IDO is Initial DEX Offering. DEX is Decentralized Exchanges. IDO Crypto Launchpad or simply IDO is the latest method of fundraising for startups especially blockchain startups, using token sales.
Lets refresh a bit about fundraising. Fundraising is the concept of raising capital for your company or project from investors, banks or general public.
Traditionally people used to fundraise by getting investments from Venture Capitalists (VCs) or banks. With the advent and success of cryptocurrencies, fundraising has also diversified. Companies are now also using token sales for fundraising.
Companies issue tokens to general public in exchange of cryptocurrencies like Bitcoin and Ethereum or other major cryptocurrencies or fiat cash. This Bitcoin, Ethereum or fiat money is the fund raised by the organisation.
Token based fundraising started with Initial Coin Offering (ICO). It was followed by Initial Exchange Offering (IEO), Security Token Offering (STO) and the latest Initial DEX Offering (IDO).
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What is an IDO Crypto Launchpad?
As mentioned, an IDO crypto launchpad is one of the methods of crowdfunding for projects especially crypto or blockchain projects.
In an IDO, a DEX or Decentralized Exchange issues the IDO tokens for a project. The investors can buy the IDO tokens or coins of these budding blockchain/crypto projects in exchange of Bitcoin, Ethereum or fiat money, to fund in their investments into a crypto or blockchain project.
The IDO is a perfect platform (decentralized) which enlists the new crypto projects and new crypto coins. It opens the gateway, for not only angel investors/institutional investors, but also general investors to pour in investments in new and upcoming crypto projects. Since a thorough vetting happens before listing a crypto project in an IDO, it is also a perfect platform to identify genuine and upcoming crypto projects to invest in.
As mentioned, an IDO crypto launchpad is not the only method of crowdfunding for crypto projects. Other methods are Initial Coin Offering (ICO), Initial Exchange offering, security token offering, Initial Farming Offering, and others.Crowdfunding options in crypto or blockchain based projects
A Decentralized Exchange or DEX is a crypto exchange which enables the exchange of one cryptocurrency asset for another cryptocurrency or fiat money. Unlike a Centralized Exchange, where the exchange of cryptocurrencies is managed by the third party Exchange, a Decentralized Exchange employs no middle men and facilitates peer to peer exchange of cryptocurrencies. The third party is replaced by Smart Contracts in DEX.Decentralized Exchange
Why an IDO Crypto Launchpad is required?
An IDO crypto launchpad is mutually beneficial to both the developers and investors of crypto projects.
The Investors, besides been given the ability to invest in upcoming crypto projects, also get the insights into the quality and worthiness of the crypto projects. The IDO crypto launchpads have ongoing discussions on the worthiness and value of a crypto project which can help an investor to select the best project to pour investment into. This also protects the investors from various fraud crypto projects in the market.
Furthermore, an IDO crypto launchpad is also beneficial for crypto coins and projects. Owing to the growing tractions of these platforms among investors and general blockchain enthusiasts, the listed crypto projects also get the exposure and popularity.
Benefits of IDO Crypto Launchpads
As mentioned, an IDO Crypto Launchpad is a method of fundraising for crypto/blockchain based startups. There are other methods also like ICO, IEO and STO. But one difference between IDO and the other listed methods is that IDO offers a trustless, decentralized blockchain based model for crypto fundraising.
Initial Coin Offering is managed and the coins are issued by the blockchain startup itself. Initial Exchange Offering (IEO) is managed and the coins are issued by a Centralized Exchange on behalf of a blockchain startup. Whereas, an Initial DEX Offering (IDO) is the same as an IEO, only that it is offered by a Decentralized Exchange. This difference in approach has many benefits. Let us see some of them.
- Access budding crypto projects and also check their worthiness. We have witnessed a tectonic shift from people shifting their focus from fiat to cryptocurrencies. There are a multitude of new crypto and blockchain projects that are launched on daily basis. In such a scenario it is helpful if we have a platform which can enlist all these new blockchain projects along with their worthiness and detailed analysis. It helps the investors and users to select the best projects.
- Better exposure and reach provided to the new crypto coins and projects: With the growing traction of IDO crypto launchpads, the crypto projects which are listed onto these platforms also gain exposure to the audience of these platforms. In a sense they get a platform which offers advertisement along with fundraising.
- Decentralized and Transparent Fundraising: Unlike ICO and IEO, an IDO crypto launchpad is not only limited to large and institutional investors. Retail investors can also participate in the fundraising by buying the IDO coin for the specific crypto project. This enhances the participation from across the investor ecosystem. This also protects the token price. Earlier, large institutional investors used to buy the majority of tokens at reduced prices and then resell it to the general public earning huge profits and hurting the crypto token price in the process.
