What Is The Difference Between IEO and ICO?
IEO means Initial Exchange Offering. Binance was the first crypto exchange to announce IEO. Bittrex, OkCoin launched IEO platforms much later.
There is no sense in disclosing IEO if we do not compare it with ICO. The thing is everybody knows what ICO means and one can estimate features of IEO only in comparison with ICO. Despite of all features shared by these methods of fundraising there is a huge difference between them.
The key and the first difference between IEO and ICO faced by any project is the launch procedure. ICO can be launched with any applicable blockchain-platform (Ethereum is usually used) while IEO can be launched on exchange platform.
You can launch ICO without any verification. All you need is to reach technical compliance — create a token and develop smart contracts.
With IEO it becomes a little more difficult. Aside with technical side, there is also an exchange verification you need to pass to participate in IEO hosted by it.
This is where the interesting part for the potential investor comes. The fact that ICO is not really regulated can be considered both as a strong or a weak side of the fundraising method. It is a strong part because you do not have to make any efforts for bureaucracy purposes, and the weak side is that an absence of tools for investors' protection creates too much opportunities for scammers.
Since the moment ICO appeared on the scene we have witnessed numerous scam projects. Those used to have whitepaper, some of them even had MVP, however, it appeared later that the runners weren’t going to provide any service at all.
With IEO you are at low risk of something like that to happen. When launching IEO an exchange acts as a moderator verifying project before it appears in the IEO listing. Considering that the name of the project participating in IEO will be linked with the name of the exchange, the exchange is very motivated to accept only reliable companies.
Generally, IEO executes the same function as the US SEC or any other organization with similar functions in other countries verifying the company when it applies for IPO. It is okay if the verification process held by the exchanges is less qualified for now. Exchanges need more time to make the verification process more advanced. Starting an IEO concept is already a huge step forward compared to ICO.
Follow the link if you want to get acquainted with Binance recommendation for those who wants to be included to the listing. On a screenshot below you can see a fragment of the form that has to be filled in when you apply for the IEO:
The key and the first difference between IEO and ICO faced by any project is the launch procedure. ICO can be launched with any applicable blockchain-platform (Ethereum is usually used) while IEO can be launched on exchange platform.
You can launch ICO without any verification. All you need is to reach technical compliance — create a token and develop smart contracts.
With IEO it becomes a little more difficult. Aside with technical side, there is also an exchange verification you need to pass to participate in IEO hosted by it.
This is where the interesting part for the potential investor comes. The fact that ICO is not really regulated can be considered both as a strong or a weak side of the fundraising method. It is a strong part because you do not have to make any efforts for bureaucracy purposes, and the weak side is that an absence of tools for investors' protection creates too much opportunities for scammers.
Since the moment ICO appeared on the scene we have witnessed numerous scam projects. Those used to have whitepaper, some of them even had MVP, however, it appeared later that the runners weren’t going to provide any service at all.
With IEO you are at low risk of something like that to happen. When launching IEO an exchange acts as a moderator verifying project before it appears in the IEO listing. Considering that the name of the project participating in IEO will be linked with the name of the exchange, the exchange is very motivated to accept only reliable companies.
Generally, IEO executes the same function as the US SEC or any other organization with similar functions in other countries verifying the company when it applies for IPO. It is okay if the verification process held by the exchanges is less qualified for now. Exchanges need more time to make the verification process more advanced. Starting an IEO concept is already a huge step forward compared to ICO.
Follow the link if you want to get acquainted with Binance recommendation for those who wants to be included to the listing. On a screenshot below you can see a fragment of the form that has to be filled in when you apply for the IEO:
In this form you need to point out whether your coin is a security or not. Moreover, you need to attach a doc file signed by lawyer confirming that your coin is not a security. It is necessary to fill these fields if you want your project to be listed in the IEO platform. For now this is the only necessary condition to complete the application. In the future there will be more of them as far as the verification practice is developed.
After filling the form the exchange will start checking your project. Let’s review advantages and disadvantages of IEO compared with ICO.
After filling the form the exchange will start checking your project. Let’s review advantages and disadvantages of IEO compared with ICO.
Antiscam Security
IEO is much safer than ICO (of course until the scam exchanges appearance) as all the exchanges are providing verification of projects before including them to listings.
If you make an analogy with the classic stocks IEO is like purchasing company stocks on New York Stock Exchange and ICO is like buying a share of a company you have saw in a newspaper for cash without signing any agreements.
If you make an analogy with the classic stocks IEO is like purchasing company stocks on New York Stock Exchange and ICO is like buying a share of a company you have saw in a newspaper for cash without signing any agreements.
Positive Attitude of Investors
Usually, the first who invest in the IEO are the people who already use the exchange services. As they are already clients of the exchange, we can be sure they trust it. As a matter of a fact they trust more the projects in the listing of this exchange.
Easier to Promote
When you apply for IEO you are up to get allocated in the exchange listing which is already well-promoted. That means that there is a huge part of job made instead of you as exchanges are motivated to promote your and other projects in the listing as your success is their success. Alongside you get a platform on the website attended by people who definitely have cryptos and want to invest.
If we make an analogy with crowdfunding — launching an ICO is like a making crowdfunding campaign hosted on your website when no one knows you yet, and launching IEO is like allocating your project on Kickstarter or Indiegogo. In which case your chances are better?
That is the reason that can compensate all the issues that arise with project moderation. As it can really be worth to pay out an exchange the part of collected funds if it gets much easier to promote your project.
If we make an analogy with crowdfunding — launching an ICO is like a making crowdfunding campaign hosted on your website when no one knows you yet, and launching IEO is like allocating your project on Kickstarter or Indiegogo. In which case your chances are better?
That is the reason that can compensate all the issues that arise with project moderation. As it can really be worth to pay out an exchange the part of collected funds if it gets much easier to promote your project.
IEO in Practice
As already mentioned Binance was the first exchange to launch an IEO platform. The first results they got were magnificent - the first project BitTorrent raised 7.2 millions USD in 15 minutes while Fetch.ai raised 6 millions USD in 22 seconds. Of course other exchanges decided to make their platforms just like Binance did.
Conclusion
Undoubtedly, IEO is a huge step forward for the crypto community. However, there is something this fundraising method lacks to become an alternative to IPO. It is about the tokens executing the same function the securities do - being a recognized asset. However, this issues can be solved by combination of STO and IEO or STO solely. This is what we are going to discuss in another article.
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