Blockchain and Crypto world aims to solve the dependency on centralized platforms and financial models. Still, there are major players as exchanges that are running in a fully controlled manner. The solution recently presented itself in IDO — Initial DEX Offering.
As I work with crypto projects, I see that the last two months more and more projects ask to help them to promote their IDOs. That indicates an increasing interest in the decentralized token listing, not only because of higher cost efficiency, but also because of no restrictions on who, when, and from where can buy tokens on DEXs. So I decided to tell you what is IDO.
Initial DEX Offering is becoming the preferred method to distribute tokens and raise capital in DeFi, along with IEOs, ICOs and direct listings at CEX.
However, it’s difficult to constitute that DEX method is fully examined. It’s only a few months of history, and the community doesn’t have full experience in that. Still, what is it and how to do so?
In some particular way, the fundraising method of IDO is similar to IEO, ICO, and STO, despite it is based on DeFi, which created a way to build innovative, robust, and easily scalable open finances. IDO is decentralized and offers ways for DeFi.
Examples of IDOs
One of the first IDO was hosted on Binance DEX and was built on Raven Protocol. Besides that we already possess BZX, a lending, margin trading protocol, and UMA (a Synthetix assets).
Many other platforms also want to jump on the trend and are launching the IDO dashboards.
The community expects a new approach to crypto fundraising from IDO, this idea already gathers it’s fans.
What is the difference between IDO, ICO and IEO?
IEO and IDO in general are the same, except for the platform that hosts the fundraising process. Speaking of ICO — a project’s takes full responsibility to manage transactions and operations on an inner platform. If it’s IEO — a centralized exchange host the “ICO” in-house. IDO is the ICO and IEO both in one, but a centralized exchange is replaced with decentralized.
IDO has a great advantage on IEO, because For IEO you need to pay exchange fee, which are raising up and up as the market develops, but for IDO you do not need anybody’s permission. Its a completely synonym of decentralization — Instead of exchanges, vocal community members are the ones who vet projects and tokens. It opens new horizons.
COMP, BZRX and UMA were released on Uniswap, which also caused fixation of distribution mechanic. Uniswap is famous for the easiest way to deliver tokens on the market in a fair manner. Tokens are being delivered in a proportion that lined up with their desired IDO price, public access is granted to the public.
The most important thing is that IDO enables users from different nations to participate in a trade where they will be sold tokens of a specified token vendor such as Raven Protocol.
Every new approach has to stabilize firstly before being fully implemented. The Synthetix assets platform’s UMA example, that has already been mentioned above, displays and reveals the current situation that needs to be solved: UMA put up to 2% of total supply and about 500k$ into a liquidity pool under a a starting price of 0.26$, the same that was paid by seed investors a few years ago.
Investors quickly lined up to purchase tokens whose price is affected by the bonding curve, this process resulted in a raising with a great pace price of the token.
Traders tried to front-run others by setting up higher gas costs, which resulted in a $2 price of UMA in a matter of a few minutes. Some of the buyers were extremely unsatisfied, as they got it with a higher price than pre-sale investors did.
BZX’s buyers face the same problem on Uniswap. The BZRX token price increased up to 12x times compared to the listing price in just 60 seconds.
IDO — the new IEO?
Initial DEX Offering is certainly a next step in Blockchain Finance and DeFi especially. Still we need to see how it will be developing and correlating itself after a series of lessons learned.
In the meantime, if you have any questions about IDO and DeFi or you are an IDO/DeFi/crypto project and want to know more how to promote you project, you can always contact me via Telegram (@baloyan) or LinkedIn.
Check out my previous articles at HackerNoon: