If you’re familiar with stocks, you’ll know that an IPO is an IPO. That’s when professional investors, independent speculators, and supporters can buy shares of a company. Cryptocurrency launches are a bit different from stock launches.
Crypto projects have ICO, IEO and IDO. Interestingly, these are all essentially different versions of an IPO, and a crypto project can participate in any one of them, any combination of them, or even all of them. But what are they? What do they mean and how are they different?
What is an ICO?
An ICO is an initial coin offering. After an ICO, anyone can buy cryptocurrencies to support a project directly from the organization that hosts the project.
Before an ICO, there is usually no availability or circulation of coins. Alternatively, availability and circulation may have been limited by the organization behind the project. For example, a coin may have already been mined, but was only available to miners. ICOs can also be public (open to anyone) or private (open to select investors, etc.).
ICOs were the initial “crypto IPO” before exchanges became popular. For example, when Bitcoin had its “ICO”, it couldn’t be listed on an exchange because there were no cryptocurrency exchanges. Because ICOs involve buying tokens directly from the project, you have to really trust what you’re investing in because it may not have been verified in any meaningful way.
What is an IEO?
An IEO is an Initial Exchange Offering. Crypto exchanges have a verification process, so crypto projects that make it to exchanges are usually more trustworthy. Also, when you buy from an exchange, you are not giving any payment information to the individual projects you invest in through the exchange.
Because getting verified by an exchange takes time, some projects may have an ICO and then have an IEO later on. However, because crypto projects are easier to discover and more likely to succeed on an exchange, a project may not have its own ICO and instead wait to “go public” on an exchange.
There is another reason why crypto projects are moving towards ICO bypass: they are afraid of regulators. For example, did you know that Coinbase reports to the IRS? Therefore, selling through exchanges takes some pressure off the organizations that host the actual crypto projects.
An IDO is an initial DEX offering, where a “DEX” is a decentralized exchange. A decentralized exchange is just like a regular exchange, but no one is in charge. So instead of the exchange buying coins from sellers and selling coins to buyers, buyers and sellers simply do business with each other.
If an ICO buys from an artist and an exchange buys from an auction house, a decentralized exchange buys from a flea market. It’s easy, fast, and fun, but it puts a lot of the responsibility and pressure back on the buyers, just like with ICOs. In fact, decentralized exchanges are older than the most popular centralized exchanges today.
Just as a project may have an ICO and a subsequent IEO, a listing on a DEX may already have an IEO and an ICO.
That is all. Right?
Thats not all. There are still other ways for cryptocurrencies to get into the hands of people. But, most of it has to do with different types of cryptocurrencies, because they are not all the same.
For example, security tokens work much like shares of a company. The only real difference between security tokens and shares is that security tokens are on a blockchain instead of being registered. But, not being a cryptocurrency and not being a stock means they can avoid responding to just about anyone.
These projects have security token offerings. However, these offers are generally limited to organizations such as investment groups.
ICO vs. IDO vs. IEO
Many crypto projects that have an ICO can be successful. Many crypto projects that are listed on exchanges are unsuccessful. Experiences with decentralized exchanges can be positive or negative. No matter how you buy crypto, just make sure you do your research first.