What Exactly Is an IDO (Initial DEX Offering)?
A decentralized and permissionless crowdfunding mechanism known as an initial DEX offerings, or IDO, is transforming the cryptocurrency market. An IDO signifies that a project is launching a coin or token through a decentralized liquidity exchange. This is a type of cryptocurrency asset exchange that allows traders to trade tokens such as crypto currencies and stablecoins using liquidity pools. A liquidity pair, for example, is USDT/ETH.
Based on where they are in the fundraising process, the projects are classified into five categories.
Crowdloan for IDO IEO private sale and public sale.
IDOs had raised the most money for initiatives in the previous several months as of August 2021, potentially showing their importance as a fundraising technique.
Is There a Better Crypto Crowdfunding Model? IDO – Is There a Better Crypto Crowdfunding Model?
Because of their mechanics, which enable better and quick liquidity at all market levels, IDOs are a perfect alternative for new enterprises and entrepreneurs wishing to develop a token and access immediate funding.
The first initial coin offering was the Mastercoin ICO, which took place in July 2013. Ethereum had a token sale in 2014 and raised 3,700 BTC in the first 12 hours, roughly equivalent to $2.3 million at the time.
The first IEO took place on April 17, 2019, and was launched on the Idax, BitForex, Bit-Z, and Bit-M exchanges. In June 2019, Raven Protocol announced that it would introduce the first-ever IDO, which would be listed on Binance DEX.
Universal Market Access Protocol is abbreviated as IDO.
Despite initial IDO issues, the Universal Market Access (UMA) protocol is another successful IDO project launch. In April, it started selling tokens on the decentralized exchange Uniswap, with a starting price of $0.26 per token. In order to achieve such pricing, UMA had to deposit $535,000 in Ethereum into a newly created liquidity pool.
It eventually ended at somewhat more than $1, prompting several buyers to complain that they had spent more than those who had bought before the auction. On the other side, this highlights the issue with Uniswap rather than UMA.
Despite the loss, UMA today has a market capitalization of over $1.5 billion and a token price of over $25.
What Are IDOs and What Do They Do?
When ICOs and token sales became popular in 2017, several organizations were hoping to solve problems using the blockchain. By the end of the year, they had raised an estimated $4.9 billion. While some have succeeded, many more have failed, it’s tough to dispute that initial coin offerings (ICOs) have major flaws: they’re centralized and fragile. ICOs have a number of issues, including third-party discrimination, vulnerability to theft and human mistake, and a lack of privacy.
Because of the decentralized nature of IDOs, this new fundraising mechanism promises to alleviate the issues with ICOs while simultaneously broadening the scope of the crypto market. By crowdfunding using IDOs, entrepreneurs can construct a blockchain product that is immune to malicious third-party influencers, as well as hackers and human error. Token buyers and holders have their monies instantly secured in their wallets and private keys.
What Are the Advantages of Having an IDO?
An initial DEX offering has a number of significant advantages as compared to initial exchange offerings (IEO) and initial coin offerings (ICO) (ICO).
Let’s take a closer look at a few of them.
Rather than waiting for a project to be approved by an exchange, outspoken community members evaluate projects and tokens, allowing for both local and large-scale collaborations.
Where do IDOs see themselves in the future?
IDOs are the newest way for crypto projects to distribute their tokens to the general public. It is necessary to improve ICOs, IEOs, and STOs. The IDO at UMA is proof of this. A decentralized exchange, on the other hand, implies that IDOs are not used as a control mechanism. To prevent token price volatility, it’s necessary to have some form of regulation in place, such as KYC requirements or ICO, IEO, and STO limits.
Another development that should be prioritized is scalability. Only DeFi efforts have used IDOs to gather cash so far; however, this does not rule out the potential of other crypto projects employing this method of funding in the future.
Simply because using DeFi platforms has a learning curve that may be prohibitive for the ordinary crypto trader. Increased DeFi awareness and education would be another enhancement as the DeFi sector grows.
Final Thoughts
The goal of cryptocurrency is to decentralize money and hence open up new investment opportunities. IDOs are a good start, but who knows if a new project is the next best thing or just another rug pull in the making? As a result, estimating the value of a coin is difficult.
Despite the rising popularity of Initial DEX Offerings, centralized exchanges such as Binance and Coinbase continue to dominate the market. Investors aren’t asking when the next IDO IPO will take place. They’re waiting to see when Coinbase will list a specific coin. This will, of course, change as more individuals become aware of decentralized exchanges (DEXs) and DeFi in general.
IDOs may have a bright future, but more education is needed. Customers of DeFi make up a modest percentage of the overall crypto market. This is a small niche right now, but it’s growing quickly. As of August 2021, IDOs have accounted for the majority of project financing in the previous three months.
Also see: https://econarticle.com/how-much-does-it-cost-to-develop-an-nft-marketplace-comprehensive-guide/
