The Initial DEX Offering (IDO): What Is It?
An initial DEX offering development, or IDO, is a fresh and innovative kind of decentralised and permissionless crowdfunding platform that is introducing a new method of raising money in the cryptocurrency industry.
An IDO means that a project is launching a coin or token through a decentralised liquidity exchange. This kind of exchange for digital assets uses liquidity pools so that users can trade tokens like stablecoins and crypto coins. A liquidity pair is, for instance, USDT/ETH.
IDO: A More Effective Cryptofundraising Model?
IDOs are the replacement for earlier iterations of the cryptocurrency fundraising model, such as initial coin offerings (ICOs), security token offerings (STOs), and initial exchange offerings (IEOs). They are a great option for new projects and startups looking to launch a token and access immediate funds because they offer better and faster liquidity at every price level thanks to their mechanics.
It avoid pre-mines, an issuance system that favours project founders over community members, are typically thought of as a fair way to launch a new cryptocurrency project in contrast to the aforementioned fundraising strategies.
In July 2013, Mastercoin launched its initial coin offering (ICO). Ethereum held a token sale to raise money in 2014. 3,700 BTC, or about $2.3 million, were raised in the first 12 hours.
On April 17, 2019, the first IEO launched on the Idax, BitForex, Bit-Z, and Bit-M exchanges. While Raven Protocol revealed in June 2019 that it would launch the first-ever IDO and list it on Binance DEX.
What is the IDO Core?
If you wish to determine how your coins affect a specific domain, you can utilise IDO, which has an unusual structure. The advanced features of this technology are more stable than any other solution. As a result, you’ll be able to maintain a larger transaction volume. You will be able to produce a large number of developments in a short period of time if you do so.
As a superior alternative to ICOs and IEOs, it has the ability to quickly get to the root of any problem. Regardless of how closely you adhere to this method, you will always achieve your objectives. The system’s most fundamental features provide a solid foundation for conducting transactions. It also ensures that tokens are distributed so that they can reach a large audience.
This solution’s mechanism facilitates a clearer view of the future. It also facilitates the interpretation of the token’s data and associated information. Even if you do not have a specific line of business, you can quickly organise the basics. With this technology, every trader is able to face a wide variety of challenges with a flawless Defi programme.
Which IDOs Have Launched Successful Projects?
Even though Raven Protocol was the first and even stated in their blog that they didn’t understand what an IDO was because it hadn’t been done at the time, the project is regarded as a success.
The Raven Protocol IDO
A deep neural network training protocol that is distributed and decentralised. The Raven Protocol is working to transform the currently monopolised by major corporations AI and machine learning industries with quick and inexpensive solutions that use the blockchain. Contributors can earn rewards for sharing their computer resources with the help of the native RAVEN token, and the utility token is employed for AI training.
Protocol for Universal Market Access IDO
The Universal Market Access (UMA) protocol was another IDO project that was successfully launched, despite some initial IDO problems. As a result, DeFi developers can create synthetic assets—tokens backed by collateral that fluctuate in value—on Ethereum. It started its token sale in April of last year with a starting price of $0.26 per token on the decentralised exchange Uniswap. UMA had to put $535,000 worth of Ethereum into a recently made liquidity pool in order to get that price.
Notably, however, because Uniswap prices tokens using a bonding curve rather than order books, the UMA token price quickly increased as investors waited in line to buy the token. As a result, traders tried to outdo one another by paying more for gas, which ultimately caused the price of UMA to increase by more than $2 minutes after the launch. Some buyers complained that they paid more than pre-sale investors when they bought, and it eventually stabilised at just over $1. However, this emphasises the problem with Uniswap rather than UMA.
Despite this initial setback, UMA currently has a market cap of more than $1.5 billion, with a token price of over $25.
The SushiSwap IDO
Another comparable example is the decentralised cryptocurrency exchange SushiSwap, which competes with Uniswap to become the most well-known Ethereum-based decentralised exchange. SushiSwap is built on Ethereum. Over $1.14 billion worth of Uniswap’s locked crypto assets reportedly moved to the SushiSwap platform in September from Uniswap users.
The platform rewarded liquidity providers (LP) on Uniswap by staking their LP tokens on SushiSwap rather than launching an initial coin offering (ICO) for SushiSwap. SUSHI tokens were given to users as payment for this. During the first two weeks of SushiSwap, users who staked their Uniswap LP tokens on the platform’s initial protocol received 1,000 SUSHI tokens every Ethereum block, or roughly every 12 seconds.
Why Do IDOs Needed?
When ICOs and token sales gained popularity in 2017, raising an estimated $4.9 billion by the end of the year, many projects were attempting to use the blockchain to solve problems. It’s difficult to deny that there are several problems with ICOs, including the fact that they are centralised and vulnerable. While many have gone on to succeed, a great deal more have failed. Third-party discrimination, susceptibility to theft and human error, a lack of privacy, and other problems with ICOs should also be noted.
This new fundraising model is aiming to address the drawbacks of ICOs while bringing fresh opportunities to the cryptocurrency market thanks to IDOs’ decentralised nature. Entrepreneurs can launch a blockchain product that goes beyond malicious third-party influencers and eliminates any problems with hackers and human error by using IDO crowdfunding. Additionally, the coins that buyers and holders of tokens immediately secure on their wallets and private keys.
An IDO’s benefits
Comparing an initial DEX offering to an initial exchange offering (IEO) and an initial coin offering (ICO), there are many obvious advantages (ICO).
Here, we’ll list a few of those.
In order to list a project on an exchange after raising money through an IEO or ICO, a project must first pay exchange fees and wait for the exchange to approve it. IDOs are a completely decentralised offering, so projects can use them without having to pay expensive fees or get anyone’s approval.
Additionally, rather than having to wait for an exchange to approve a project, active community members evaluate projects and tokens, which makes way for both modest projects and extensive collaborations.
IDOs offer immediate access to liquidity and trading in contrast to IEOs and ICOs, which entail a waiting period at first. IDOs also assist users in becoming more efficient by providing a secure wallet and trading platform support that are combined into a single interface. Additionally, to make the user experience simpler, IDOs may support a variety of wallet types.
Where Do IDOs See Their Future?
IDOs are the most recent method for crypto projects to distribute their tokens to the general public, but just like ICOs, IEOs, and STOs, more work needs to be done in this area. UMA’s IDO serves as proof of this. However, a decentralised exchange with IDOs implies the absence of a control mechanism. It’s critical to have some sort of control over fundraising, as noted in ICOs, IEOs, and STOs, to eliminate token price fluctuations or implement KYC regulations.
Scalability is an additional improvement that requires attention. IDOs are currently the only means of crowdfunding used by decentralised finance (DeFi) projects, but this does not preclude the use of IDOs by other crypto projects. Of course, for these projects to succeed, existing DeFi users will need to be interested in purchasing a project’s token.
Why? simply because learning how to use DeFi platforms involves a learning curve and may be difficult for the average crypto trader. As this industry develops, increasing awareness and education of DeFi would be another improvement.
The idea behind cryptocurrencies is to decentralise finance and thus widen its doors. IDOs are a first step in achieving this, but who is to say if a new project is the best option or just another rug-pull waiting to happen? As a result, it is challenging to determine whether a specific coin is worth X amount.
IDOs may have a successful future, but greater awareness is required. Additionally, the crypto market as a whole. It is still a relatively niche industry but is expanding exponentially, only comprises a tiny portion of DeFi users.