ICOs created the first fundraising boom for Crypto/Blockchain projects during 2017-18 before the relentless bearish market & regulatory hurdles in the second half of last year stagnated the market. Innovation has been the hallmark of this DLT movement and it came out with a better solution. Binance – one the of the biggest digital exchanges by trading volume started the Binance Launchpad. As evident from the name, the offering provides a launchpad for startups who want to raise money for their project. Everything from due diligence, verification, marketing and listing of the token is taken care by the Exchange. The IEO (initial exchange offering) platform acts like a “crowdfunding as a service.”
Binance Launchpad has acted as one of the pioneers in this new venture with the massive success of the first three token sales. This has got other exchanges scrambling to embrace the phenomenon and launch their own native platforms (below) providing similar services. We will be looking at how an IEO improves on the fundraising process over an ICO with a brief introduction of the three projects that were launched using the Binance IEO platform.
- Trustworthy Platform – The biggest advantages of having an IEO over an ICO is perhaps the factor of trust that the prior brings. To maintain their good reputation the exchanges carefully screen & vet the proposed projects to rule out any scams or fraudulent schemes. We have already seen an example of this happening when Bittrex cancelled the RAID IEO hours before the crowdsale was supposed to initiate. A terminated relationship, which was an essential part of the project, between RAID & the gaming analytics company OP.GG became the reason. For ICOs, you just go by their face value.
- Security & Verification – Project owners don’t have to worry about the security of token issuance since the exchange takes care of the IEO’s smart contract. Since the participants in the token sale need to have an account created on the exchange, the KYC (Know your Client) /AML (Anti Money Laundering) procedures are already been performed as part of the process.
- Smoother Processing – The token issuers are looking at a smoother & streamlined process than if they were to do it on their own. Tackling regulatory hurdles, authenticity issues & marketing budgets are all the exchanges’ problem now. Of course all of this comes at a price, but the hassle free experience more than makes up for it. A huge & stable customer base of the IEO exchange also becomes advantageous to not only promoting the project but raising more money through them.
- Guaranteed Listing – And finally the package of conducting an IEO comes with the guarantee of listing the digital token on the exchange platform. There is a listing fees associated with this process but the service pays for itself when the tokens are available for trading right after the crowdfunding campaign culminates.
IEO is still a pretty new phenomenon, but the good thing is major exchanges like Binance, Huobi, OKEx & Bittrex etc. are offering their platforms for the service, so you can be at peace that only viable projects would be hosted, since their reputation is at stake. However, You will need to go through the cumbersome process of registering an account with the exchange conducting the IEO, which includes KYC/AML verification. Also, you will need to fund your account with the cryptocurrency that is accepted in the crowdsale – for Binance Launchpad you need to hold the native BNB (Binance coin). Binance has recently proposed a change in the token sale format. And finally, the token listing fees can be high for startups – a combination of fixed amount and/or a percentage amount of the token sales.
Binance Launchpad has been the most successful IEO platform so far with the troika of high-profile crowdsale campaigns concluded so far. Let’s briefly review these projects before wrapping up.
- The first in the series was BitTorrent Token (BTT), a native cryptocurrency for the P2P file sharing BitTorrent platform which runs on the Tron protocol — TRC 10 token. Tron made headlines last June with the high-profile acquisition of the P2P platform. The IEO for the BTT token concluded within 15 minutes on Jan. 28 – accumulating $7.1 million with the sale of 50 billion tokens. The BTT tokens were sold in two separate sessions – one for customers holding the native Binance token (BNB) & the other for the ones holding the Tron (TRX) token.
- If you thought that was impressive, the second token sale blew away all records when Fetch.AI (FET) token sale concluded within a record-breaking 22 seconds to reach a hard cap of $6 million by selling 69 million tokens. Fetch.AI describes itself as a decentralised digital world where a collective super intelligence actively delivers answers to you. Economic activity takes place under the Open Economic Framework (OEF) by Autonomous Digital Agents.
- The final token event was the sale of Celer Network (CELR) tokens. The March 19 event wrapped up in 17 minutes and 35 seconds, with all 597,014,925 CELR tokens getting sold in a single session. Celer network is a layer-2 scaling solution which offers secure off-chain smart contract & payment solutions.
A study by the Stratis group last year had revealed that 80% of the ICOs conducted in 2017 were identified as scams. Companies were created out of thin air with no viable projects or developers to back them and the hysteria took the better of people. IEOs have now sought to fix these inherent flaws in the original fund-raising process. Will the IEOs become the new model of fundraising and perhaps create the next Crypto/Blockchain funding boom? A long road lies ahead…