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July 3, 2022
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Ever since Cryptocurrency has started trending, fundraising methods like IEO/IDO/IGO are being used to raise funds for the new start-ups that launch new projects. It is essential for any business to gather capital and by going the crypto way, many start-ups have gained a lot of momentum.
Depending on their needs, the type of their project, etc, the start-ups can choose any of the 3 fund-raising methods [IEO/IDO/IGO]. So in this article, you will get a tutorial on how to participate in these fund-raising methods and which method you should prefer over the other and how you can benefit from them.
On the simplest level, IEO is a way of raising funds used by new crypto startups. IEO stands for Initial Exchange Offering and you may have already guessed that it sounds a lot similar to the IPO we know from the stock market.
After ICO (Initial Coin Offering) which used to directly interact with investors to raise funds, IEO makes use of centralized exchanges. Therefore, in the case of an IEO, the majority control is not in the hands of the startup or the investors, but in the hands of the crypto exchange.
A number of international exchanges like Binance offer their launchpad where startups can launch their new projects. Once a startup approaches a launchpad platform, the crypto exchange will decide whether to accept the offer or not after doing a thorough research.
Therefore, it’s easier for investors to trust a project as the crypto exchange itself does the work of reviewing the credibility of the startup. This is the sole reason IEO is more preferred than ICO. The IEO offers certain advantages over the ICO and some disadvantages when compared with the IDO.
One of the main advantages of IEO is that it is more secure. As compared to ICO, there are less chances of you entering into a scam if you are opting for IEO. Another advantage is that exchanges make the whole process easy and convenient for both startups and investors.
However, there are certain disadvantages too. As the whole process is controlled by centralized exchanges, not all startups get the opportunity to apply for IEO. Additionally, as all the marketing and promoting is done by the exchange, startups are charged with heavy fees.
Also, investors need to hold a large number of tokens in IEO, thus small investors are by default sent out of the picture. However, due to greater advantages, most startups choose to go with IEO and so do the investors.
Let’s see how one can participate in an IEO.
Participating in an IEO is by far the easiest as opposed to IDO or IGO. IEOs are controlled by the centralized crypto exchanges and hence the process is more streamlined for both startups and investors.
Here are the steps to participate in an IEO:
Various startups keep on applying for IEO for their crypto project on various exchanges and launchpads. If you see a crypto project with it’s IEO launching, you will need to find out the platform or crypto exchanges which will be hosting the IEO.
Remember that, crypto exchanges do due diligence about the new projects but it’s better to do your own research before trusting a platform or startup. Look for the purpose or utility of the project and the team behind the project before you decide to participate.
Now that you have decided which IEO to apply for, you will need an account on the platform on which the project will be launching. For example, for projects launching on Binace Launchpad, you need to have an account on Binance.
Do your KYC and follow other required verification processes asked by your exchange to prepare for participating in IEO. If the IEO is going live on the launchpad you are already using, then you can move to the next step.
Depending on your exchange, you may have to keep a certain amount of tokens ready in your wallet. For example, Binance asks users to keep their wallets filled with BNB to be eligible to participate in IEO.
Whereas, other platform’s may require a certain wallet amount irrespective of the type of tokens you own.
Once IEO is launched, the early investors get a chance to buy the new tokens using the cryptocurrency they are holding in their wallets.
The successor of IEO and a simpler and enhanced version to invest in, IDO was introduced. Initial DEX Offering is one of the new ways for fundraisers to invest in companies. IDO is the platform where new startups or companies come forward with projects, these projects are basically new tokens or coins in the market.
Through IDOs, companies can easily access their funds, providing great liquidity by avoiding the pre-mining process. IDO is the new way of crowdfunding with its decentralized method. It eliminates the risk we face in ICOs. Companies can directly release their blockchain, there will be no third-party involvement, and people can have safety assurance.
On IDOs, people don’t need to pay exchange fees, nor do they have to wait for approval like in ICOs and IEOs. Many small projects have the opportunity in IDOs and people have a variety of options for wallets too. As the successor of IEO, it mostly eliminates all the drawbacks we face there. For example, you can count on its transparency, fluidity, and flexibility.
With multiple advantages, IDOs too have some drawbacks. With such a secure system, people however figure out the loophole and try to make more money out of it. As the IDOs provide every project to launch, you can face some scammers with vague projects to loot people or with just ideas without execution.
Even if you invested in real projects, the companies will hold some tokens for their investors. Even the competition is so high that people have to invest huge amounts to get an allocation in a good startup. So to be fair, every system has some pros and cons and it is up to your interest what you choose for.
After that brief information, let’s go through the steps for participating in IDOs.
Now that you are aware of the term IDO, participating in IDOs is simple too. You just have to do proper research about the basic things, the steps mentioned below will help you to participate in an IDO.
KYC/AML is now compulsory for every banking process or you can say for digital money-related platforms. To avoid any scams or future security issues, globally every government made this compulsory even for cryptocurrency.
So after creating an account, you have to get done with KYC/AML first mostly for every project and then you can go beyond that.
