Initial Exchange Offerings (IEOs) are getting more and more popular. But with the growing popularity, there is also an increase in scams. So we thought to share our experience we got by researching IEOs for this article.
First of all, what are IEOs?
Tokens sold in an IEO are distributed to the investor by the exchange itself. The tokens are minted beforehand and are sold through the exchange platform directly. Using an exchange makes it easy for both, the project and the investors. Projects can trust investors have already passed the KYC process and the investor can trust that a thorough examination of the project was done by the exchange before listing.
Usually, on each exchange platform, it is possible to purchase Tokens with Coin owned by that exchange. A good example is Binance, which holds token sales on Binance Launchpad and only allows participants to buy new tokens via the exchange’s own Binance Coin (BNB). But there are also platforms which allow buying with Bitcoin and Ethereum.
A list of ongoing IEOs can be found on icobench.
IEOs offer easy access to upcoming projects, the projects gain trust through well-known exchanges and the tokens can easily be traded after their listing.
All an investor needs, is an account on the exchange and some cryptocurrency that the exchange accepts for the IEO.
Projects conducting an IEO become more trustworthy, as the exchange will have the project checked and researched thoroughly. This confirms a proper use case and good developers that won’t exit in scam.
Usually, the tokens have the opportunity to get listed on the exchange after completing the IEO stages.
Projects can benefit from conducting an IEO with a notable exchange. Unfortunately, this also brings more scammers onto the market. There are a lot of emails and telegram IEO offerings where a user pretends to be an employee of an exchange. When contacted via email, the email was sent from email addresses that differed from the exchanges official email address. This is what should make you doubt the legitimacy of the offer.
So always be careful and double check the offerings! Confirm email addresses and people.
The exchange platforms are aware of this problem and give the advice to be very careful and only trust emails sent from official email addresses
Why are IEOs considerable?
IEOs are quite new and allow the easy purchase of Tokens through an exchange platform.
Especially for those users who are already registered on the exchange platform, this means they do not need to conduct KYC again and can purchase Tokens in different crypto currencies accepted by the exchange.
If you confirmed the offer and agreement with the exchange you are good to go. IEOs offer a lot of advantages for the project, the exchange, and the investor:
- Easy access to a large number of potential investors
- Help with token distribution
- Gain trust by being backed by a notable exchange
- possibility to get listed after IEO
- Get paid for hosting the IEO
- Increase in transaction volume
- Increase in user base
- Easy access to new token
- Trust in the project as the exchange already researched the project
- Easily trade tokens after listing
this blog post if you think more people should be more aware of this issue or
want to learn more on the topic of IEOs.