What is IEO and why is it safer than ICO?
The initial exchange offering (IEO) is gaining popularity on the market of the cryptocurrency lately. The trading platforms create special services to use the token sale mechanism, which shows impressive results either in terms of speed or demand among the investors.
Binance Launchpad by Binance was the first on this field and after them, Bittrex, OKcoin, OKEx, and other cryptoexchanges join the use of the new tool.
The feature of an IEO is that the tokensale is run through the exchange, instead of the smart contracts by Ethereum or another blockchain.
Therefore, a project cannot start an IEO without a cryptoexchange’s approval which will check everything carefully before the start not to spoil its own reputation.
Unlike ICO, an IEO has the following advantages for a project: the trust of potential investors due to the exchanges’ vouch; the big coverage of potential buyers among the clients of the exchange; the fast entry of tokens into the secondary market through the listing on the platform which carried out the IEO.
Also, the mechanism creates a certain attractiveness for an investor. The trading platform act in accordance with due diligence of a projects, estimating the investment attractiveness, the viability of the created products, the risks, the financial status, the situation in the market, etc. The fact that the trading floor undertakes all the reputational risks raises the trust level of investors.
ICOs become frequent to replace private coin offerings, which are accessible mainly for large investors. IEO democratize the process of investment into digital assets, making it available for a wide range of participants.
An IEO is an important factor for the trust of the project but does not give 100% of reliability. A cryptoexchange cuts an explicit scam before a tokensale, but it does not mean that the further development of a ready-made product will be complete or that it will enjoy demand.