What Does an IDO (Initial DEX Offering) Mean?
An initial DEX offering, or IDO, is a new and exciting sort of decentralized and permission less crowdfunding platform that is revolutionizing the cryptocurrency world.
When a project launches an IDO, it indicates it’s launching a coin or token through a decentralized liquidity exchange. This is a sort of cryptocurrency asset exchange that uses liquidity pools to allow traders to trade tokens such as crypto currencies and stable coins. USDT/ETH, for example, is a liquidity pair.
The projects are divided into five categories based on where they are in the fundraising process.
- private sale
- public sale
- crowd loan.
As of August 2021, IDOs have raised the most money for initiatives in the previous several months, possibly indicating their prominence as a fundraising tool.
IDO – Is There a Better Crypto Crowdfunding Model?
IDOs are a fantastic solution for new projects and entrepreneurs looking to establish a token and access immediate funding due to their mechanics, which provide improved and immediate liquidity at all market levels.
The Masterpoint ICO, which took place in July 2013, was the first initial coin offering. In 2014, Ethereum held a token sale and raised 3,700 BTC in the first 12 hours, which was roughly comparable to $2.3 million at the time.
On April 17, 2019, the inaugural IEO took place, launching on the Idax, Bit Forex, Bit-Z, and Bit-M exchanges. Raven Protocol, on the other hand, said in June 2019 that it would launch the first-ever IDO, which would be listed on Binance DEX.
IDO stands for Universal Market Access Protocol.
The Universal Market Access (UMA) protocol is another successful IDO project launch, despite initial IDO problems. It began selling tokens on the decentralized market Uniswap in April, with a beginning price of $0.26 per token. UMA had to deposit $535,000 in Ethereum into a freshly constructed liquidity pool in order to attain that pricing.
It eventually settled at slightly over $1, prompting some buyers to grumble that they paid more than pre-sale investors. This, on the other hand, emphasizes the problem with Uniswap rather than UMA.
Despite this setback, UMA now has a market value of over $1.5 billion and a token price of more than $25.
What Is the Purpose of IDOs?
Many companies were aiming to solve problems using the blockchain when ICOs and token sales became popular in 2017, raising an estimated $4.9 billion by the end of the year. While several have gone on to prosper, much more have failed, it’s difficult to deny that ICOs have several flaws: they’re centralized and fragile. Third-party discrimination, vulnerability to theft and human error, and a lack of privacy are among prominent flaws of ICOs.
Because of the decentralized nature of IDOs, this new fundraising mechanism aims to address the difficulties with ICOs while also expanding the crypto market’s possibilities. Entrepreneurs can create a blockchain product that is immune to malevolent third-party influencers, as well as hackers and human mistake, by crowdfunding with IDOs. The coins of token purchasers and holders are instantaneously secured in their wallets and private keys.
The Benefits of Having an IDO
When compared to initial exchange offerings (IEO) and initial coin offerings (ICO), an initial DEX offering has a number of distinct advantages (ICO).
Let’s take a look at a couple of them.
Rather than waiting for an exchange to authorize a project, outspoken community members assess projects and tokens, allowing for both local and large-scale partnerships.
Where Do IDOs See Their Future?
IDOs are the newest means for crypto projects to get their tokens into the hands of the general public. ICOs, IEOs, and STOs need to be improved. UMA’s IDO is proof of this. A decentralized exchange, on the other hand, indicates that there is no control mechanism using IDOs. When it comes to fundraising, it’s critical to have some type of control, such as KYC requirements or ICO, IEO, and STO restrictions, to prevent token price swings.
Scalability is another development that should be prioritized. Currently, only decentralized finance (DeFi) initiatives have used IDOs to raise funds; however, this does not rule out the possibility of other crypto projects using this method of funding.
Simply because using DeFi platforms has a learning curve, which for the average crypto trader may be prohibitive. As the DeFi industry grows, another improvement would be to increase DeFi awareness and education.
The idea behind crypto is to decentralize finance and hence offer up new avenues for investment. IDOs are one step in the right direction, but who knows if a new project is the next best thing or a rug pull in the making? As a result, determining whether a coin is worth X amount is tough.
Despite the growing interest in IDOs, centralized exchanges like Binance and Coinbase continue to dominate the industry. Investors aren’t inquiring about the timing of the next IDO IPO. They’re curious about when Coinbase will list a specific coin right now. Of course, as more people become aware of decentralized exchanges (DEXs) and DeFi in general, this will most likely alter.
IDOs may have a promising future, but more awareness is required. DeFi customers make up a small portion of the broader crypto market. This is currently a small niche but is rapidly expanding. The last three months of project financing have mostly been IDOs as of August 2021.