Let’s Talk IDOs: A Brief Guide

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If you’ve been hearing about IDOs and have been a bit confused or lost about some details, here’s a quick crash course on IDOs and all you need to know.

A Brief Introduction to IDOs

An initial DEX offering, or as it is popularly known IDO, is a new and refined means to raise funds in the decentralized finance (DeFi) space. Whenever you hear a project launching an IDO, it simply means the crypto project is releasing its native coin or token on a decentralized exchange (DEX). This crypto asset typically relies on liquidity pools where traders can swap tokens for other coins and Stablecoins. For example, USDT/ ETH is a liquidity pair. Some popular IDO projects include the Raven Protocol IDO, Universal Market Access Protocol IDO, and SushiSwap IDO.

IDO vs. Other Crypto Fundraising Mechanisms

IDOs are the latest methods for fundraising in the crypto space, giving them a bank of evolutionary fine-tuning. Predecessors of the IDO process include initial coin offerings (ICOs), security token offerings (STOs), and initial exchange offerings (IEOs). IDOs are best suited for projects looking to speedily raise funds for further development or growth. IDOs do this by offering better and immediate liquidity at every price stage, thanks to their mechanics.

Unlike its predecessors, IDOs are seen as a better way to launch new crypto tokens as it eliminates the need for pre-mines, which is an issuance mechanism that places the interests and welfare of project founders over the community and members. That said, IDOs are community-centric and are better at guarding against rug pulls.

Do We Need IDOs?

The ICO boom of 2017 spurred massive traction for many crypto projects, and safe to say this boom played a crucial role in the evolution of the general crypto industry today, with estimates placing that over $4.9 billion was raised by the end of that year. While many projects that partook in ICOs back then have gone on to become success stories, more have failed.

The ICO fundraising mechanism came with its downsides, with centralization being one of its biggest vulnerabilities. Other setbacks in the ICO system include third-party discrimination, susceptibility to theft and human error, and privacy deficiencies. IDOs are a dramatic improvement in ICOs as they built on many of their strengths and eliminated most of their vulnerabilities. One of the hallmarks of IDOs from ICOs is decentralization; a critical component of the crypto space.

Opting to raise funds using an IDO allows project developers to release their projects in a manner that is isolated from malicious third-party influencers while eliminating the possibility of a hack or human error. Also, participants of an IDO receive instant security on their wallets and private keys.

With this explanation, you should be able to independently answer the question posed earlier.

The Future Of IDOs

IDOs are one of the latest innovations in the ever-growing scope of innovations in the crypto space. As mentioned earlier, IDOs are the refined and new-age method for fundraising, building on the success and shortcomings of predecessors like ICOs, IEO, and STOs. Regardless, the IDO system is not without its flaws and could use some innovative disruptions. Critical areas to target innovations include scalability. IDOs need to grow to the point where other sectors outside the DeFi space can tap into the system as a reliable form of crowdfunding.

 

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Azeez Mustapha

Azeez Mustapha is a trading professional, currency analyst, signals strategist, and funds manager with over ten years of experience within the financial field. As a blogger and finance author, he helps investors understand complex financial concepts, improve their investing skills, and learn how to manage their money.