ICO, IEO, and more recently, IDO, cryptocurrency projects raise funds through numerous public crowdfunding exchanges. This article will explain to you the meaning of an IDO, its difference from IEO as well as how to participate in the newly created offering.
What is An IDO?
Also known as Initial DEX Offering, an IDO is a decentralized way of raising funds for Blockchain projects by selling its token directly to prospective traders.
This mechanism is created and still works like an Initial Exchange Offering (IEO). However, an IDO is a decentralized exchange while an IEO is centralized. That is, no one gives permission or holds custody of IDO trading. IDOs are very similar to IEO, although while the former doesn’t charge exchange fees for listing, the latter boasts of an enormous trading volume. There are also many other benefits of an IDO over its counterparts (which we’ll talk about later in the article).
As a decentralized project, IDOs are becoming popular amongst decentralized finance (DeFi) and NFTs. The offering is also in support of small projects and small-time investors, raising smaller amounts compared to IEOs and ICOs
Participating in an IDO
Getting allowed onto an IDO can be done in two ways; by buying launchpad tokens or gaining a spot through lotteries.
Getting Whitelisted on Blockchains:
Well-known blockchains like Ethereum, Polkadot, Solana and Cardano ensure safelisting.
To get allowed for a spot on the IDO offering, traders have to hold a minimum amount of the native token. The larger the holdings veer for whitelisting, the more the native token appreciates. Nodes are only allowed to win once, while some launch pads offer spots for non-token holders. These non-token holders have to stake their coins to enter the whitelisting spots.
IDO whitelisting also includes a Know Your Customer (KYC) check and a Web 3.0 wallet connection. Such a wallet could be Metamask or any other choice.
Safelisting in these launchpads is very important because they ensure the credibility of transactions through vetting, i.e. they make projects and transactions undergo a lot of checks before being given a chance for safelisting.
They also give the new projects the liquidity support they need for trading. They entice liquidity providers with a reward of native tokens.
Starting Your IDO With Polka Starter
Polka Starter is one of the best IDO exchange platforms out there. It has a unique set of functionalities which include fixed swap tools and fixed token swap prices to cap each person’s participation in IDO trading. Its features enable more people to adopt the new projects, which in turn facilitates quick project community creations.
Earning A Safelist Slot Through Polka Starter Token: POLS
You also boost your chance of earning a safelist slot by holding a certain amount of POLS tokens. For every 250 POLS held, traders have the opportunity to win an IDO lottery. Similarly, with more, you have a greater chance of winning an IDO slot. Possessing 1000 POLS gives traders a 1.1 boost. A whitelisted winner cannot participate in the IDO for another seven days.
On the flip side, a POLS token holder can.
POLS boosts its liquidity by locking pairs with Ethereum, known as ETH-POLS. The token holders can also stake their tokens for NFTs through the NFT drop. This feature gives them unique access to liquidity pools.
Numerous individuals and bodies are announcing crypto projects’ launch and their IDO exchange rate on Twitter:
Pros of Using an IDO
Oversubscription of IDO: Due to its set of functionalities, prospective traders often oversubscribe IDO projects. Oversubscription can help create a community of loyalists. For example, a Defi insurance platform, Tidal Finance, launched its IDO on Polka Starter in March. They received a whopping 500 potential buyers for every slot.
Fewer Fees: Unlike ICOs and IEOs, IDOs don’t attract high fees on crypto exchanges. However, cryptocurrency exchanges may charge exorbitant fees to safelist projects on their blockchains.
Liquidity: ICOs provide instant liquidity as the tokens of completed projects start trading immediately in the DEX, a feature that ICOs and IEOs do not have as they have to wait for centralized exchanges to list tokens on their network.
Fairness in Mining: Small investors are given little to no chance of early trading on ICOs and IEOs. It is because tokens are already mined and sold before launching, which appreciates how successful the launching is. However, IDOs limit the allocation of tokens to prevent large-scale investors from snuffing out small ones.
Easier Project Launch: IDOs also facilitate easier project launching. As its credibility is already confirmed, exchanges don’t need to vet the tokens of the new projects before trading can begin, which allows the not-so-big tokens to gather funds from the public. Building an active community will also help with on-chain traceability and public smart contracts for constant reviews of projects.
Cons of Using An IDO:
It requires more work from investors: For an IDO to function properly, it should have a reliable IDO platform that isn’t prone to scams. This platform would have to conduct the necessary vetting and the KYC check. And so, it is not always the best security option if not vetted by a reputable launchpad. So, as an investor, it is not advisable to invest in a project without confirming its credibility and vulnerabilities to security issues.
Oversubscription: Though it could be a massive plus to the new projects hoping to build a large community, it can also be a deterrent. IDOs were created for more minor token sales; this feature can lead to oversubscription as large-scale projects want to use its launching platforms.
In turn, limiting participants by drafting a whitelist regulates oversubscriptions. However, it does also freeze out many potential enthusiasts in a particular project.