Cryptocurrency startups have found a number of ways for raising capital. ICOs was the first method to be invented. However, ICOs have ended up being shrouded by lots of scams due to lack of proper regulations.
IPOs and STOs were among the first methods to be invented alongside ICOs. However, these two (STOs and IPOs) have not become as successful as the ICOs due to the strict regulations set by the regulatory authorities like SEC.
The ease with which ICOs are operated attracts a lot of investors and inventors were forced to come up with a way to make the ICOs scam proof. They had to come up with a formula to make the ICOs crowdfunding possible, even in countries like China, where ICOs are banned due to lack of proper regulation formulas. This is basically what led to the invention of IEOs.
IEOs employ the same working principles as the ICOs and thus maintains the simplicity with which they are carried out. However, by using the crypto exchange Launchpad, they make them safer compared to the ICOs since the development team has to meet a number of requirements for their project’s token sale to be listed on the exchange. Therefore, the issue of scams in IEOs is greatly minimized since they would keep the reputation of the crypto exchanges at risk.
Nevertheless, although the IEOs make it more interesting and safer for investors, the investors still carry the bulk of the risks; the project may pick or fail. The fact that a project gets funded through a crypto exchange Launchpad does not mean that the project will automatically become a success.
However, we cannot refute the fact that projects that have done their crowdfunding through IEOs have ended up hitting their target within a very short timeframe compared to the ICOs which take months and at times even end up missing their targets. We have seen projects hit their targets even in minutes.
In IEOs, the target investors seem to be guaranteed. The exchange users, of course, trust their exchange platform and tend to take up every opportunity that comes up on the exchange. Therefore, if the exchange lists an IEO, the users will be fighting to invest in it. But the question is; how sure are the investors that the project they invest in will succeed and become profitable.
IEOs are still not very reassuring just like the ICOs. Investors can only hope and pray that the project team does its best to ensure that the project picks to give the tokens more value than the value at which they purchased it. In a way, they cannot be compared to the STOs, where the investor gets a share of ownership of the project.
At the moment IEOs seem to be carrying the day and developers can depend on them for raising funds. However, for investors, the rise and fall of ICOs should serve as a lesson. Investors should always ensure due diligence whenever they are choosing which project to invest in.
It is true that scamming is greatly reduced in IEOs, but even genuine projects flop if they were not well planned. Investors should do thorough research about the projects before investing their money.
What does the future hold for IEOs?
One thing is for sure; cryptocurrency exchanges are here to stay. In an actual sense, we should expect to see more and more exchanges entering the market.
Blockchain and cryptocurrency startups have gathered momentum and the easiest way for them to raise capital is by depending on the general public for funding. The banking sector is too costly for them. Blockchain startups cannot afford bank loans since the projects may not thrive as anticipated since they wholly depend on how the general public receives them.
From an expert view, IEOs will most definitely outstay the ICOs. Also, more countries are set to embrace IEOs compared to ICOs since they are offered through exchanges which are easily regulated by the regulatory bodies.
IEOs, therefore, have no problem with complying with the set laws and governments won’t have to come up with new rules to regulate them.