In the crypto space, an Initial Exchange Offering (IEO) is a fundraising method that involves using a cryptocurrency exchange to raise funds for new projects. Unlike traditional trading, where assets are bought and sold after the project is live, an IEO allows you to buy tokens before they are available on the market.
How Do IEOs Work?
1. Typically, the company that wants to organize an IEO should undergo rigorous preparations:
Develop a strong business model.
Acquire experienced team members with a solid track record.
Provide a detailed whitepaper outlining the project's goals, technology, and use cases.
Decide between a hard cap (maximum fundraising limit) and a soft cap (initial goal with room for more investments).
2. Then, the company selects an exchange platform for the IEO.
3. The exchange carefully reviews the project to ensure its legitimacy and potential, as its reputation is often at stake when it decides to offer an IEO.
4. Once approved, the IEO can start.
Why Are IEOs Useful?
1. IEOs cater to existing cryptocurrency holders, making it easier to attract investment capital.
2. The involvement of a reputable exchange can add credibility to the project, as the exchange performs detailed research on the project and its proposal.