What is IDO?
IDO (Initial DEX Offering) is a form of token issuance on a decentralized exchange (DEX). This is a way to raise funds for blockchain projects by issuing tokens directly to the public.
The development of IDO began in June 2019, and Binance DEX was the first IDO project organization platform. IDO developed after ICO, STO, IEO and other fund raising models. Because it was developed after the above model, IDO improved its limitations and promoted the positive aspects, becoming a distinctive model.
IDO's role
IDO allows investors to purchase and hold tokens to participate in potential commercial activities. After the initial sale, the value of the token is likely to increase significantly, leading to huge returns and profits for investors and traders.
For project parties
IDO is used to raise funds from the investor community to support the development of projects. If a well-known DEX is chosen, the project will receive widespread publicity among exchange users. Thereby establishing connections within the ecosystem of the DEX and possibly cooperating with related IDO projects.
For decentralized exchanges (DEX)
Increase traffic and trading volume on exchanges.
Network with other possible businesses.
Enhance the status and visibility of the exchange.
What is the difference between IDO, ICO and IEO?
What these three forms have in common is that they help project owners raise large amounts of funds for project development, while also helping investors buy at a lower discount and have the opportunity to obtain multiple returns.
The biggest difference between these three forms of financing is where the sale is made. ICOs are sold on the project owner’s website, IEOs are sold on centralized exchanges, and IDOs are sold on decentralized exchanges.
Advantages and Disadvantages of IDO
Advantages of IDO include
Optimize project costs
Projects conducting IEOs and ICOs will need to pay exchange fees and wait for a certain period of time before they can be traded on centralized exchanges. The IDO project can display transactions on decentralized exchanges without paying any fees or asking for permission from others.
Create more opportunities
Community members can review projects and tokens directly without waiting for approval from centralized exchanges. This helps small projects work with multiple partners and be successful.
Simplify the investor and user experience
IDO provides fast and highly liquid trading. Operations and user experience become even more streamlined through exchange platform integration and support for multiple private wallets.
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Disadvantages of IDO include
The chance of buying IDO is very low
Many people started to participate in investment activities, buying cryptocurrencies because the profits they bring are very high. However, the competition rate for this format is quite high as IDO places are limited.
Whitelist mechanism lacks transparency and security
Projects in the form of IDO all use the whitelist mechanism. You must complete the necessary tasks to be whitelisted. After that, people on the whitelist will be randomly selected to buy IDO.
To increase their chances of being whitelisted, many people use tools and bots to cheat on whitelisting. As a result, investors’ chances of being whitelisted become unfair.
Additionally, there have been cases where customers signed up for the whitelist multiple times but only won once, leaving them quite dissatisfied.
hidden risks
Now, you need to own a certain amount of IDO platform tokens to participate in IDO activities. Therefore, if the whitelist "falls behind" and the price of the token on the platform drops, you will have to accept the possibility of "unilateral loss, bilateral loss".
However, if you recently won an IDO and the price of the underlying token increased again, that's "compound interest," meaning high risk comes with huge rewards.
Some successful projects started with IDO include
First, many people are skeptical about IDO because it has never been implemented before. However, after the success of Raven Protocol, people’s perception of it changed.
Raven Protocol is a decentralized protocol designed to provide cost-effective and speedy solutions by leveraging blockchain to transform the AI and machine learning industry, currently dominated by large enterprises. Backed by the RAVEN token, contributors will be rewarded for sharing their computing resources, while utility tokens will be used for AI training.
In addition to the Raven Protocol being a successful project, the Universal Market Access (UMA) Protocol is also a successful project. Through UMA, DeFi developers can build synthetic assets on Ethereum. Last April, the protocol opened its token sale via the Uniswap exchange, starting at $0.26 per token, with its price rising all the way up to $2. The current price of UMA token is $12.85.
These are some examples of projects started through IDO and found success. If you have anything else that needs to be translated, please feel free to let me know.
Why do we need IDO?
