IDO – Initial Dex Offering or Initial Decentralized Offer. This is a DeFi concept. A promising new method of fundraising.
An option for attracting investments such as ICO, which peaked in popularity in 2017, has gradually lost the trust of cryptocurrency users. Due to a large number of fraudulent projects, people lost a lot of money, a new mechanism was needed.
IDO is the most relevant method of raising funds at the moment. The collection of money to launch a token takes place on a decentralized exchange. Funding is provided by private users. An analog of this option can be called the work of a venture fund to raise money for a startup. The sale of tokens and listing on the site takes place almost simultaneously, unlike ICO, IEO.
Smart contracts are used to raise funds. As a rule, the total number of tokens is limited, so the organizers of the token sale use various mechanisms to attract more participants. Among other things, they limit the number of tokens for one investor, use lotteries, and other methods. Tokens are used as lottery tickets, their price may differ depending on the project, reaching $ 1000 or more. The principle is that the more tokens an investor has, the higher his chances of participating in IDO.
How to participate in IDO
All participants of the token sale must register in the white list on the service website. In addition, the common method of registration is via Twitter or Telegram. It is practiced to use several platforms at once for placing a token sale. There may be malfunctions in the work of decentralized sites during the IDO placement period. This is due to a sharp increase in the number of users – hundreds and even thousands of times compared to a regular visit.
Among the popular platforms for token sales is the Coin-list service. Decentralized cryptocurrency exchanges such as Uniswap are used for IDO tokens based on the Ethereum blockchain. Services on other blockchains are also used – Binance Smart Chain, Polkastarter, Solana. The reason for leaving Ethereum is the high commission in this system.
The first IDO project was Raven Protokol – effective distance learning. The listing was carried out on the Binance Dex site in June 2019. This was the period of maximum popularity of IEO, after which there was a decline in activity and the subsequent transition to IDO.
Benefits of IDO
The main advantage of the IDO token sale is the guarantee of the placement of tokens on the exchange listing. ICO did not guarantee the placement of cryptocurrency on a decentralized platform. This caused the collapse of many projects that simply did not live up to the listing.
It should be borne in mind that listing on the exchange is not a guarantee of making a profit. It is necessary to carefully study all the features of a particular IDO before starting to invest.
By its nature, IDOs are comparable to ICOs and IEOs (Initial Exchange Offerings) combined. Only instead of a centralized exchange, as in the case of IEO, a decentralized service is used. Advantages of IDO over the specified methods of attracting financial resources:
- independent decision-making on holding;
- instant liquidity of digital assets;
- quick start of trading;
- minimal organization costs.
In most cases, IDO allows its user to participate in the development of the project, vote. The main feature of the initial decentralized offer is the lack of clear rules, they are set by the issuer of digital assets. Therefore, it is recommended to study the project before embarking on an investment. You can lose serious money on the token sale.
Features of IDO, differences from ICO, IEO
The peculiarity of ICO is that the issuer of the cryptocurrency is engaged in the search for a site for listing. IEO – this role is taken by centralized services, IDO – decentralized resources.
Also, in IDO:
- there is no commission for placement;
- audit of the project is not required;
- there are no restrictions on the number of sites;
- crowdfunding is not regulated;
- all responsibility is on the user.
IDO is an effective tool in the DeFi world. Its capabilities and features have not been fully studied, not formulated. The IDO format allows interesting projects to develop.