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Is it better to do an ICO or an IDO?

ICO (Initial Coin Offering) or IDO (Initial Dex Offering)

IDO is becoming the more widely accepted fundraising method for startups. IDO or Initial DEX offerings are an innovative way for startups in the crypto sphere to raise funding for their projects. It is relatively new to the scene, yet many people immediately flock to this new fundraising method.

Entrepreneurs and startups might be confused over choosing ICO development or IDO development, as both seemingly operate simultaneously. Hence, this article will inform you of the differences and help you choose ICO development services or IDO development services.

Overview of ICO

In 2017, the crypto market experienced a bullish trend and had a steady influx of high-risk ICOs. These ICOs exposed the flaws in the ICO model and highlighted a requirement for secure crowdfunding platforms. This need became apparent around the same time crypto exchange platforms brought about the idea of the IEO. The IEO provided a safe and robust launchpad environment for crypto projects.

Concurrently other experiments occurred around the same time. Experiments like the DAICO or Decentralized ICO was a concept that emerged in 2018. The model followed the ICO fundraising logic with an improvement wherein the ICO did not release all their funds right away. This step overcame a significant flaw in ICO development and ICO launch.

The convenience and safety provided by IEOs were successful, but the centralized nature of these launches was negative. The centralized nature ensured intermediary approving specific projects and extracting a fee for these approvals. The presence of an intermediary was the exact opposite of the decentralized nature crypto aimed for.

The rapid growth of the Defi ecosystem made it possible for DEX platforms to lock value and daily trading volumes. These platforms also made decentralized crowdfunding possible. IDOs leveraged these decentralized exchanges and provided a decentralized alternative to their centralized predecessors.

Overview of an IDO

An IDO or Initial DEX Offering are token crowdfunding sales. These sales take place on decentralized exchange platforms like PancakeSwap, Uniswap and SushiSwap. These sales do not rely on centralized fundraising platforms. The most prominent and earliest DEX was built using the Ethereum blockchain. Presently, there are numerous alternatives like the Binance Smart Chain, Polkadot and Solana.

Through IDO development, a crypto project launches its token on a DEX and can attract significant investment from interested investors.

The first IDO launched was Raven Protocol in 2019. Following this project was UMA, Compound and Curve. These projects rose to popularity and are now household names within today’s Defi ecosystem.

The big difference in traditional exchanges is that IDOs launch their tokens on DEX platforms. They achieve this process by opening liquidity pools of token pairs instead of order books. This process ensures that the token price varies if the token is sold or bought, and the token ratio in the liquidity pool changes.

The IDO separates itself from the ICO and IEO fundraising models by autonomously carrying out the token projects. It then lists the token project on a decentralized exchange. This process ensures new projects engage with the decentralized community rather than relying on intermediaries. The method also remains in keeping with the P2P foundations of the blockchain space.

Benefits of Defi

IDOs are hugely popular in the crypto sphere and sell out in record time. In April, OccamRazer showcased its skills by holding a successful IDO. The IDO Launchpad sold 200,000 tokens in less than thirty seconds. Like popular IDOs, the token sold out almost immediately, leaving most investors out of luck.

IDO sees the most success in launching Defi projects. However, there is no stopping the centralized crypto companies from utilizing IDOs advantages in cost and time. IDO service providers make IDO development less intensive and ensure that this form of fundraising best suits small companies and startups.

CoinsPaid, a B2B crypto payments solution, is an example of a non-Defi company that uses the benefits of IDO to its advantage. In particular, Crypto processing, one of their many products, is a white-label crypto payment gateway accepting more than thirty coins and twenty fiat currencies. It promises the best exchange rates to customers, and the ecosystem has an institution-oriented exchange, OTC desk, cryptoprocessing, and B2B and B2C hot wallets.

IDO or ICO: Which one is better?

IDO development provides more significant benefits than ICO development or IEO development. In principle, IDO provides frictionless liquidity, minimal listing costs and rapid trading. IDO remove the need for intermediaries and creates an open, transparent and fair way for anyone to launch a new crypto project. This step is a step forward compared to the pre-mined ICO models where founders earned rewards after contributing to the community.

IDOs also have a low market cap after their public listing. This feat is due to the vesting period for a private investor and the money raised from the IDO. Here, each participant wins a small allocation of the funds. This model creates a sustainable demand, leading to healthy market development. This model is preferable to the earlier ICO and IEO model, where investors rush to sell their tokens after listing.

Also, IDO does not require the project to pay a hefty fee or offer their tokens to exchange. Platforms cannot stop or request approval to launch IDOs. The platforms cannot prevent the project from listing itself on other decentralized exchanges. IDOs retain total control over their sale parameters and are in line with the project’s vision.

Also, token projects have a wallet and private keys without moving in and out of a centralized exchange. Many DEXs also accept different wallet types, which also creates a better user experience.

In conclusion, IDOs provide a cost-effective method of token listing. They provide instant trading and rapid liquidity with minimal slippage. It does this through liquidity pools on various DEX platforms that have a high user volume.

Where will IDOs go from here?

Presently, IDOs remain focused on launching new Defi projects. However, not every crypto startup is geared towards Defi. Their target might not be crypto-smart and present a learning curve barrier to an IDO launch. Also, Defi users may not have the interest to invest in non-Defi projects.

IDOs established themselves as the logical next step in decentralized fundraising on multiple blockchains. The addition of IDOs provides the potential for launches reaching beyond the Defi niche.

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