What exactly is IDO?
An Initial DEX Offering, also known as an IDO, is a method that projects can use to sell their freshly created crypto tokens to the community by using a decentralized exchange (DEX).
A typical IDO lets investors lock their money into a smart contract before releasing a project's native token.
When a project launches its token at the token generation event, investors get these new tokens in exchange for the locked funds sent to the project.
IDOs give projects an easy and cheap way to distribute their tokens and raise money while also giving investors a higher level of security than they would get from an ICO.
Investors who want to join an IDO need a cryptocurrency wallet like MetaMask. Add more crypto to the wallet to join the IDO and pay transaction fees.
When putting money into any IDO, you should be careful. Always do a lot of research on your own.
This calls for taking a close look at a project's IDO mechanisms, token economics, vesting durations, and founding team, all of which might vary from one platform to the next and from one project to the next.
And most importantly, be sure that any investments you make in initiatives that start on DEXs are ones in which you can invest your faith.
IDOs use a decentralized exchange (DEX) for token sales. A cryptocurrency project gives its tokens to the DEX.
Users send their money through the platform, and the DEX takes care of the final transfer and distribution.
Smart contracts on the blockchain make these things happen automatically.
The rules and steps of an IDO depend on the DEX that is running it, but there are some methods that are usually used:
1. A project is approved to run an IDO on a DEX after it has been checked out. They sell a set number of tokens for a fixed price, and users lock their funds in exchange for these tokens.
During the token generation event (TGE), which will happen in the future, investors will get the tokens.
2. Most of the time, a list of approved investors is known as a "whitelist." It's possible that in order to get on the list, you'll need to do some marketing work or simply give the address of your wallet.
3. Some of the money raised is used to create a liquidity pool for the project's token. The team gets the rest of the money.
After the TGE, investors will be able to trade the token. Most of the time, the liquidity provided is locked for a certain amount of time.
4. During the TGE, the user gets the tokens, and the LP starts trading.
IDOs are the next step after other types of crypto fundraising, such as initial coin offerings (ICOs), security token offerings (STOs), and initial exchange offerings (IEOs).
IDOs are a great choice for new projects and startups that want to launch a token and get access to funds right away. This is because IDOs offer better and more immediate liquidity at every price level.
IDOs are generally seen as a fair way to start a new cryptocurrency project because they don't use pre-mines, giving out coins that favor project founders over community members.
In July 2013, the Mastercoin ICO was the first ICO. In 2014, Ethereum held a token sale to raise money. In the first 12 hours, it raised 3,700 BTC, which was about $2.3 million at the time.
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On April 17, 2019, the first IEO happened on the Index, BitForex, Bit-Z, and Bit-M exchanges. At the same time, Raven Protocol announced in June 2019 that it was making the first IDO that would be listed on Binance DEX.
Most token offerings have become more fair and safe for investors over time. IDOs have some clear benefits that back this up:
1. You don't have to deal with a project directly and put your trust in their smart contracts.
Several successful sales will have been made on a reliable IDO platform. If the smart contracts are the same, you can trust the offering.
2. Immediate liquidity is provided following the sale. IDOs will put some of their money into liquidity pools to make a market easy to trade in after the sale. This helps cut down on slippage and fluctuations.
3. There's no need to sign up. You don't have to give any personal information to participate in the sale.
All you need is a wallet and money. This means that anyone can use it. But not having KYC or AML processes can also be seen as a negative (more on below).
4. IDOs are cheap and easy to get for projects. It's often more accessible and affordable for a small, less-known project to launch its token on a DEX than on an extensive, centralized exchange.
5. IDOs often have measures to stop whales, meaning no single investor can buy a lot of tokens.
IDOs have become a standard way for new projects in the crypto market to raise money because they are easy to use, cheap, and easy to get.
Token sales have grown into their own business. To sum up, taking part in a deal through a decentralized liquidity exchange is usually safer than taking part in a project.
Still, picking the right project is a big part of an IDO's success. In the crypto space, nothing beats good old-fashioned research for this.
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