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What is an IEO?

An Initial Exchange Offering, as its name suggests, is conducted on the platform of a cryptocurrency exchange. Contrary to Initial Coin Offerings (ICOs), an IEO is administered by a crypto exchange on behalf of the startup that seeks to raise funds with its newly issued tokens.

As the token sale is conducted on the exchange’s platform, token issuers have to pay a listing fee along with a percentage of the tokens sold during the IEO. In return, the tokens of the crypto startups are sold on the exchange’s platforms, and their coins are listed after the IEO is over. As the cryptocurrency exchange takes a percentage of the tokens sold by the startup, the exchange is incentivized to help with the token issuer’s marketing operations.

IEO participants do not send contributions to a smart contract, such as governs an ICO. Instead, they have to create an account on the exchange’s platform where the IEO is conducted. The contributors then fund their exchange wallets with coins and use those funds to buy the fundraising company’s tokens.

Why do an IEO over an ICO?

Given that there have been so many ICOs, why should a team seek to conduct their fund raising differently? There are several advantages afforded by conducting an IEO, including:

Tapping on the existing user base of the exchange to obtain contributions for the IEO.

Preventing a “Gas War” between sale participants, assuming the exchange is not decentralised (till date there have been no IEOs conducted on decentralised exchanges).

Making it significantly more difficult to scam contributors who know that they can only purchase the token from the exchange.

Functioning as a vote of confidence from the exchange and sponsor, which has to conduct its own due diligence on the developer’s project.

Listing on the exchange where the IEO has been carried out is a natural next step.

Why Initial Exchange Offering is preferred?

Huge advantages for Crypto Investors has been the major reason why IEO’s are preferred and an alternative for ICO. Apart from being able to trust the crypto exchange to be as safe intermediary is the simultaneous listing of coins since the exchange acts a kind of partner organization.

If you aren’t sure of which people to invest, anyone can invest rather than it is restricted in the country. As discussed, once you complete all the formalities which are stated above, you will be given access to the sale.

However, countries such as the United States, China, Venezuela, New Zealand, North Korea, and many other countries are barred from participating. One more thing is, the rules and regulations may change from one exchange to another but the basic steps for the users will remain the same.