IEO Is the New ICO: A New Paradigm for Startup Financing

ICOs are Not Dead, They are Just Evolving
Coin Cloud Team
, published on 
April 18, 2019
IEO Is the New ICO: A New Paradigm for Startup Financing

You know what we're tired of hearing? That ICOs are dead. The fact is, Initial Coin Offerings (ICOs) are not dead; they are evolving. Just like the crypto world keeps evolving each day, so does the model of crowdsourcing.

Want to know a secret? There is a new invention in the crypto-world: Initial Exchange Offerings (IEOs). Similar to ICOs, IEOs will be used to raise capital for startups by creating and issuing tokens to investors. But in this method of fundraising, developers sell the new tokens directly to the crypto market, via an exchange platform.

The Future of Start-up Funding

When a company creates a token, they send it to a suitable exchange, which will list them for public investments. The crypto exchange acts as a counter-party to start-up financing. The company enters into an agreement with the exchange over the pricing and conditions governing the sale of the tokens. But wait, there's more.

The exchange has to conduct feasibility and viability screening of the companies before deciding to list their tokens. Once satisfied with everything, the exchange can charge the developers a given fee, and ensure compliance with pre-established procedures before listing. And do you know what this solves? The very problem faced by ICOs: fraud.

How Invested are Exchanges in IEOs?

Crypto exchanges can earn a percentage of the proceeds of the tokens sold. Also, the sale of tokens attracts new users to these exchanges, who have to sign up and may decide to utilize the exchange’s other services. In addition, the exchange receives a listing fee from developers. Depending on the agreement with the developers, the exchange can also gain exclusive rights to a token. So, if a token is successful, the exchange gains new revenue streams and increased popularity within the crypto-world.

Think about this for a moment. Since the exchanges are heavily invested in the listing of a token, don’t you think that they would do more due diligence to ensure that they only list credible tokens?

Should You Care About IEOs?

Whether this new funding model is here to stay, only time can tell. As it stands, more users continue to embrace the models as well as exchange platforms. So, what does this mean for casual crypto-investors? Is it time to throw caution to the wind?

No, investing, as always, needs you to weigh all the factors. Not all IEO tokens will turn out to be a success.

Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.

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