Initial Exchange Offering (IEO)
Written by Alex Gedevani
Introduction
An Initial Exchange Offering (IEO) is a fundraising event administered by a crypto exchange on behalf of the project team that seeks to raise funds with its newly issued tokens. This differs from an Initial Coin Offering (ICO) where the project team conducts the fundraising themselves. To participate in the token sale, token issuers have to pay up a listing fee to go along with a percentage of the tokens sold during the IEO. The first IEO Platform was Binance Launchpad which observed success, subsequently followed by other exchanges like Bittrex, OKEx, KuCoin, and Huobi launching their own IEO platforms.
Benefits: It’s easy for users to participate in IEOs as they simply need a funded account on the exchange to participate. Exchanges carry reputational risk with IEOs so it’s in their best interests to offer a strong degree of trust behind the project. IEOs can immediately offer liquidity and introduction of a product to a sizeable user base. By proceeding with an IEO, the project team is able to reduce time spent on marketing and associated marketing spend, and focus more on the development of the product.
Disadvantages: There are concerns around transparency with ICOs regarding token supply count and vesting schedules as these two factors should play an important role in an investor’s decision making process. IEOs are not as easily accessible to the mass market as other offerings like ICOs. They have higher minimum token holding requirements which effectively exclude sizeable investor populations
Suggested Reading
What is an Initial Exchange Offering (IEO) and how does it work? by Hakan Selim Ozturk
A Definitive Guide to Initial Exchange Offerings
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