The initial DEX offering (IDO), one of several innovative funding methods, was developed as the cryptocurrency sector as a whole matured. However, the initial coin offering (ICO), the first method of fundraising in the cryptocurrency industry, was controversial in 2017. Additionally, it made a lot of early investors millionaires overnight.
What, then, is an ICO? In layman’s terms, an ICO is an unregulated method of raising money from retail investors through crowdsourcing. The absence of governance and security for investors was the fundamental issue with ICOs. Project teams were not subject to any due diligence due to the lack of control measures.
Most ICO projects could, and many did make remarkable profit claims. Many ICO initiatives were gimmicks or, worse, plain scams designed to steal your money. In addition, they gave the cryptocurrency sector a bad reputation and deterred many potential new investors from joining.
With new fundraising techniques, decentralised finance (DeFi) seeks to solve this issue. The Decentralized exchange (DEX) model is an example of one such scheme. Access to a different, more inclusive crowdfunding model is being made available to crypto investors through DEXs.
What Is An Initial DEX Offering?
Initial DEX offerings (IDOs) are a method of acquiring money that harnesses the investing capital of retail investors. The development of the IDO was to make up for the “conventional” ICO crypto crowdfunding model’s drawbacks. DEXs can be regarded as decentralised liquidity exchanges because an IDO collaborates with them rather than a centralised exchange.
The most recent model for ICOs seeking investor funding is the IDO. They have some limits, though. The scalability of DEXs, for example, is lower. The ability to raise more than $1 billion through ICOs and CEOs is not unusual. It has never happened to a DEX.
A lack of understanding of cryptocurrency functions may prevent the average crypto trader from using DeFi platforms because of their steep learning curve. Funding DeFi education is necessary for effectively addressing this situation.
How Do Crypto IDOs Work?
DEXs’ ability to offer instant token liquidity is the reason IDOs are successful. Due to this, DEXs frequently provide generous benefits to the providers of liquidity pools. DEXs can function smoothly for their users because of liquidity.
Most projects give the DEX liquidity by allocating a portion of the funds to facilitate trade. It’s becoming commonplace to use this strategy. Proof-of-stake (PoS) is a widespread consensus technique used by many projects. However, in this situation, the mechanism primarily serves to deter investors from selling their investments too fast.
Investors participating in the PoS consensus must keep their money in their wallets in the supported cryptocurrency. As compensation for their “stake” in the network, investors earn rewards.
Investors can start trading the project token right away after the project launch. When the IDO launches, early adopters can sell their tokens for a higher price. Tokens can be purchased in bulk for a reduced price by investors who invest early.
The token value rises after the start of the public auction. The price will start to rise after the initial sale.
As a result of the abundance of liquidity offered for trading pairs on a liquid exchange, gas costs for executing a new smart contract are minimal. Smart contracts are helpful in asset token and liquidity pool management. Additionally, IDOs can immediately create tickets, unlike conventional fundraising approaches.
How To Launch A Crypto IDO
1. Create A Business Strategy
Create a strategy that makes sense and plan the token offering for delivery over a DEX. The plan should outline the problem the project seeks to tackle, how much the cost will be, which blockchain it will use, its overall marketing plan, and how it will continue to gain momentum after the IDO.
2. Design Marketing Collateral
A website and a white paper are the bare minimum of marketing materials for an IDO launch. Investor confidence increases with a professionally designed and well-branded website.
Investors who have already analytically committed to the idea can be moved emotionally by a robust website. Additionally, the website can give the project a more polished appearance. Many initiatives may have trouble building a brand identity, especially if they don’t have websites.
In contrast, a superb crypto white paper adds specificity and data to the investing experience. By doing this, the investor advances further up the pipeline.
3. Access DEX Launchpad
An IDO will be accepted if the project satisfies the platform’s standards, which are often consensus and whitelisting.
4. Create The Cryptocurrency
A cryptocurrency’s launch is now a simple procedure. To have the app handle all the laborious tasks, users might use an app like CoinTool. And how long precisely does it take to develop a cryptocurrency? The fact that it doesn’t take very long might be apparent to users from control.
Token generation is not complicated. Making a cryptocurrency is something that practically anyone can learn to do. Determining the project’s actual value and utility is the tricky part of persuading investors to invest their money in it.
The token is listed for trading on the DEX upon completing the IDO and Token Generation Event (TGE). Listing happens through an automated market maker (AMM), such as PancakeSwap or SushiSwap.
5. Launch The Token To Start Raising Funds
The following is a summary for people interested in learning how to introduce a cryptocurrency token. Creating a token pool is done by the project team. Investors buy tokens in advance through a token pool.
After the TGE, which will happen shortly after the IDO, the investors will start receiving their tokens. The issuer can conduct an auction rather than establish a fixed price, resulting in a price determined by supply and demand.
Some projects can offer incentives to investors for their liquidity. In the end, the project may gain and maintain momentum. However, users might increase their earning potential by supplying liquidity.
Differences Between An ICO And An IDO
One key benefit of IDOs over ICOs is that they don’t require a premise. By doing this, investors’ confidence may increase, exceptionally if they choose their projects using fundamental analysis. Investors worried about the token’s long-term emission rate may become alarmed by a high pre-mine allocation.
IDOs provide token access to investors more equitably. IDO tokens, in particular, can be traded right away. Such lockups are not conceivable with IDOs, unlike ICOs where lockup periods are usual.
Insiders and early investors frequently receive favourable terms in ICOs that are not available to public investors. Because smart contracts do not allow for this, such favorability is impossible with IDOs.
To address many of the issues that ICOs raised, IDOs came to light. Teams can provide investors with an opportunity to engage more directly with their preferred projects by using IDOs. IDOs are a “great equaliser” because of the perception of their fairness. IDOs offer a platform for start-up projects and exposure for small teams with creative ideas.