What is IDO, IEO and ICO in Crypto, learn with Phemex

An Initial DEX Offering, or IDO in short, is a novel crowdfunding technique that allows crypto projects to launch their native token or coin via decentralized exchanges (DEXs). A successor of the infamous Initial Coin Offering (ICO), IDO is a fool-proof way for projects to bootstrap themselves or raise funds for growth and development.


What is an IDO (Initial DEX Offering)?
IDO, or Initial DEX Offering, is a crypto coin (or token) offering that happens on a decentralized exchange (DEX). Unlike an ICO, however, where tokens are sold before an exchange listing, in an IDO, tokens are immediately listed on the DEX through which they’re launched. This means project developers themselves are no longer required to collect assets for pools, and instead the pool is created on a DEX after the IDO is conducted through its own or a third-party launchpad.

The IDO model gained in popularity because crypto projects could raise funds through liquidity pools without intermediaries, and investors could benefit from instant token trading, which is, essentially, a win-win situation for everyone.

A History to the Emergence of IDOs

What is an IPO (Initial Public Offering)?
For a long time, businesses struggled to raise funds for their ambitious goals. Some of the most popular ways for a business to raise funds was through angel investors, VCs, and eventually, an initial public offering (IPO), where a part of the company’s total shares are sold to the public.

What is an ICO (Initial Coin Offering)?
When the crypto industry went mainstream around 2017, projects emulated this technique by selling a part of their total crypto token supply to the public in ICOs. ICOs then became an instant hit in the crypto space, with investors jumping at the opportunity and raising an estimated $4.9 billion by the end of 2017. However, the rise in scam projects and Ponzi schemes led to a terrible downfall in the popularity of ICOs. As a replacement in 2018, a new fundraising method called the Initial Exchange Offering (IEO) surfaced.

What is an IEO (Initial Exchange Offering)?
An IEO was similar to an ICO but launched on a centralized exchange and came with the promise that the token would be listed on an exchange and investors would not be scammed. Moreover, in IEOs crypto projects were carefully examined and the barrier for projects to do an IEO was relatively high. As a result, this created a trust factor among investors and the greater crypto community. IEOs gave birth to some of the most popular blockchain projects of today including Polygon and Elrond.

The Birth of Initial DEX Offering (IDO)
However, in 2019 when DEXs came into the picture, many crypto projects were drawn to the decentralized nature of these exchanges. Thus, making them a better avenue to launch tokens and raise funds without the complications of centralized exchanges.

This resulted in the birth of the concept of IDOs, to which the Raven protocol was the first-ever project to launch an IDO. Then, there also came IDO launchpads that offered services tailored specifically for new projects to conduct IDOs. This further boosted the popularity of IDOs as a fundraising method in the crypto space.

What are the Advantages of an IDO?
Although ICOs and IEOs gave rise to some of the most popular crypto projects, they come with their own set of problems. In the case of ICOs, the lack of screening posed a threat to the investors and made investors vulnerable to huge losses. With regards to IEOs, centralization was a major concern as CEXs are susceptible to thefts and cyber scams.

In this context, IDOs are becoming the new favorite in the crypto market and they have quite a few advantages when compared to ICOs and IEOs.
  • For starters, IDOs are completely permissionless and require little to no fee for a token listing on DEXs.
  • Because DEXs do not hold user funds, they are not susceptible to security breaches and investors can access tokens through their secure wallets.
  • Tokens are immediately available for trading, eliminating the waiting period hassle.
  • Most DEX launchpads run on community governance. This means that it is a community and not just a few central authorities that make the decision to list a project.
What are the Challenges to IDOs?
  • Pump and Dump: Pump and dump is a pretty common problem for projects issuing IDOs. This is because since token trading is available immediately, a set of people can buy a large number of tokens, thus causing an unprecedented increase in price, and then, selling off those tokens for huge profits resulting in a price drop.
  • No stable price: Again, because token trading is immediately available, token swapping starts pretty quickly and only a few investors can grab the token at the listed price.
The challenges that come with an IDO cannot be ignored, but the benefits of IDOs outweigh these challenges, and IDO launchpads have been working towards overcoming these challenges in the near future. Considering the growth of DeFi and DEXs over the past few years, it is safe to say that the future for IDOs is bright and DeFi projects are better positioned to benefit from IDOs as compared to ICOs or IEOs.

About Phemex
Their name derives from the combination of Pheme and MEX.
Pheme is the Greek God of fame who represented the public’s voice. MEX stands for mercantile exchange. Together, they symbolize their vision for an enhanced financial future in which everyone’s voices are heard and old identities are cast away in favor of equal opportunities.

Phemex has the mission to empower everyone to trade simply and manage risk efficiently.

From day one, our mission was and will always continue to be the empowerment of individuals. We want everyone in this world to have access to the right set of tools that will allow them to manage risk efficiently and trade simply. We sincerely believe this to be a fundamental right that all traders should enjoy.

They see themselves becoming a leading financial services provider in this industry, one that is unrivaled in trustworthiness, honesty, and integrity. Above all else, they wish to stand out for how they treat their customers. However, they will never compromise or abandon their firm commitment to deliver the highest level of quality products and services as they continue to grow with their community.

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