Nowadays there are a huge number of offers of various tokens of different values In the cryptocurrency world. To attract investors to the project, companies often conduct token sales. Tokensale is the initial sale of tokens at a fixed price. In this way, it’s easier to gather an audience from scratch that will be interested in a new product than to conduct an initial public offering.

ICO, IDO, INO, IGO are different types of sales. 

ICO - Initial Coin Offering

The issue of coins by the project, to raise funds at an early stage of startup development. A couple of years ago, this was one of the most popular ways to raise funds for the development of the project. The purchase of tokens was carried out at the expense of other crypto coins or fiat money. A startup that is interested in ICO, as a rule, issues coins and sells them at a fixed price. The use of airdrop in this case isn’t uncommon. The team also creates a “White paper” to familiarize users with the project and technology and a “roadmap” to show an approximate project development plan. After the ICO and airdrop, the coin is released for open sale. Further, its value depends on the confidence of investors in it. If the prospect of the project is visible, then the cost increases, otherwise it falls.  

The ICO system itself has been functioning since 2013, but the peak of its popularity occurred in 2017 (the maximum amount collected was $8 billion). At that time, the ICO system wasn’t regulated by the authorities in any way, which led to an increase in fraudsters, speculation and deception. Against the background of the crypto boom and the cheapness of the release of projects, unscrupulous developers didn’t disdain to release projects with minimal viability. In 2019, the effectiveness of ICO dropped sharply. According to Satis Group data for 2018, up to 80% of all ICO startups turned out to be deceptive or were never launched. All this has greatly undermined investor confidence in this sale-model. 

But despite the failure of the whole principle of ICO, some projects were still able to attract millions and even several billion investment dollars in 2017-2018.

Examples:

  1. EOS - $4.19 billion;
  2. Telegram Open Network - $1.7 billion;
  3. TaTaTu - $575 million.

IEO isn’t much different from ICO

In Initial Exchange Offering, the exchange acts as an intermediary between the company that issues tokens and the investor. It also takes on part of the launch work, since the exchange already has its own audience and advertising platforms. For its work, the exchange receives fees and coins of the project. 

Advantages of IEO

  • For the investor, the positive side is that the possibility of fraud is excluded, since the project is thoroughly checked by the exchange.
  • Users don’t need to wait for the listing, they are only charged with investment risks.
  • According to experts, this type of sale is more reliable, but don’t neglect the site where the IEO takes place.
  • The benefit for the exchange lies in the possibility of additional earnings and in attracting new users and audience.
  • The advantage of issuing projects is that the release of coins in IEO is much easier and faster than in ICO.
  • Potential investors are already users of the exchange, so their trust in the project is initially higher, also there is no need for developers to spend money on advertising and providing audience coverage.

Disadvantages of IEO

  • The exchange has full control over the tokensale
  • Which allows the platform to set the minimum value of the coin and limits on the volume of sales.  

The first token sales in IEO took place in 2017, but the popularity of the system came in 2019 after the sales of BitTorrent and Fetch.Al , where they raised $7 million and $5 million respectively. 

IDO - Initial DEX Offering

This system is similar to IEO, but fundraising takes place on a decentralized exchange (Binance DEX and Uniswap). If we compare it with an ICO, in which investors first purchase tokens, and then only wait for the listing of them, in IDO, the sale takes place almost simultaneously with the listing. In addition, with IDO, projects don’t need to pass verification on crypto exchanges. A nice plus of IDO is that users from different parts of the world can simultaneously participate in token auctions. The reliability of the system is increased by checking participants with smart protocols.

IDO has become a more popular system than ICO. This happened mostly due to the authority of Binance DEX, through which the Raven tokensale passed, which raised more than $ 500,000 in 2019.

Disadvantages of IDO

Despite the fact that it took into account all the disadvantages of previous models of sales, there are still cons. 

The most significant disadvantage is the absence of any mechanism for controlling the value of the token. As a rule, immediately after the first purchase, the value of the token begins to grow, so a completely small number of investors can purchase the coin at its original cost.

Experienced traders, knowing the vulnerability, can take advantage of it and earn. 

So, for example, in 2020, during the sale of BZRX by IDO, a special bot developed by traders bought a huge number of coins at the starting price. The value of the coin soared, after which traders sold coins much higher than the original price, which earned millions of dollars.

The most important differences between ICO, IEO and IDO

  1. A way to attract finance. In the case of IDO, a decentralized exchange is involved. ICOs have issuers themselves. 
  2. Charging a commission. ICO has a commission for listing, IDO does not.
  3. Liquidity of coins. In the IDO system, the liquidity of coins is provided by the exchange itself. When using ICO, the issuer itself is looking for suitable exchanges for listing and liquidity of coins. 
  4. Regulation. In IDO, due to decentralization, regulation is excluded. With an ICO, regulation is possible, depending on the jurisdiction and conditions of the project. 
  5. Coin storage. In ICO, the storage of tokens is carried out by the issuer, while IDO is responsible for the safety of funds on the user himself. 
  6. Project audit. It is available with IEO, but it is absent from IDO and ICO. 
  7. Restrictions on placement on third-party sites. IDO and ICO do not have it, but the IEO system does with EOM. 

However, the types of tokensales are not limited to ICO, IEO and IDO alone. In addition to them , there are more:

  • IGO - Initial Gaming Offering

This type of sale practically does not differ from the previous types. A distinctive feature is only the token belonging to a game. 

  • SHO - Strong Holder Offering

An investment collection system that can attract financing from individuals holding a certain cryptocurrency

Example: DAO MAKER platform

  • LBP- Liquidity Bootstrapping Pool

A type of tokensale that takes place in the form of an auction. The price of a coin directly depends on demand. With a low interest, the cost falls, with a high interest, on the contrary, it increases.

  • IFO - Initial Farm Offering

In this token sale, new coins are purchased if liquidity is provided in a certain pool. This system helps to attract capital to new DeFi projects, thanks to farming offered by a decentralized exchange.

Conclusion

Investments in IDO are considered to be the most profitable and safe. These are the most modern and technological solutions in which the developers have tried to implement the advantages of previous systems and avoid their shortcomings. 

With proper analysis and a responsible approach in choosing a startup for investment, you can increase your contribution in the shortest possible time by tens or even hundreds of times.

Test your knowledge of ICO, IDO, INO, IGO with our quiz!
In what year was the ICO system popular at its peak?
2013
2017
2015
2019
When were the first sales of IEO tokens held?
2021
2017
2013
2019
What are the most important differences between ICO, IEO and IDO?
No charging a commission
Project audit; Liquidity of coins
No restrictions on placement on third-party sites
Regulation; Coin storage
What other types of tokensels are there besides ICOs, IEOs and IDOs?
PoA; PoK
IGO; SHO
PoS; PoW
LBP; IFO
You answered % of the questions correctly. Congratulations.
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