Why Do We Need IDO (Initial DEX Offering)

What Does an IDO (Initial DEX Offering) Mean?

An initial DEX offering, or IDO, is a new and exciting sort of decentralized and permissionless 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 stablecoins.

USDT/ETH, for example, is a liquidity pair.

A list of upcoming, live, and completed ICO projects may be found on CoinMarketCap's ICO calendar. The projects are divided into five categories based on where they are in the fundraising process: IDO, IEO, private sale, public sale, and crowdloan. 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?

Initial coin offerings (ICOs), security token offerings (STOs), and initial exchange offerings (IEOs) are all crypto fundraising strategies that have been replaced by IDOs (IEOs). 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.

Unlike the aforementioned types of fundraising, IDOs are often seen as a fair approach to establish a new cryptocurrency project by eliminating pre-mines, which are an issuance scheme that favors project founders over community members.

The Mastercoin 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, BitForex, 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.

What are some examples of successful IDO-led projects?

Raven Protocol is regarded a successful effort, despite being the first and even saying in their blog that they didn't know what an IDO was because it hadn't been done at the time.

IDO Raven Protocol

This is a deep neural network deep-learning training protocol that is decentralized and distributed. The Raven Protocol is attempting to change the AI and machine learning industries, which are now controlled by large enterprises, by providing cost-effective and quick solutions that utilize the blockchain. Contributors are rewarded for providing their computer resources with the native RAVEN token, while the utility token is used for AI training.

IDO stands for Universal Market Access Protocol.

The Universal Market Access (UMA) protocol is another successful IDO project launch, despite initial IDO problems. This allows DeFi developers to create synthetic assets, which are collateral-backed tokens whose value fluctuates, on Ethereum. 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.

However, because Uniswap uses a bonding curve rather than order books to price tokens, the UMA token price immediately climbed as investors lined up to buy the token. As a result, traders tried to get ahead of the game by paying greater gas expenses, causing UMA's token price to skyrocket more than $2 minutes after the debut. 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.

IDO SushiSwap

SushiSwap, a decentralized crypto exchange based on Ethereum, is another example.

SushiSwap is seeking to replace Uniswap as the most popular Ethereum-based decentralized exchange. SushiSwap users are said to have transferred approximately $1.14 billion in Uniswap's locked crypto assets to the SushiSwap platform in September.

SushiSwap, rather than holding an ICO, compensated liquidity providers (LP) on Uniswap by allowing them to stake their LP tokens on the platform. Users were rewarded in SUSHI tokens for their efforts. During SushiSwap's first two weeks, 1,000 SUSHI tokens were distributed to users that staked their Uniswap LP tokens on SushiSwap's first protocol every Ethereum block, or around every 12 seconds.

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. Furthermore, 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.

When a project raises cash through an IEO or ICO, it must first pay exchange fees and wait for the exchange to approve the project before it can be listed. Projects using IDOs don't have to pay excessive fees and don't need authorization from anyone because it's a truly decentralized service.

Furthermore, 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.

IDOs allow quick access to liquidity and trade, unlike IEOs and ICOs, which require a waiting period. Furthermore, IDOs assist customers by providing a secure wallet and trading platform assistance that is integrated into a single interface. IDOs can also handle multiple types of wallets, which makes the user's experience easier.

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, but they, like ICOs, IEOs, and STOs, still 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. Of course, for these ventures to succeed, existing DeFi users will need to be interested in investing in the project's token.

Why? 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.

Another thing to keep in mind is that, 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. Not only that, but DeFi customers make up a small portion of the broader crypto market, which is currently a small niche but is rapidly expanding. According to the CoinMarketCap ICO calendar, the last three months of project financing have mostly been IDOs as of August 2021.