Initial DEX Offering Development (IDO)
A new and exciting type of decentralized and permission less crowdfunding platform called an Initial DEX Offering Development, or IDO, is introducing a new method of raising money in the cryptocurrency industry.
When a project launches an IDO, it means it is doing so through a decentralized liquidity exchange to launch a coin or token. This kind of cryptocurrency asset exchange relies on liquidity pools where users can trade tokens like stable coins and crypto coins. One such liquidity pair is USDT/ETH.
IDO: A Better Model for Crypto Fundraising?
IEOs, STOs, and ICOs are some of the other crypto fundraising models that have been replaced by IDOs (IEOs). IDOs are a great option for new projects and startups. They are eager to launch a token and access immediate funds. They offer better and faster liquidity at every price level thanks to their mechanics.
IDOs are generally regarded as a fair way to launch a new cryptocurrency project by avoiding pre-mines, which is an issuance system that favors project founders over community members, in contrast to the aforementioned fundraising techniques.
In July 2013, the Mastercoin ICO became the first-ever ICO. In its first 12 hours of a token sale in 2014, Ethereum raised 3,700 BTC, or about $2.3 million at the time, raising money.
On April 17, 2019, the Idax, BitForex, Bit-Z, and Bit-M exchanges launched the first IEO. In contrast, Raven Protocol declared in June 2019 that it would launch the first-ever IDO, which would be listed on Binance DEX.
What Are a Few Successful Projects That IDOs Have Started?
Raven Protocol is regarded as a successful project despite being the first to attempt it and even claiming in their blog that they were unaware of what an IDO was because it hadn’t been implemented yet.
IDO Raven Protocol
This deep learning training protocol for deep neural networks is distributed and decentralized. The Raven Protocol is working to transform the AI and machine learning industries, which are currently dominated by major corporations, by offering quick and affordable solutions that use the blockchain. The utility token is used for AI training, and the native RAVEN token is used to reward contributors for sharing their computer resources.
IDO for the Universal Market Access Protocol
The Universal Market Access (UMA) protocol was launched with success, despite initial IDO problems. This makes it possible for DeFi developers to create synthetic assets—collateral-backed tokens with fluctuating values—on Ethereum. With a starting price of $0.26 per token, it began its token sale on the decentralized exchange Uniswap in April of last year. UMA had to deposit $535,000 in Ethereum into a recently established liquidity pool in order to receive that price.
Notably, however, because Uniswap uses a bonding curve for pricing tokens rather than order books. The price of the UMA token quickly increased as investors waited in line to buy the token. Due to traders trying to outbid one another by paying more for gas. The price of UMA’s token increased by more than $2 minutes after the launch. Some purchasers grumbled that they paid more than pre-sale investors for their purchases. The price eventually stabilized at just over $1. This, however, emphasizes the problem with Uniswap as opposed to UMA.
Despite this early setback, UMA now has a market capitalization of more than $1.5 billion. It has a token price of over $25.
Another comparable example is SushiSwap, a decentralized cryptocurrency exchange built on Ethereum that is vying with Uniswap to become the most well-known Ethereum-based decentralized exchange. SushiSwap users reportedly transferred over $1.14 billion worth of Uniswap’s locked crypto assets to the SushiSwap platform in September last year.
It’s interesting that the platform chose to reward liquidity providers (LP) on Uniswap by staking their LP tokens on SushiSwap rather than launching an ICO for SushiSwap. Users received SUSHI tokens as payment for doing this. Users who staked their Uniswap LP tokens on SushiSwap’s initial protocol received 1,000 SUSHI tokens every Ethereum block, or roughly every 12 seconds, during the first two weeks of the platform.
Why Do IDOs Exist?
Many projects were trying to use the blockchain to solve issues when ICOs and token sales gained popularity in 2017, raising an estimated $4.9 billion by the end of the year. It is difficult to ignore the fact that there are several problems with ICOs: they are centralized and vulnerable. While many have gone on to succeed, with many more failing. Other significant drawbacks of ICOs include discrimination against third parties, susceptibility to theft and human error, and a lack of privacy.
This new fundraising model is making an effort to address the problems with ICOs. They are opening up new opportunities for the cryptocurrency market thanks to the decentralized nature of IDOs. Entrepreneurs can launch a blockchain product. It goes beyond malicious third-party influencers by using IDO crowdfunding. It also gets rid of any problems with hackers and human error. Furthermore, the token coin purchasers and holders are immediately secured on their wallets and private keys.
Benefits of an IDO
Compared to initial exchange offerings (IEO) and initial coin offerings, an initial DEX offering development has a number of glaring advantages (ICO).
Another thing to keep in mind is that, despite the growing popularity of IDOs. The market is still largely under the control of centralized exchanges like Binance or Coinbase. Investors do not inquire as to the timing of the upcoming IDO listing. They are currently curious as to when Coinbase will list a particular coin. Of course, as people learn more about decentralized exchanges (DEXs) and DeFi in general, this will probably change.
Here, let’s go over a few of those.
When a project raises money through an IEO or ICO. It must first pay exchange fees and wait for the exchange to approve the project before it can be listed. IDOs are a fully decentralized offering. Projects don’t have to pay high fees or ask for anyone’s permission.
Additionally, active community members evaluate projects and tokens rather than waiting for an exchange to do so, which makes way for both modest projects and extensive collaborations.
IDOs offer instant access to liquidity and trading in contrast to IEOs and ICOs, which necessitate a preliminary waiting period. Additionally, IDOs facilitate user workflow by providing a secure wallet and trading platform support with Single interface. Additionally, IDOs may support a variety of wallet types to make things easier for users.
What Direction Are IDOs Going in the Future?
IDOs are the most recent method for distributing tokens to the general public for crypto projects. They still need to be improved just like ICOs, IEOs, and STOs. The UMA IDO provides proof of this. However, a decentralized exchange with IDOs means that a control mechanism is absent. The removal of token price fluctuations or the implementation of KYC requirements, as noted in ICOs, IEOs, and STOs, are important controls to have when it comes to fundraising.
They prioritized Scalability. Only decentralized finance (DeFi) projects have currently raised money through IDOs, but this doesn’t mean other projects in the cryptocurrency space cannot do the same. Naturally, these projects will need some interest from current DeFi users to invest in a project’s token for them to succeed.
Why? simply because there is a learning curve associated with using DeFi platforms. It could be a barrier for the typical crypto trader. As this industry expands, another improvement would be to raise awareness and educate people about DeFi.
The idea behind cryptocurrency is to make finance more accessible by decentralizing it. IDOs are one step in achieving this. But who is to say if a new project is the best option or a potential scam? As a result, it can be challenging to estimate a coin’s value.
IDOs may have a promising future, but more education is required. Furthermore, the DeFi user base represents a tiny portion of the overall crypto market. It is still a tiny industry but is rapidly expanding.