What is ICO, IEO, IDO? How are these 3 different?
- 1. What is an ICO?
- 1.1 How does ICO work?
- 1.2 Reasons to choose ICO
- 1.3 Advantages of ICO
- 1.4 Cons
- 2. What is an IEO?
- 2.1 How does the IEO work?
- 2.2 Why do few people choose IEO?
- 2.3 Advantages of IEO
- 2.4 Disadvantages of IEO
- 3. What is an IDO?
- 3.1 How does IDO work?
- 3.2 Reasons why IDO is "hot"
- 3.3 Joining method
- 3.4 Advantages of IDO
- 3.5 Disadvantages of IDO
- 4. What is the difference between 3 forms ICO, IEO, IDO?
What is ICO, IEO, IDO? How do distinguish these 3 forms of capital call? BHO Network will outline the primary differences between ICO, IEO, and IDO in the article below, to help you better understand the 3 investment forms that are very interesting in the cryptocurrency market today. Follow along!
1. What is an ICO?
ICO stands for Initial Coin Offering, a method of raising capital using cryptocurrencies. This method is popular for projects without fully developed Blockchain platforms, products and services. Payments are usually made in Bitcoin or Ethereum.
Investors in ICOs cause the ICO to increase in value. In other words, they expect to receive a high ROI as the first investors in that crypto project.
The popular form of ICO fundraising with undeveloped projects
1.1 How does ICO work?
ICOs are often compared to IPOs (Initial Public Offering). But this comparison is misleading. IPOs usually apply to established companies with the sale of a part of the company's shares as a way to raise capital.
In contrast, ICOs are mainly used to raise capital for a company's project. Investors purchasing Tokens will not purchase any ownership rights. ICO is different from IPO in that a project can raise money from the community even though the product has not been fully developed, sometimes it is just an idea presented in whitepaper.
ICOs can raise capital from the community
1.2 Reasons to choose ICO
Investors will profit if the value of the Token is appreciated compared to the original price (ICO) of that Token. When you decide to make a profit by this method, you need to buy at the community price when the Token is opened for sale at the ICO, then wait for the product to develop and sell.
Many investors choose ICO
1.3 Advantages of ICO
- It is relatively easier to create and set up an ICO project than STOs and IEOs. Companies with ICO projects must issue a whitepaper, a website of related products, and a team that will execute the project's techniques.
- The cost of launching ICO is relatively low, so it is suitable for new investors in the market with a small investment.
- The government has less interference in this form of ICO.
- More liquidity in a short time.
- Investors have complete control over them.
- One can raise funds through bounty programs, private and public sales through Airdrops.
Advantages of ICOs are relatively low launch costs
- One of the main disadvantages of this system is the relatively poor security features. The system is easily exploited and scammed by bad guys.
- For long-term investments, ICOs are not a sensible option.
2. What is an IEO?
IEO full name is Initial Exchange Offering, this is a fundraising event managed by an exchange. Contrary to ICO, IEO fundraising will be conducted on a well-known exchange fundraising platform, such as Binance Launchpad,... Here, users can buy Tokens with coins directly from their exchange wallet.
Funded IEO on the platform of the famous exchange
2.1 How does the IEO work?
For users, IEOs are easy to join because they don't need to manage on-chain transactions with different wallets on blockchains. Users only need to have an account on the exchange and an amount in their account to participate in the IEO through the website interface.
In addition, exchanges are also strengthening their reputation by IEO quality projects on their platforms, which also brings a higher level of trust to the project.
For projects looking to raise funds, IEOs offer the promise of an immediate audience of their products which can reduce the cost of setting up an external marketing channel.
It is easy for users to participate in IEO when they have an account on the exchange
2.2 Why do few people choose IEO?
Because the project must calculate about % of the profit divided back to that centralized exchange, the Token sale price usually will not attract investors to buy much.
Read more: What is Proof of Stake (POS)? Things you need to know
2.3 Advantages of IEO
- All exchanges are KYC/AML, which is highly secure for investors.
- Investors directly participate in the exchange, unlike ICOs and STOs.
- Due to the level of regulation, the trusted platform of the exchanges should be able to protect investors from fraudulent activities.
- Investors do not transfer their funds into a smart contract like an ICO, but buy directly into their account.
IEO is very secure
2.4 Disadvantages of IEO
- Funding costs are very high in IEO and the system is difficult to set up.
- Liquidity is low compared to the other 2 groups.
- Investors have very little control over the operations of the exchange.
3. What is an IDO?
IDO is the abbreviation of Initial DEX Offering, which means the initial issuance of Tokens on a decentralized exchange initiative the Raven Protocol project team first proposed IDO.
3.1 How does IDO work?
IDO can be organized by the Token issuer independently, independent of any other unit, organization or individual. IDO can also be performed directly from the project's development team on the Blockchain platform through transactions from the project's product, the issuer.
IDO is not dependent on other individuals or organizations
3.2 Reasons why IDO is "hot"
The decentralized protocol is increasingly popular and trusted by investors. With the ability to not need to use an intermediary server. Blocks in Blockchain Technology work independently, connect and operate based on transparency and consensus of nodes in the same network.
IDO protocol is more and more popular with investors
Read more: What is SegWit? All the thing you need to know about SegWit
3.3 Joining method
You can choose one of the following methods: Lock Token, Staking Token, Hold Token.
3.4 Advantages of IDO
- No need for anyone's permission
- Instant liquidity
- Can always make transactions
- Easy and fair crowdfunding for everyone
3.5 Disadvantages of IDO
- Lack of control mechanism
- Instant price fluctuations when conducting large volume trades
- No authentic information about investors
4. What is the difference between 3 forms ICO, IEO, IDO?
- These 3 forms of capital calling can help project owners raise large amounts of capital for project development. At the same time help investors can buy reasonable discount prices.
- The most significant difference between these three methods of raising capital is the location of the sale. ICO is open for sale right on the website of the project owner, IEO is available for purchase on centralized exchanges and IDO is open for sale on decentralized exchanges.
The similarity of these 3 forms is to raise a large amount of capital
- What is Mining Pool? How Mining Pool Works?
- What is Liquidity Pool? All you need to know about Liquidity
The above article has summarised the advantages and disadvantages of 3 forms of ICO, IEO, IDO. Hopefully, you have an overview of the risks and potential of this market. Please follow the article of BHO Network to update this helpful knowledge.
Published on September 05, 2021
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