- Fast Trading: IDO crypto launchpads allow for fast trading of tokens after their launch. Investors are able to buy the tokens at its launch at reduced prices and resell them at higher prices at the time of IDO. For example, during the UMA protocol fundraising, the initial token price of $0.26 immediately jumped to just around $2.
- Enhanced Liquidity: Unlike IEOs, Initial DEX Offerings offer liquidity pools for cryptocurrency assets. DEX encourages investors to lock their cryptocurrencies in a liquidity pool in exchange of attractive interests been given to the investors. Even in most DEX a part of the tokens issued for a blockchain startup is locked in the liquidity pool. This liquidity pool acts as a reserve to fulfill any order on the DEX. This enhances the liquidity of cryptocurrencies even the most recent ones.
Liquidity refers to the ease with which an asset like stock, cryptocurrency, real estate, NFT, etc. can be converted to another asset. For example, stocks and cryptocurrencies have high liquidity as they can be easily swapped for fiat cash.
Liquidity in a crypto exchange is a vital function to consider before investing. Increased liquidity means increased trade and hence lesser volatility. Low liquidity implies a much more volatile market. Centralized Exchanges use asset reserves to address any unfulfilled order. A Centralized Exchange also uses 3rd party Market Makers (which are generally large exchanges) to fulfill orders. A DEX uses a liquidity pool which is a reserve of cryptocurrencies.Liquidity in a marketplace
Challenges in IDO Crypto Launchpads
Though we could see the potential benefits in terms of providing liquidity for the new tokens, better reach to new crypto projects, etc. , IDOs have their own share of challenges or disadvantages.
First is the identity of token issuers. Anyone can issue tokens in an IDO. No permissions and KYC are required as it happens in an IEX with Centralized Exchanges. Hence, there can be many fake token issuers also.
Second is that the Decentralized Exchanges (DEX) have no control mechanisms. This is how an advantage turns out to be a disadvantage. For a proper fundraising process, some control mechanism should be there.
Whale investors can manage to manipulate the token price as they can buy as many tokens as they want to at lower prices and sell them at higher prices to general public to earn huge profits, but in the process degrading the token price.
Which blockchain platforms are used for an IDO development?
An IDO is a decentralized platform which can be built on a single blockchain or multiple blockchain platforms. Some of the most popular blockchain platforms used for an IDO development are:
Binance Smart Chain
Which are some of the best IDO?
What is the difference between an IDO and an ICO?
The IDO uses a Decentralized Exchange to issue tokens to the general public. Whereas, in an ICO, like an IPO, the startup manages the issuance of tokens to the general public.
What is the difference between an IDO and an IEO?
Initial Exchange Offering (IEO) is managed and the coins are issued by a Centralized Exchange on behalf of a blockchain startup. Whereas, an Initial DEX Offering (IDO) is the same as an IEO, only that it is offered by a Decentralized Exchange.
What does IDO mean in crypto?
IDO refers to Initial DEX Offering. It is a method of raising funds for a crypto or blockchain based project.
How does an IDO work?
An IDO uses a Decentralized Exchange to issue the tokens to the investors.
How can I join an IDO?
You can go to an IDO launchpad like BSCPad, GameFi, Seedify, TrustPad, DAO Maker and check for different projects. You will also need the native token of the IDO launchpad. You can check the details about projects by clicking on them. Then you will be directed to a Whitelist application, that you need to fill. Once approved you will be eligible to invest in an IDO.
Fundraising via token sales is not something new. It started with ICO, IEO, STO and the latest one is the IDO. While the IDO method is developed to cater to some of the drawbacks of the earlier models (mentioned above), it has its own set of challenges also.
Be it the manipulation of the token price by whale investors or scams that can be planted to take investors’ funds. But certainly IDO has some advantages that supersedes the drawbacks.
It is open to all the investors not only to large private investors. Since it maintains a liquidity pool (crypto asset reserve), liquidity for new tokens also is easily achieved very soon. For the same reason it offers fast trading of tokens.
But certainly, we need to do proper research and go with trusted platforms only when choosing an IDO. Be it an investor who wants to invest early in budding blockchain/crypto projects or a blockchain startup which wants to accumulate funding-both the parties should thoroughly research before going with an IDO. Unlike IEO or ICO, an IDO is self governed by the community members and the Smart Contract protocol.
According to me IDOs are the next step in crypto fundraising that is going to stay. It will need improvements in terms of better control mechanisms, KYCs etc.