ICOs vs. IEOs: What's the Difference?
Initial coin offerings (ICOs) and initial exchange offerings (IEOs) are two popular ways for cryptocurrency startups to raise funds. While they share some similarities, they also have significant differences. In this blog post, we'll compare ICOs and IEOs to give you a better understanding of each method.
ICOs
An ICO is a fundraising method in which a company issues a new cryptocurrency token and sells it to investors in exchange for other cryptocurrencies such as Bitcoin or Ethereum. Due to the anonymity provided by cryptocurrencies, ICOs have become a popular way for startups to raise money without the need for a traditional bank loan or venture capitalist.
Some notable ICOs include:
- EOS raised $4.1 billion in 2018
- Telegram raised $1.7 billion in 2018
- Filecoin raised $257 million in 2017
However, with the anonymity that ICOs provide, they are also prone to scams and frauds as investors don't have any guarantee of the legitimacy of the project.
IEOs
An IEO is a fundraising method in which a company partners with a cryptocurrency exchange to launch its token sale. The exchange acts as a mediator between the company and the investors by verifying the legitimacy of the project and conducting due diligence on behalf of investors.
Some notable IEOs include:
- BitTorrent raised $7.2 million on Binance in 15 minutes in 2019
- Fetch raised $6 million on Binance in 22 seconds in 2019
- Celer Network raised $4 million on Binance in 17 minutes in 2019
IEOs are perceived as safer than ICOs as the exchange conducts a thorough screening of the project before listing it on its platform. IEO investors also don't need to worry about transferring their funds to an unknown wallet address as the exchange handles the entire process.
Conclusion
While both ICOs and IEOs have their advantages and disadvantages, the decision of which method to use ultimately depends on the company's goals, the project's legitimacy, and the regulatory environment. Companies looking to raise funds through ICOs must conduct thorough due diligence and investor screening to avoid fraud and scams while IEOs offer more safety for investors.
Regardless of which method a company chooses, bringing innovation to the industry is what matters most, and these two fundraising methods have proven themselves as the forefront of the financial ecosystem.