Is Initial Exchange Offering (IEO) the Future of Crypto Fundraising.
Is Initial Exchange Offering (IEO) the Future of Crypto Fundraising. Image credit: Pixabay

Fundraising is hardly easy when launching a business.  

With respect to ICO there has been enough proof that 80% tend to be scams and only a mere 8% manage to reach the trading stage on the various cryptocurrency exchanges per a study done by Investopedia. 

However, it seems that the next step is initial exchange offering (IEO) which is a type of crowdfunding similar to an ICO. With funds flowing again, it’s time to leverage crowdfunding platforms. Here’s some history from the ancient era of 2019 – from the point of view of a crypto enthusiast.

“The cryptocurrency market appears to be gradually regaining lost ground from 2018. In the year-to-date (data from 2019) period, Bitcoin is up 151%, Ethereum is up 86%, Ripple is up a subtle 15%, Litecoin has an impressive 320% gain, Bitcoin cash has gained 151% and EOS is up 15.66%.

The performance of the 6 largest coins by market cap suggests that serious money is moving into crypto and its high time crypto investors started exploring the opportunities in these new coins that are launching via IEOs,” per investing.com.

Before you get excited though about it becoming the new panacea that will fix everything, here’s some data from Coinmarketcap for 2020:

“Projects with a negative ROI have collectively raised $1,050,430,000, which is 62% of all funds raised by IEOs and 93% of funds raised by top 15 IEOs. The performance of the top 15 IEOs is unmistakably similar to projects in the ICO era. Startups became public too fast and spent their attention and resources on boosting the token price instead of developing their product.”

Whisky, Tango, Foxtrot happened?

Just like with any good concept when launched, a slew of dubious characters jumped on the ICO bandwagon. Mainly due to the public’s gullibility (who invests in Ponzicoin?!), and quite quickly, it was established that 80% of ICOs were fake and pointless. Perhaps a tenth of a percent of those left will be of some use according to Andreas Antonopoulos, a global Bitcoin expert. 

Now, while there are enough cases proving how evil ICOs is, here’s a new angle: something as complicated as thousands of lines of code and hundreds of gigabytes of data is probably quite nuanced. If you’re going to form an opinion here, it’s worth taking a look at publications by true specialists instead of biased articles by Medium authors who often don’t study the subject in-depth or are just looking for someone to be angry at after a long day. 

If you’re going to listen to anyone, it better be sources such as firms in the lilies of Coinmarketcap or a cybersecurity engineer with a lifelong experience or even a millionaire with a number of successful predictions about this. Perhaps an investment firm that’s been around for decades too would be a good idea. Let’s take a look at the factors that made ICOs and IEOs as credible and effective as IOUs and inspect a few cases of fundraising going right, and wrong (well, mostly wrong).

What’s going on with fundraising? 

We’ll put it out – and by no means, you have to take it on faith – that the crypto scene offers staggering opportunities (potentially). While it’s very young but for a nine-year-old sector, it’s tremendously successful, easily competing with those who have been around for hundreds of years, and outperforming them by a long shot. That ICOs were a simple and beautiful way for people who never imagined such opportunities to have their dreams come true. 

One of the risks are cybercriminals with trillions are being spent on security – and still, many more companies get hacked every day. 

The question, of course, like with the recently hacked Binance, which, surprisingly, people are still using, will be: is the improved security of IEOs enough? Also, are IEOs really as good as they would have you believe? 

Here are the three best (air quotes) IEOs so far, as of 23rd of July 2020: 

1. LEO 

While maintaining the concept behind ICOs, IEOs introduced a much better model with greater security and, apparently, not bad demand, with $1.7 billion gathered last year alone with ROIs as high as 577%. A lions’ share of that (sorry) was gathered by LEO. Will the sad story of ICOs repeat itself once more with only a few seeds out of thousands falling on fertile soil and growing into beautiful trees? 

“The secondary market performance of the top 15 IEOs reveals that most IEOs are still struggling to keep the token price higher than the token sale. Although IEOs are currently the subject of considerable hype, many market participants, including senior executives of the largest cryptocurrency exchanges, admit that IEOs are more of a PR and marketing tool rather than a fundraising option.”

  • Raised: 1 000 000 000.
  • ROI 1.22x USD1.07x BTC1.33x ETH
  • Date: Jun 12, 2019 — Jun 12, 2019
  • Who: Bitfinex. 
  • How did it go? Besides management still looking for missing $850 million in user funds and constantly going to court along with Poloniex and Bittrex over claims of price manipulation, Bitfinex is doing really well. 

2. MATIC 

  • Raised: $5,000,000 
  • ROI 7.88x USD4.86x BTC5.93x ETH
  • Date: Apr 25, 2019.
  • Who: Matic Network, a solution for faster and cheaper transactions for crypto that aims to solve the long-discussed scalability problem through usage of an adapted version of Plasma with PoS based sidechains.
  • How did it go? Remarkably well. 

“Considering this ICO is being launched on Binance Launchpad the short-term potential is excellent, long-term this is also very interesting, eventually working off-chain solutions seem like the cornerstone of the future of Blockchain technology. If they will be able to fulfill their goal they could have tremendous long term potential.”

3. NOMINEX 

IEO: ongoing.

Nominex is a platform that decided to adopt a new model to the IEO scene based on the above-mentioned report by Coinmarketcap:

“Although many projects do raise money, most end up spending the majority of funds raised (up to 85%) on market-making to support the token price. IEOs help popularize projects and grow the token holder community, but their usefulness in terms of raising capital is questionable. IEOs help exchanges attract new traders, increase trading volume and drive additional revenue, but we have strong doubts about the real value for startups.”

The issue of security has to be solved once and for all, which Nominex addresses with providing cybersecurity from the world’s digital security capital, Estonia. The question of value is at the forefront of Nominex’s advancement, which is why it’s introducing an array of features designed to increase its token utility by an order of magnitude.

A new system of token distribution that uses a mix of the best features of IEOs and ICOs without their disadvantages can be examined in depth here

4. Bitwings

  • Raised: halfway through, results unknown
  • ROI mind-blowing (in theory, according to the team)
  • Date: halfway through at the time of writing
  • Who: The famous BitWings promises, fasten your seatbelt, cutting edge leadership, solutions and unique products, and even (drumroll) technological innovation. How much better can it get?
  • How did it go? With seemingly no blockchain experts, an exceedingly high price of $1200 for the phone, and stunning competition from the world’s elitest professionals the chances of BitWings producing a functioning product are slim to none. But the public loves dark horses! What if they pulled it off and your phone actually mined you untold fortunes as well as face-timing your Mom cooking you spaghetti bolognese and keeping track of floods of likes swarming your social networks – AND with a cat sticker on the front? Never say never!

Conclusion

With rapidly dwindling results, so far only Nominex has shown promising prospects. But will Nominex implement enough cutting-edge and adequate mechanisms that will address and fix the current problems in the crowdfunding mechanism? 

Will they ensure the new DCO system will finally finish what the failed ICOs and rapidly weakening IEOs have started? 

Will the concept of crowdfunding finally get the reputation and the results it deserves? You can find out by keeping a tab on Nominex or actively participating here.