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What are the differences between IEO and ICO?

What are the differences between IEO and ICO?

With the rise of Bitcoin and virtual currencies as a whole, new terms have been assimilated by the financial market. Traditional acronyms, like ICO, have been joined by other types of offerings.

This is the case of IEO, which has been increasingly applied in this market. However, it may be difficult to differentiate the particularities of each one. With that in mind, we have prepared this special post for you which will provide more details on the following:

1.What is an ICO?

2, What are tokens?

  1. What is an IEO?

1. What is an ICO?

For ease of understanding, we have to mention the IPO (Initial Public Offering), a very recurring term in the financial market. It refers to the time when a company decides to open its capital and sell shares on stock exchanges.

We have a very similar situation with regards to ICOs. When it opens, the developers of this project provide people who are interested in some units of a digital currency (tokens) with some form of offering, in exchange for Bitcoins or Ethereums, for example.

Thus, those who are applying for financial resources in this project acquire new cryptocurrencies and allow developers to raise the capital needed to make the process move forward.

In today’s world, crowdfunding, a technique used by developers, entrepreneurs and artists to raise funds for a specific project is gaining massive popularity.

The ICO is similar to such systems. This is because investors apply a certain amount and expect to receive rewards when the project is successfully completed.

However, unlike ordinary crowdfunding, applications are made through cryptocurrencies already established in the market. When new options start to kick in, investors receive a share commensurate with what they invested.

From there, depending on the success of the new currency, these agents may choose to keep the new currencies they helped to get off the paper or to exchange them for more traditional options like Bitcoin.

2. What are tokens?

The token is a kind of asset with a value chosen directly by the issuer.

You can even issue tokens of your own work: this way, the item holder can get awards as a time of a professional’s activities. We can also compare them to titles. Since the token is nothing more than a benefit that guarantees the rights to a particular utility (use of a platform or application, exchange for physical assets, discounts on certain products).

Thus, tokens relate to the main purpose of an ICO, that is, to raise funds (capital) with investors in exchange for bonds that will be useful in the future. They are also used in an IEO, as we will see later.

3. What is an IEO?

Initial Exchange Offering (IEO) is also an initial currency offering, with a key difference from ICOs: the effective participation of an exchange, a company that offers an online platform for buying or selling currencies.

Thus, the developers and this exchange agree with terms and conditions, determining the respective individual contribution limits, crypto active values, and values before the sale begins. After the offer, anyone who is financially interested in the project can start purchasing tokens on the platform.

IEO is a recent creation, but its development has increased exponentially because it brings elements of highly secure transactions. It is further proof of how crypto active ones have aroused interest.

Fortunately, the success of IEOs is not mere lobbying. First of all, it signals confidence in the project as a whole. One of the major concerns surrounding ICOs, for example, is finding out which ones offer a solid opportunity for investors.

Fortunately, the success of IEOs is not mere lobbying. First of all, it signals confidence in the project as a whole. One of the major concerns surrounding ICOs, for example, is finding out which ones offer a solid opportunity for investors.

Exchanges are professional and demanding when conducting transactions, which gives the procedures a higher level of seriousness. Thus, the cryptocurrencies provided in IEOs are within the parameters set by the market and the general network of users.

3.1 IEO

It is important to note that the reputation of the exchange is always at stake because cryptocommerce is directly associated with the exchange of information over the Internet. A platform that does not operate on demand may quickly lose credibility with market users and agents.

Thus, credible exchanges are adequately protected against scams, fraud and phishing, for example. By marketing tokens through these platforms, you can be more secure than traditional ICOs.

Another significant advantage concerns protection over possible price manipulations. We can illustrate with the following situation: When ICO starts, there is the first round of investments and applications. In this way, the developed currency is listed in the exchanges.

Operations begin with early investors looking for quick ways to make a profit. This type of behavior can cause phenomena such as a pump (rapid increase in price excessively) or dump (rapid decrease in value).

Because IEOs require the presence of an exchange, this type of problem is mostly avoided. Also, another differentiator for developers is the increased confidence in their tokens from other platforms.

This is because exchanges and trading platforms do not operate in a vacuum. Since the currency created by developers has already been screened by a responsible company, it is well regarded by other players in the market.

So after the initial offer, listing on other trading platforms will be much more agile as developers have already gone through an exchange validation process.

Did you like our article and want to know more about how to overcome Bitcoin’s scalability barrier? So enjoy the visit and read our post about Lightning Network!


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