What Is an Initial DEX Offering (IDO)?
An initial DEX offering, or IDO, is a new and intriguing sort of decentralized and permissionless crowdfunding platform that is introducing a new manner of fundraising in the crypto realm.
When a project launches an IDO, it indicates it is launching a coin or token through a decentralized liquidity exchange. This is a sort of crypto asset exchange that uses liquidity pools to allow traders to swap tokens such as crypto coins and stablecoins. For example, USDT/ETH is a liquidity pair.
A list of upcoming, live, and historical projects that are fundraising may be found on CoinMarketCap's ICO calendar. The projects are classified based on their fundraising stage: IDO, IEO, private sale, public sale, and crowdloan. As of August 2021, the last several months of project fundraising have been IDOs, possibly indicating their popularity as a fundraising tool.
IDO: A Better Crypto Fundraising Model?
IDOs are the successor to existing crypto fundraising strategies such as initial coin offerings (ICOs), security token offerings (STOs), and initial exchange offerings (IEOs) (IEOs). Because of their mechanics, IDOs are a fantastic solution for new enterprises and entrepreneurs looking to establish a token and access immediate money.
Unlike the previously listed fundraising techniques, IDOs are usually seen as a fair approach to establish a new cryptocurrency project by eliminating pre-mines, which is an issuance scheme that favors project founders over community members.
The first ICO was the Mastercoin ICO in July 2013. In 2014, Ethereum generated funds through a token sale, raising 3,700 BTC in the first 12 hours, which was roughly comparable to $2.3 million at the time.
The first IEO took place on April 17, 2019, and was launched on the Idax, BitForex, Bit-Z, and Bit-M exchanges. In contrast, Raven Protocol stated in June 2019 that it was launching the first-ever IDO, which would be listed on Binance DEX.
What Are Some Successful IDO Projects?
Despite being the first, and even saying on their blog that they didn't know what an IDO was because it hadn't been done at the time, Raven Protocol is regarded as a successful effort.
Raven Protocol IDO
This is a deep neural network deep-learning training protocol that is decentralized and distributed. The Raven Protocol is working to provide cost-effective and fast solutions that use blockchain to transform the AI and machine learning industries, which are currently dominated by large corporations. Contributors earn rewards by sharing their computer resources using the native RAVEN token, while the utility token is used for AI training.
IDO's Universal Market Access Protocol
The Universal Market Access (UMA) protocol is another successful IDO project launch, despite initial IDO issues. This enables DeFi developers to create synthetic assets on Ethereum, which are collateral-backed tokens whose value fluctuates. It launched its token sale in April via the decentralized exchange Uniswap, with a starting price of $0.26 per token. To obtain that pricing, UMA had to deposit $535,000 in Ethereum into a newly formed liquidity pool.
Notably, because Uniswap token pricing is based on a bonding curve rather than order books, the UMA token price quickly increased as investors lined up to purchase the token. As a result, traders attempted to get ahead of others by paying higher gas costs, which resulted in UMA's token price jumping more than $2 minutes after the launch. It eventually settled at just over $1, with some buyers complaining that they paid more than pre-sale investors. This, however, highlights the problem with Uniswap rather than UMA.
Despite this initial setback, UMA now has a market capitalization of more than $1.5 billion, with one token costing more than $25.
SushiSwap, a decentralized crypto exchange built on Ethereum, is attempting to replace Uniswap as the most popular Ethereum-based decentralized exchange. SushiSwap users reportedly migrated over $1.14 billion in Uniswap's locked crypto assets to the SushiSwap platform in September.
Interestingly, rather than holding an ICO for SushiSwap, the platform rewarded liquidity providers (LP) on Uniswap by staking their LP tokens on SushiSwap. Users were rewarded in SUSHI tokens for their efforts. During SushiSwap's first two weeks, 1,000 SUSHI tokens were distributed every Ethereum block, or roughly every 12 seconds, to users who staked their Uniswap LP tokens on SushiSwap's initial protocol.
Why Do We Need IDOs?
When ICOs and token sales became popular in 2017, raising an estimated $4.9 billion by the end of the year, many projects were attempting to solve problems using the blockchain. While many have gone on to succeed, with far more failing, it's difficult to deny that there are several issues with ICOs: they're centralized and vulnerable. Other notable flaws of ICOs include third-party discrimination, vulnerability to theft and human error, and a lack of privacy.
With the decentralized nature of IDOs, this new fundraising model is attempting to solve the issues of ICOs while adding new possibilities to the crypto market. Entrepreneurs can release a blockchain product that is immune to malicious third-party influencers by crowdfunding with IDOs. Not only that, but token buyers' and holders' coins are instantly secured on their wallets and private keys.
Benefits of an IDO
In comparison to initial exchange offerings (IEO) and initial coin offerings (ICO), an initial DEX offering has numerous distinct advantages (ICO).
Here are a few examples:
When raising funds for a project through an IEO or ICO, projects must first pay exchange fees and wait for approval by the exchange before being listed. Projects using IDOs do not have to pay high fees and do not need anyone's permission because it is a completely decentralized offering.
Furthermore, instead of waiting for an exchange to approve a project, vocal community members vet projects and tokens, allowing for both small and large-scale collaborations.
In contrast to IEOs and ICOs, which require an initial waiting period, IDOs provide immediate access to liquidity and trading. In addition, IDOs help users by providing a secure wallet and trading platform support that is integrated into a single interface. IDOs may also support multiple types of wallets, simplifying the user experience.
Where Will IDOs Be in the Future?
IDO development company are the newest way for crypto projects to distribute their tokens to the public, but like ICOs, IEOs, and STOs, improvements are still needed. UMA's IDO demonstrates this. However, because IDOs are decentralized, there is no control mechanism. When it comes to fundraising, it's critical to have some form of control to prevent token price fluctuations or to have KYC regulations, as noted in ICOs, IEOs, and STOs.
Scalability should also be prioritized. Currently, only decentralized finance (DeFi) projects have raised funds through IDOs; however, this does not rule out the possibility of other crypto projects using this form of crowdfunding. Of course, for these projects to succeed, existing DeFi users must be interested in investing in a project's token.
Why? Simply because using DeFi platforms requires a learning curve that may be difficult for the average crypto trader. Another improvement would be to raise DeFi awareness and education as the industry grows.
The idea behind cryptocurrency is to decentralize finance. IDOs are one step toward making this happen, but who knows if a new project is the next best thing or a rug pull waiting to happen? As a result, determining the value of a specific coin is difficult.
Another factor to consider is that, despite rising interest in IDOs, centralized exchanges such as Binance and Coinbase continue to dominate the market. Investors aren't wondering when the next IDO listing will take place. Right now, they're curious about when Coinbase will list a specific coin. Of course, this will most likely change as more people become aware of decentralized exchanges (DEXs) and DeFi in general.
The future of IDOs may be bright, but more awareness is required. Not only that, but DeFi users are only a small portion of the overall crypto market, which is still a relatively niche field but is rapidly expanding in size. Having said that, according to the CoinMarketCap ICO calendar, as of August 2021, the majority of projects funded in the previous few months have been IDOs.