The global blockchain market is in the middle of the transformation from the dying ICO (Initial Coin Offering) model to new IEO (Initial Exchange Offering) model, that is, from issuing and selling tokens directly to using the exchanges as platforms that guarantee immediate listing.
The key platforms set up the competition pace and determine the future of the IEO trend. Their metrics and their approaches to due diligence and selection criteria do matter for the listed on main platforms startup projects in terms of gaining immediate marketing attention and for the users as well.
Moreover, the exchanges act as counterparties between startups and investors with all the consequences that stem from that. For example, they might become one more point of failure, due to the hacker or regulatory attack. Sophisticated investor remembers the golden crypto rule: not your keys – not your coins. In the IEO model, the centralized exchanges are in full control of their users’ private keys.
1 – Binance
Although the first IEOs were conducted back in 2017, and the Binance co-founder and chief executive officer Zhao Changpeng admitted during the interview to Bloomberg, that his exchange was not the first “who coined the term IEO”, the world largest exchange by trading volume is regarded as the first big mover and trendsetter. Zhao Changpeng celebrated this role and said that the company does not see other platforms as competitors:
“Other exchanges copying us is a strong validation of our model and the highest form of compliment. More importantly, we have limited bandwidth and are only able to find/help a small number of all good projects out there. The more we can help our entrepreneurs together with other exchanges, the better this industry will be. Again, when the industry gets bigger, everyone benefits. For this reason, we encourage others to copy our model. But the key here is they need to help good projects grow, not facilitate scams”
With the first mover advantage, the first projects became a true howling success and celebrated the renewed interest of investors, that gave up hopes for ICOs. BitTorrent reached the cap in less than 15 minutes, Fetch.AI set up a new record – the tokens were sold out in 22 seconds. The third project on the Binance Launchpad platform, Celer Network, also became the last conducted that way – the new projects will be sold as a lottery and the chances for winning are in direct correlation with the stake in Binance token for the last 20 days. The first three sales left a lot of hungry investors, and the new lottery model inspired investors to search for alternatives.
2 – Huobi
Huobi was the first major exchange who rushed to copy the Binance success. The Binance’s Launchpad rival, the coin launch platform Huobi Prime was aired on March 26 with conducting sales for the TOP Network Project. As the company blog states:
“1.5 billion TOP tokens were sold in full, successful orders take one second on average to proceed, transactions take 7 seconds, 5 seconds and 7 seconds respectively in each round to complete, about 130 thousand people worldwide have participated and 3764 people have purchased”
Indeed, the second mover advantage brought the glory and the new record. But this glory came with its downsides and the platform was accused of insider trading, scam, fraud etc. As a response for allegations, the exchange changed the rules. The next IEO, scheduled for April 16, is being conducted with the HT holding requirement: now investors need “an average monthly holding of 500 or more Huobi Tokens”.
Watch how the IEO project raised 4 million dollars in just 10 minutes on Huobi Global platform in our exclusive video stream:
3 – OKEx
Being one of the leading exchanges by trade volume, OKEx did not want to fall behind. In March the company announced its own token sale platform – OK Jumpsmart. Looking at the criticism falling to the heads of competitors, the company decided to set up the rules in advance.
“To ensure the token sale is a fair and open process”, the company introduced “a subscription and allotment approach”.
During the 30 minutes window, the users can subscribe for the sale. Later they are rated using the “allotment coefficient”, that is based on the amount of OKB holding.
The start was more than a jump! The Blockcloud tokens “ sold out in 1 second”, according to the company announcement from the April 10. This streamlining of token sales left again a lot of investors disappointed, and they did not fall short in comments, calling it simply a joke. In response the company invited the community to participate in rules creation on twitter:
“The 2nd round of OK Jumpstart is starting soon! We understand that our rules are far from perfect and that’s why we need your feedback. Please help us improve our token sale by commenting on your suggestions below. We’ll pick 5 best comments and prize 10 USDT each on Apr 18”
4 – Bittrex
The long-established exchange Bittrex rushed into the race with unprecedented enthusiasm, announcing its first IEO in February. The company planned to bomb the market with the project from the gaming industry, hoping to get immediate traction.
All the rush lead to the unprecedented event: minutes before the token sales start, the company has canceled the IEO offering of the RAID token, “as a result of significant changes in the business status of RAID”, mentioned the company in the official statement. In fact, the exchange was one step away from backing up the company that could have been the next big industry fraud, shading the bright future of the newly born trend.
The fumble with the first project did not stop the company from the second attempt. And rightly so – the Bittrex IEO for VeriBlock sold out in 10.4 seconds on April 2, according to the company tweet. The same day the market experienced a massive rally in cryptocurrency prices, that significantly contributed to market optimism. Yet, the rocket speed token sales made again the army of left out investors.
5 – Kucoin
Another well-known exchange Kucoin joined the race announcing brand new platform Spotlight in March. On April 3, the first IEO for MultiVac project sold out in 7 seconds and attracted users from 59 countries.
At first, the token sale rules were crystal clear: the only requirement was to have a verified account and the principle was “first-come, first-served”. Meeting with criticism around limiting regular investors from the participation, now the exchange plans to use the lottery model in the future.
The lightning speed of sales is not the only concern of investors. Since the exchange native coins are used as an instrument in the IEO model, the value of the target token is influenced by the value of the exchange token. For example, the Kucoin exchange token (KCS) dumped hard after the MultiVac sales.
6 – Coineal
Established in 2018 Coineal Launchpad has been winning its niche too. On April 8 a Vietnam-based blockchain project REDFOX Labs announced that they deem Coineal as an ideal platform for its token launch due to the strong regional footprint in Asia and a record of successful IEOs.
According to the exchange webpage, decentralized gaming platform GTEX, blockchain solution token GOB, a content exchange platform TOOL, public chain IPW Token, ITО solution Levolution (LEVL), legal ecosystem ZeroBank and Kizuna Global token has finished IEOs or its sessions successfully. Notably, Kizuna Global project issued a hybrid token with functions of both security and utility token, that seriously broaden the IEO business case.
There are another three sales in progress and one among scheduled. Additionally, on April 16, the food protocol HINT chain, number one Korean DApp, started its pre-sale on the platform.
For some blockchain experts, the trend of Initial Exchange Offerings marks the end of the long-drawn-out cryptowinter. The IEO mechanism is expected to bring more security to the fundraising application of blockchain technology. The market will observe an immediate listing of the newly created tokens, that has long been one of the main problems for startups aiming to raise capital. The number of fraudulent projects is also expected to decrease due to the interest of main exchanges to conduct proper due diligence.
On the other hand, centralized exchanges have a long history of being victims of hacker attacks. Moreover, the token sales are becoming more sensitive to regulatory actions, as the exchanges are the direct subjects to regulators. This can impact not only tokens in questions but legit and promising projects. Yet, the trend is upcoming. In either case, the following months will determine, whether the IEOs will withstand additional pressure points and become the new industry standard, or not.