The term Initial Exchange Offering (IEO) came into existence in late 2017 and early 2018 when Initial Coin Offerings slightly declined. An IEO is the initial sale of cryptocurrencies or Tokens through a cryptocurrency exchange. While an Initial Coin Offering (ICO) is conducted directly by the issuer through its own infrastructure, an IEO is conducted by the exchange on behalf of the issuer or backers of the Token.
The key features of an IEO are as follows:
- The token issuers pay the exchange in the form of a listing fee which may consist of a fixed fee and a part of the Tokens to be issued.
- The tokens which are issued through the IEO are listed in the exchange for trading after the IEO is over
- The allocation of tokens is conducted by the exchange and the funds are received by the exchange
- The participants in an IEO do not send the contributions to a smart contract but instead open an account in an exchange which is conducting the IEO
- The AML/KYC process in an IEO is conducted by the exchange
- The exchanges conducting an IEO generally screen the token and the issuers before listing it on the exchange
Advantages of an IEO
The main advantages of an IEO are:
- IEOs are considered as more trustworthy since the exchanges screen the tokens before listing and check the fundamentals and the issuers before agreeing to conduct the IEO and list the token. The exchanges undertake this process since they want to preserve their own reputation.
- The AML/KYC process is conducted by the exchange which means there are minimal hassles for the token issuer.
- The marketing budgets for an IEO are lower since the exchange has an interest in promoting IEOs and hence the exchange also supports in advertising
- Since the tokens are guaranteed to be listed in an exchange after an IEO, so liquidity for the tokens is almost assured
- The IEOs minimize legal expenses which may be involved while securing permission for an ICO
- Exchanges have an immediate user base who are aware about cryptocurrency and hence there is a ready customer base
Conducting in an IEO
The IEOs are conducted with support of a cryptocurrency exchange. The issuers of the token approach an exchange which conducts IEOs. The issuers generally have to submit the whitepaper, information about the team behind the project and the token and the future plans for the project. Information about existing investors and registration should also be provided. Last, but not the least information should also be provided about the progress of the project and the milestones planned and completed.
The information is then evaluated by the exchange which decides whether to accept an IEO for listing on the exchange. If the exchange decides positively, it is essential that the promotional campaign is commenced to promote the Token before the IEO. This Campaign is normally completed in cooperation is exchange.
Exchanges as IEO Platforms
A large number of cryptocurrency exchanges have conducted IEOs including Binance Launchpad, Bitmax Launchpad, Bittrex IEO, OKEx Jumpstart, KuCoin Spotlight and Huobi Prime.
Exchanges quote different prices for conducting an IEO and information changes rapidly. However as a general rule, most of the exchanges with high volumes share the common requirement of a high listing fee, a viable product, a good team and track record. The projects also need to be backed by a strong legal structure and an opinion from a prominent international law firm.
Binance and Bittrex both charge above USD 300,000 with an upper limit of USD 1 million (USD 0.5 million for Bittrex). The costs for Bittrex include costs both for listing an IEO. KuCoin requires that you send the project for review by the exchange but the costs may be around 25-25 BTC. Information about the costs for other exchanges is available on request. The costs may vary from around $50,000 and approach USD 1 million depending upon the exchange.
Empire Global has a team of experienced professionals who will assist you through the entire process of conducting an IEO including assistance in preparation of documents, submission of application and dealing with the exchanges to complete the IEO and the listing process. We request you to get in touch with Empire Global at the earliest to understand the entire process in detail about conducting an IEO.