Initial Exchange Offerings (IEOs) are a means by which start-up projects raise needed capital through token sale on an established crypto exchange platform. It differs from the Initial Coin Offering (ICO) model where projects raised funds using smart contracts for digital asset sale.
For an IEO to work, the project seeking to tap into the crypto market for capital must be listed on the cryptocurrency exchange where the initial offering will take place. This way young crypto projects reduce their marketing efforts and need not worry about crowdsale security.
IEOs provide serious projects with a legitimate way to raise capital in a cryptocurrency space that is increasingly characterised by fraudulent schemes. The authenticity of an already existing exchange platform also serves as a major source of incentive for investors seeking investment opportunities.
As a rule for the sale of securities, the online trading platform must be guided under the Federal securities law and must take responsibility for requirements such as Anti-Money Laundering and Know Your Customer information. Some of the earliest crypto exchange platforms to initiate IEOs include the Binance Launchpad, Bittrex International, and the Bitmax Launchpad.
As helpful as popular exchanges can be for IEOs, the higher cost involved is a major deterrent for crypto start-up project teams.