So what is an IEO?
Simply put, an initial exchange offering (IEO) in crypto layman terms is a token sale organized and conducted on an exchange.
When a crypto project is seeking for means to raise funds, one possibility is to conduct a token sale – whereby newly minted tokens are issued and sold to interested parties and investors.
In the case of an IEO, an exchange like Binance would take over the token sale process and investors would invest into the token sale directly via the exchange platform.
This would be akin to the traditional equities market where corporations looking to go public would work with large financial institutions as underwriters.
This differs from an initial coin offering (ICO) where a token sale is usually conducted directly by the projects themselves, rather than having an exchange do it for them.
Why Have Initial Exchange Offerings (IEO) Been So Successful?
Most IEO’s on popular exchanges have been an incredible success for crypto investors.
For example, BitTorrent (BTT) as mentioned above was a 10x return for investors.
Fetch.AI (FET) was an almost 4x increase upon listing on Binance after its IEO, and is still up about 2.5x from its ICO price today.
Matic Network (MATIC) also enjoyed 10x returns shortly after it was listed on Binance post-IEO.
These are just a few select examples but the point is, most IEO’s have generated very lucrative returns for IEO investors.
We can partially attribute this success to a few key improvements that initial exchange offerings (IEO) have over initial coin offerings (ICO):
The IEOs are Vetted by Exchanges
One of the biggest advantages of IEO’s over ICO’s is that the projects have already been vetted and analyzed by the exchanges themselves.
When an exchange agrees to conduct an IEO, there’s a lot of branding risk for the exchange because listing a scam/low quality project can do serious harm to the trust that users have on the exchange.
Thus, you can ensure any credible exchanges will maintain strict listing standards and perform due diligence in making sure there aren’t any scam or low quality projects that go through its token listing platform.
Back in the ICO phase, trust and quality were a huge issue for crypto investors. There were simply too many projects that conducted an ICO to exit scam or just didn’t execute as well as they had marketed it.
IEO’s have essentially converted this issue into a benefit, because credible exchanges have basically vetted and handpicked some of the best projects for you to invest in.
For exchanges, the quality of the project is extremely important to them.
We saw this in the case of Bittrex when they cancelled the IEO of Raid after Raid had notified them of a partnership cancellation with OP.GG just before the launch of the IEO.
Bittrex felt like the partnership with OP.GG was too important for the project and without it, the quality of the project is no longer on par with their listing standards.
It’s kinda like having Binance tell you, “Hey, we’ve looked at a hundred different projects – here’s a couple we think that really stands out from the rest. Take your pick.”
Tokens from an IEO are more Liquid
Another major advantage of conducting an IEO over an ICO is that tokens tend to be more liquid because the projects get 100% listed on the exchange they conducted an IEO on.
From what I’ve seen, many crypto investors tend to underestimate the impacts of a liquid token – this is something you should absolutely price in when gauging the risk of an ICO or an IEO.
Take for example, Sparkster (SPRK), a project that conducted an ICO back in mid 2018.
Guess what? They didn’t list on an exchange until one year later on June 14, 2019 – and their token price dropped 7.5x from its ICO price the moment it got listed.
It didn’t even get any better afterwards! In fact, it’s continued falling since and is currently 15x below its original 15c ICO price.