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Introduction

The cryptocurrency system has experienced exponential growth since its inception over the past years. Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) are part of the innovative changes that have gained ground as fundraising campaigns.

These have gained popularity and have allowed blockchain startups to garner funds and launch their products based on decentralization.

This article will discuss ICOs and IEOs as fundraising campaigns, their advantages, shortcomings, and challenges.

Initial Coin Offerings (ICOs)

Initial coin offerings (ICOs) are events where companies sell their new cryptocurrencies to investors to raise money. Companies carry out the procedure by announcing the dates, rules, and purchasing process of the ICO. On the release date, investors can then purchase the new cryptocurrency.

The investors are required to make these purchases in another cryptocurrency, preferably Bitcoin or Ethereum to a designated crypto wallet address.

There are also incidences of purchases with fiat money. After payment, the investors receive their purchase of the cryptocurrency in their submitted wallets. The first ICO was brought about by MasterCoin in 2013, now known as Omni, but it was Ethereum in 2014 that truly opened the market for more long-standing investments. Ethereum raised the sum of $18 million and led to the emergence of decentralized applications (DApps).

ICOs can be launched by anyone. However, there are certain requirements needed for this.

A team put together by the creator or a partnership with an existing ICO company
A website and social media handle
A whitepaper
A project roadmap

ICOs are barely regulated, which leaves room for high volatility. It is strictly banned from existing in some countries. Governing bodies in most countries have set up regulatory committees to ensure there are minimal cases of fraud. The US Securities and Exchange Commission (SEC) classifies some tokens, making them securities, and regulates them strictly. There is an ICO calendar on CoinMarketGap.

Examples of ICOs include Ethereum, Cardano, Tezos, DragonCoins, and Ripple.

Initial Exchange Offerings (IEOs)

Initial Exchange Offerings (IEOs) are fundraising campaigns for cryptocurrency startups to raise money on a trading platform. It is quite different from ICos where they raise it on their own, without an intermediary. After the ban on ICOs by China in 2017, IEOs came into the picture as a steady alternative.

IEOs are launched on a crypto exchange chosen by the company. The startups are charged a fee, and a part of the tokens are sold to raise money for the exchange. After that, the remainder of the tokens are listed on the exchange market to increase the company’s profile.

IEOs are more costly than ICOs as they promise companies more security and visibility. Some notable IEOs are attached to some cryptocurrencies. They include;

Binance: Binance Launchpad
Bitfinex: Bitfinex Token Sales
Huobi: Huobi Prime
Bittrex: Bittrex International IEO
BitMax: BitMax Launchpad
KuCoin: KuCpon Spotlight

Conclusion

Ddddd While ICOs and IEOs are exciting fundraising campaigns, it is important to know the risks and challenges associated with them. As the cryptocurrency system grows, compliance with regulation and protection of investors will play a vital role in keeping the industry intact.

Investors will need to maintain responsible investing and transparency to keep up the sector’s sustainable sector.