The world of cryptocurrencies is filled with acronyms, as well as the title of this text. In fact, the terms listed form a veritable alphabet soup. In common, both refer to “initial offers” of something, or, in this case, some token specific. Such offers can be created by people, companies Or until entities without a central command.
These offers have some similarities, as well as differences between them. Generally speaking, each differs, as already mentioned, in the form and by Where is realized. So check out the differences between ICO, IEO, IFO and IDO in this text. Beforehand, check the meaning of each of these acronyms below:
- Initial Coin Offering (ICO);
- Initial Exchange Offering (IEO);
- Initial Farm Offering (IFO);
- Initial DEX Offering (IDO).
First, it is worth highlighting the source of these acronyms, which, paradoxically, is in the stock market. The four were inspired by the famous acronym IPO, which means Initial Public Offering (Initial Public Offering). The term is used in financial market to designate companies that are starting to negotiate their actions on the stock exchange.
Analogously, the tokens who go through these offers are usually starting your negotiations. That’s why all these offers contain the I, of Initial (initial). After all, they are tokens newly released by companies or projects that are still in the search phase. capital of investors.
although the first token offer has been released in 2013, the token market boom started in 2017. With the appreciation of the Bitcoin (BTC) and, later, of the Ethereum (ETH), the market opened its eyes to this modality. People and companies saw in tokens a way fast and cockroach to capture resources and finance projects.
A token offer can occur in a independent, through exchanges or even via decentralized finance (DeFi). As the market evolved, new types of offerings emerged and made their name. Currently, the four mentioned modalities in this text they are the best known and move the greatest amount of resources.
Acronym in English for Initial coin offering, this was the first modality of sale of tokens to appear in the market. In an ICO are issued tokens that are later released in the market. Not there are specific rules: any person, company or group can create a token and release it via ICO. Therefore, the modality has a high degree of freedom of entry.
This offer is launched on the market and open for any investor wishing to purchase the offered tokens. It is enough for this investor to have a Wallet and tokens from the blockchain where the ICO is performed. Most of these tokens are issued on the Ethereum, that is, you must have tokens Ether (ETH) to acquire the created tokens.
Through an ICO, investors can basically issue any type token. For example, there are tokens that give access to some product or service (utilities). Another ICO can create tokens that represent some real asset (gold, immovable or movable property). Finally, the company can raise investment through the tokenization part of its assets, transforming the holder of the tokens into a partner (security).
The first ICO was held in 2013 by Mastercoin, one of the first platforms to allow the creation of tokens. At the time, the amount collected from the sale was $5 million, a negligible amount close to the more than $6 billion collected by the modality in 2017. However, the pressures regulatory and the large amount of blows made the sport go into decline from 2019.
Acronym in English for Initial Exchange Offer. IEOs are a more restricted of token issuance, as, unlike ICOs, they demand a trusted third party on the operation. In this case, the third is usually a exchange, a platform that mediates the trading of cryptocurrencies.
An IEO can happen in two ways: by exchange itself or by the 3rd using your platform. The first model is the most common and also what has more examples of success. In it, the exchange itself resolves to create and to distribute its own token, that is, the exchange creates and issues the product.
These tokens usually grant discounts and services to its holder, who can use them directly on the company’s platform. Many platforms also offer financial products to token holders, as savings that yield fees, for example. The token also serves as reference price for other cryptocurrencies, creating pairs trading within the exchange.
In this sense, the most successful example of IEO is the Binance Coin (BNB), token created by Binance, the world’s largest exchange in traded volume. The token was created in 2018 and initially offered discounts in the fees charged by the platform. With the growth of Binance, BNB gained new uses and a demand which made its price soar 1,000% since January 2021.
In addition to releasing their own token, exchanges can use an IEO to sell tokens created by the 3rd. In this way, if a people or company decides to launch a cryptocurrency and make this sale at platform of an exchange, this qualifies as an IEO.
The released token is traded on exchange, in the same way as a action cast in a stock Exchange specific, like B3 or Nasdaq, for example. This type of sale has benefits significant in relation to ICOs. There are, for example, few cases of frauds in projects launched via IEO. In addition, IEOs have:
- Security and credibility of a platform recognized in the market;
- Through an IEO, the investor has access to a consolidated and large client base, depending on the size of the broker;
- The token has a greater chance of being traded and, therefore, gaining liquidity in the market;
- Exchanges have mechanisms to assess the risks of each project, reducing the risk of fraud and losses for investors.
Acronym in English for Initial Farms Offer. In general, the IFOs work like the ICOs, but they also have differences each other. The main one is that IFOs are geared towards decentralized finance (DeFi), with the release of tokens taking place through the decentralized exchanges (DEX).
IFOs allow users to buy tokens through “pre-sales” hosted through a DEX. Such pre-sales are for the acquisition anticipated of tokens before they are listed for trading in general, ie an IFO gives the investor the chance to purchase the tokens at lower prices. cheap. Currently, DEX pancake swap it is one of the main platforms where IFOs take place.
To participate in an IFO, users must provide liquidity, that is, leaving your tokens on the DEX platform. The value, in turn, is used to guarantee the acquisition of tokens during pre-sale. Typically, DEX asks for liquidity in a pair of your own token plus the token of network where it is performed. For example, PancakeSwap IFOs often ask for liquidity in the pair Cake-BNB (Cake is the PancakeSwap token).
This liquidity must be provided through a Wallet with the format adopted by the network where the token is issued. Thus, tokens of the Ethereum must be sent in wallets ERC-20, tokens of BNB in the pattern BEP-20, and so on. Typically, each DEX has a list with instructions on how to participate in these offers.
Some DEX have a system of veto to prevent the offer of tokens that may appear suspects, like blows. However, such a feature not is available on all platforms. Furthermore, this veto not guarantees the success or token integrity, which means users must always make their own. research before investing.
Finally, there are the Initial DEX Offers, that is, when a token is launched directly on the platform of a DEX. Tokens released in this offer may represent any asset that is traded on DEX. But its holders not have rights shareholders on the entity that issued the tokens.
IDOs can be created to represent not just cryptocurrencies, as well as any other type of asset. Song, films, works of art, all this can be tokenized and have its launch on a DEX. This IDO offers companies a tool to engage their communities in an economy that enriches their products and services, allowing them to do decisions business people about their assets.
In a way, the IDEs are similar to IEOs. The main difference is that, in the case of IEOs, companies launch their tokens and raise funds through a centralized exchange, while the IDEs occur in a DEX. In both cases, the negotiation of tokens is immediate, once the project is able to raise the funds. Despite being in the DEX, the IDOs also have a series of rules, like:
- the project must pay a huge sum or offer apart from the tokens to be released on DEX;
- there is a non-compete policy, ie the project cannot list its tokens on other exchanges;
- the project creators have a very small margin to control the parameters of the token sale.
Some famous DEX in the market offer IDO service, as in the case of Binance Dex, Uniswap and Polkastarter. Currently, many traders prefer acquire tokens via GONE than through ICOs. This is because, in ICOs, the issuer of tokens has more control about the fundraising round, which can generate a disadvantage. IDOs, on the other hand, as they are intermediated by a DEX, tend to generate a greater isonomy between the parts.
In short, the token issuance market registered a large growth in the last years. Since popularity from ICOs to safety of issuances by exchanges, the modality continues in adaptation and constant evolution. Far from having declined, token offers are on their way to becoming a new option in investment for the cryptocurrency market.
Also read: What are the main DeFi networks available in the cryptocurrency market?
Also read: Decentralized Exchange: know what it is and how to use a DEX
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