Initial DEX Offering (IDO) is one of the crypto industry’s innovative approaches to raise funds. This is an alternative fundraising approach pioneered by the industry after the Initial Coin Offering (ICO) drew much ill will in 2017. ICO is an unregulated approach to raise funds from retail investors. Although IOCs made many early investors millionaires overnight with their impressive profits, many retail investors also lost money as several ICO projects turned out to be outright scams/quick cash grabs.
New investors have been discouraged from investing in the crypto space due to the negative impression of ICO projects. Decentralized finance (DeFi) has attempted to address this issue by creating alternative fundraising models, and the DEX (Decentralized Exchange) model is one such approach.
What is an IDO?
An IDO is the latest fundraising approach used by crypto projects to raise funds from investors. It is a token offering on a DEX. Liquidity pools (LP) play a crucial role in IDOs as they create liquidity after the sale. IDOs allow users to lock funds in the DEX to generate new tokens. Some of the funds raised through IDOs will be added to a liquidity pool with the new token before being returned to the project.
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These liquidity pools are one of the main reasons for the success of IDOs. Liquidity allows DEXs to function smoothly. This is why liquidity providers are rewarded by DEXs.
Early investors in a crypto project can sell their project tokens at a higher price once that project’s IDO goes live. Early investors have the benefit of being able to buy large amounts of tokens at a discounted price and later sell those tokens at a higher price after the initial sale has taken place.
Another positive aspect of an IDO is that investors do not have to wait long for the token to be listed. Here the list is made immediately after the completion of the IDO. This allows investors to liquidate their investment faster compared to ICOs.
IDOs are a cheap and easy way for projects to distribute their tokens. However, IDOs also have certain limitations. DEXs are not scalable. While projects have raised over $1 billion through ICOs, they may not be able to raise such large amounts through IDOs. This is mainly due to the lack of knowledge about DeFi platforms, which prevents new crypto traders from investing in IDOs. Also, DEXs are vulnerable to hacking. In the past there has been news of hackers siphoning investor funds from DEXs.
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The Best IDO Launchpads of 2022
Here are three top IDO launchpads of 2022
Binance, one of the most famous crypto exchanges worldwide, has its own IDO launchpad known as Binance Launchpad. On this platform, participants who can invest in the upcoming IDO will be selected via a lottery system. This is based on the Binance Smart Chain (BSC) and users can use their Binance coins to get a lottery ticket to participate in the IDO. According to the information available on the Binance Launchpad website, it has launched 64 projects so far and helped them raise $130 million. Over 3.5 million unique users participated in these IDOs.
OKEx is a prominent crypto launchpad project that has helped launch successful IOCs like Perlin, Beam, and Harmony. OKEx has its own token launch platform called OKEx Launchpad. It allows crypto projects to raise funds and connect with a global community of crypto enthusiasts. OKEx Launchpad lists projects for a limited time. In this time frame, OKEx users can stake OKB (native coin of OKEx) and receive the tokens issued by these crypto projects. The more OKB-Coins users stake, the more tokens they can get.
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KuCoin is a top cryptocurrency exchange in China with a global customer base of over 10 million. KuCoin Spotlight is its own token launch platform. What is unique about Kucoin Spotlight is that users can earn rewards for trading specific digital assets. KuCoin Spotlight has launched 20 projects so far with the highest ROI for these projects exceeding 924x according to the data available on the exchange.
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