Launchpads are one of the dark sides of IDOs, here you have to hold tokens. Holding tokens doesn’t mean you can easily get the allocation. The process is all biased; the launchpads favor the holder who holds the highest and gets allocations.
So indirectly, launchpads want you to invest more and buy more tokens. And if you hold the huge pack of tokens, or provide liquidity, you will have a higher chance to get an allocation.
Sometimes, allocation doesn't include only holding tokens, you have to do certain tasks as the project companies say. Just like YouTubers have lucky draws and they have conditions like subscribing to them and more, you have to tweet about the project, retweet some tweets, and like some posts.
This process is usually lottery based and sometimes referral based. The winners list of wallet addresses is announced by the launchpad/projects. You need to get your wallets ready with the specified coin, which will be contributed.
After successfully grabbing a whitelist slot, you will have to then join the IDO Pool and contribute in it through the wallet. These are the pools where you will have to contribute your amount. The pools are opened at a specific time.
Usually, these pools are FCFS (first-come-first served), which means that, no matter what your allocation is (lottery-based or guaranteed-based), only a certain number of users will be able to contribute to the pool.
Generally, these pools will have a fixed amount which you will need to contribute. In this case, the pool closes once a number of users have contributed to the pool. We also have another case, where the amount of funds to be contributed depends upon the user, which means there is a minimum and maximum amount of funds you can contribute.
So, in this case, the pool will close once the pool limit is reached. Once the transaction is completed, you will need to wait for the distribution process.
The Distribution is usually done on the day of the TGE. The distribution is done according to Vesting of Project’s Token. This is done to prevent the mass surge in selling of tokens just after the IDO by the users to prevent any dump. This mass surge can lead to a huge price loss.
Vesting is a preventive measure for the same. The Projects usually partially distribute the tokens during the TGE to the wallets of the IDO Participants. The remaining tokens are made available in fractions in the couple of months after TGE. Usually tokens are directly distributed in your wallet address but sometimes you will need to claim the token from the claim page of the launchpad /projects.
IGO stands for Initial Game Offering. As the gaming projects increased in the blockchain industry, IGO was introduced. Well, IGO is nothing but a means of raising funds for blockchain gaming projects that concern NFT. With the help of IGO, investors can invest in gaming projects in the early developmental stages.
The assets offered by IGO generally involve in-game assets like new characters, weapons, skins, mystery boxes, accessories, and more. IGO helps investors to participate in gaming projects that would offer them huge returns after launching. Here investors can invest in any gaming project without any mediator.
The organization of IGOs is generally via launchpad platforms like TrustSwap, Binance NFT, EnjinStarter, and more. Participants or investors can make their choice after thorough research about the gaming projects as well as the launchpad platforms. However, there is no guarantee in any investment for a profitable return so it becomes important to have potential risks in mind.
Now that we know what IGO is, let us now see how one can participate in it. When it comes to participating in IGO, the procedure depends on different launchpad platforms as they have their different ways. Apart from that, to participate in IGO it is important that investors have a certain amount of cryptocurrency in their wallet.
As mentioned earlier, every launchpad platform has its own policies and procedures. Today we will talk about how to participate in IGO on Binance NFT.
Here they use a subscription mechanism so that all investors can get an equal opportunity to participate in IGO. One can participate in IGO on Binance NFT from multiple options. The following are the steps to follow to participate in IGO on Binance:
Step 1: Log in to your Binance NFT account.
Step 2: Pick the IGO project banner that you want to participate in.
Step 3: You will now be able to see a subscription page where you will be able to find all the details on the project like the purchase limit for tickets, total NFT usage, and much more.
Step 4: In a Binance IGO there are four phases:
The whole crypto world revolves around the term “decentralized” and thus every organization or company works on it’s own sets of rules. Even in the case of these fundraising methods, the crypto exchanges offering launchpads and the startups presenting new projects have their own sets of rules.
One should be familiar with the different platforms and participation rules in order to achieve maximum benefits after investing. With the right knowledge and with the right project, investors can easily get a minimum of 10x gain on their initial investment.
Vesting is a process in which tokens are released to the investors in a given time instead of distributing all the tokens on the day of sale. Thus depending upon the vesting period decided by the project owners, the tokens are distributed every week or every month.
To win slots for new launchpad projects, every launchpad decides on a certain criteria which needs to be fulfilled by the investors. For Binance launchpad, you need to hold a certain amount of Binance's own cryptocurrency BNB. The allocation then would depend upon the number of average holdings.
Other launchpads might require some other cryptocurrency to be held or staked or sometimes just a certain wallet balance has to be maintained in order to get an allocation for the project.
The allocation we talked earlier can be of two types:
Guaranty-based allocation usually depends upon the number of tokens held by an investor. However, in lottery based allocation, slots are selected randomly and based on pure luck.
So this tutorial must have given you a pretty good idea on what IDO, IEO and IGO are and how you can benefit from them. When you are about to choose any one of these fund-raising methods, just make sure to weigh the pros and cons of every method because it is ultimately going to help you get some heavy returns!
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