When ICOs and token sales became popular in 2017, raising an estimated $4.9 billion by the end of the year, many projects attempted to leverage blockchain to solve problems. While many projects have been successful, many more have failed due to their centralized nature.
IDO is the latest method that has its own advantages and will help crypto projects launch their tokens to the public. However, given some obvious shortcomings, IDO needs to be improved and enhanced to ensure the success of the project and promote the development of the platform.
IDO needs to make the following improvements in the future
First, what needs to be emphasized is scalability. Currently, only decentralized finance (DeFi) projects raise funds through IDOs. However, this does not mean that other projects in the crypto space cannot use this form of crowdfunding. Of course, in order for these projects to succeed, they need some interest from existing DeFi users to invest in the project’s tokens.
Additionally, another factor to consider is that despite the growing interest in IDOs, centralized exchanges like Binance or Coinbase still control the market. Investors may be more concerned about when Coinbase will list a certain token than when the next IDO whitelist will be conducted. Of course, this is likely to change as awareness of decentralized exchanges (DEX) increases.
The future of IDO may be bright, but more awareness is needed. Furthermore, DeFi users only account for a small portion of the market. So while IDOs are unlikely to replace ICOs or IEOs in the short term, they introduce a new and gradually improving crowdfunding model.
How to spot potential IDO projects
Token sale process
The IDO project will have its own token system and will need to clearly and transparently disclose token transaction information and have a token sales address. Tokens are distributed according to certain funding requirements at each stage according to the project’s roadmap.
Project popularity in the community
Reputable IDO projects usually receive support and appreciation from the community. There are many forums and websites that gather a large number of experienced IDO investors. Investors will utilize these reputable forums and websites to monitor IDO progress, discuss cryptocurrencies, evaluate and score IDO projects, etc.
IDO project development team
The success of an IDO project largely depends on the team implementing strategies, marketing plans, crisis management, development roadmaps, etc. A reputable IDO project will provide investors with complete information about the IDO project team and advisory board to assess the credibility of the project.
Information in the white paper
A white paper or prospectus is a detailed document that provides investors with information about a company's mission, technology, strategies, and technologies so that they can have a better understanding of the project and then make informed decisions. The prospectus contains sufficient IDO strategy, token ownership incentives and legal issues, competition, market size; working principles and use cases of the token; development and release schedule; consultants and partners; development team, project promotion strategy, etc. .
How to buy IDO on Polkastarter
To participate in purchasing IDO on Polkastarter, the condition is that you need to have at least 3000 POLS (POLS tokens are the internal tokens of the Polkastarter network) in your personal wallet (e.g. Metamask).
Methods to select projects with investment potential in 2023
As with any investment, high returns come with risks. In order to invest safely, you need to understand the market and how IDOs work.
We'll help you learn the secrets of how to safely participate in IDOs.
Use the correct link to register IDO. Scammers will take advantage of IDO's momentary excitement to create fake registration pages. Therefore, you need to use the correct registration page to avoid losing money inappropriately.
Use the issuance platform on a trusted decentralized exchange (DEX). In fact, there are many reliable DEXs that can participate in IDO. Improve your chances of successfully acquiring your tokens by using a centralized and trustworthy exchange.
Research the project you want to invest in. Is this project being built by a reputable, reliable team? How will the funds raised be used? How is the profit amount calculated? By having a clear understanding of the above issues, you can avoid unfortunate risks.
Frequently asked questions about IDO
Who can make IDO sales?
IDO is implemented entirely independently by the token issuer. Therefore, anyone can conduct an IDO as long as there is a plan to conduct a new token sale.
Does IDO require KYC (Know Your Customer) verification?
Whether KYC verification is required depends on the project team and project issuer.
How is the price of IDO determined?
The price is determined by the project development team or the token issuer. You must agree to these prices regardless of whether they reflect the value of the tokens.
Who will approve the IDO?
Since anyone can implement IDO, the project should technically be governed by the issuer's location. However, IDO relies entirely on the token issuers themselves and provides no other guarantees. Taking Binance DEX as an example,
Binance Chain’s validators only vote on project listings, based solely on suggestions and discussions in the community forum.