorite method to raise money from investors in a massive way, and crypto enthusiasts. They are being expelled by the newest, promising and innovative Initial Exchange Offerings (IEO).
How are the two methods different, and who benefits exactly from the money of the people who bet on these crypto projects regardless of their nature?
THE DETHRON OF THE ICO:
How to raise money was one of the first things that crypto entrepreneurs realized they could do without almost any problem, while developing the young industry.
The Initial Coin Offerings, or better known ICO, by its acronym in English provided a way to sell tokens to the public and raise billions of dollars from a large number of users in a short period of time, because at that time of year 2017, where the ICOs were at the top of their throne, was the fashion of the time and nobody, or anything could overcome them.
This crowd funding model quickly proved to be the best way to obtain large amounts of cash, with few conditions attached. The model was soon adopted by practically all the companies that launched a token between 2017 and the beginning of 2019.
However, the crisis of the cryptocurrency of 2018 in which the bubble finally exploded and the price levels collapsed to the ground, proved fatal to the massive financing model of the ICOs, since the large sales, the loss The confidence of the buyer and the increase in the regulatory backward movement substantially reduced the amount collected through the Initial Coin Offering.
Today all the crypto industry is looking for another way to raise funds from investors, first were the Securitues Token (STO), but more recently the “IEOs” were born.
In a nutshell, Initial Exchange offerings (IEO) are ICO that are closed to public sale.
Instead of marketing new cryptocurrencies for all, companies are now using the crypto Exchanges to offer a preview of the crypto projects at the same time they offer their tokens to their potential clients.
The project teams that are behind the new cryptocurrencies must comply with the requirements of the Exchange crypto, while this, in turn, protects the taxpayers of the project, or the startup from being victims of a scam, or from malicious characters.
As such, the model supposedly reduces the chances of being scammed, or at least that is the perception, and retail investors have begun to return to token offers, be they ICOs or IEOs
The international media reported that so far around $ 180 million has been raised in 23 different Initial Exchange offerings, and most of them were made in the last two months.
ARE THE IEOS HAVING AN IMPACT ON THE CRYPTO ECOSYSTEM?
Bill Shihara, executive director of Bittrex, based in Seattle, said that this model has the potential to be larger than the ICO at its peak moment in 2017. It was reported that Bittrex crypto Exchange was reporting a “Significant demand” from both the users and the token teams.
Bittrex was scheduled to hold its first IEO on March 15 before canceling the offer at the last minute for problems not yet disclosed.
This new model of crowd founding, the IEO was initiated by Finance, the largest exchange of cryptocurrencies in the world. The Malta-based company launched an IEO earlier this year with the popular BitTorrent file-sharing software application, which raised a record $ 7 million in less than 15 minutes, as reported on our portal.
However, Zach Fallon, a securities attorney who worked on ICO matters at the United States Securities and Exchange Commission, better known as the SEC. He said that the IEO “take everything from an ICO and make it worse”. Jeff Dorman, partner and manager of Arca Funds, based in Los Angeles. He seconded and echoed the previous statements saying that the foundations of an IEO are directly at odds with the decentralized spirit embedded in Blockchain technology and cryptography as we know it.
On the other hand Nejc Kofric, CEO of Bit stamp, based in Luxembourg, told the international media that his company is “staying away from the IEO. Entering this space is short-sighted and the industry had to be more regulated before more companies enter the market. ”
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