Initial Exchange Offering

A type of crowdfunding where crypto start-ups generate capital by listing through an exchange.

A type of crowdfunding where crypto start-ups generate capital by listing through an exchange.

What Is an Initial Exchange Offering (IEO)?

Initial exchange offerings are fundraising events where crypto start-ups raise money through a trading platform. This is in contrast to an initial coin offering, where the business itself will attempt to generate interest in its project on its own website.
China banned ICOs at the end of 2017 and left the crypto world scrambling to find other solutions to fund new businesses. IEOs take place on a crypto exchange on behalf of the company that is launching new tokens. Start-ups are charged a fee, as well as a certain proportion of tokens sold, in order to fundraise on the exchange. The tokens are then listed on the exchange upon completion of the IEO — helping to raise the company’s profile in the eyes of investors. Unlike ICOs, where contributions are sent to smart contracts, participants send contributions through the platform that hosts the IEO.

IEOs have risen in popularity among key cryptocurrency exchanges. Binance Launchpad was one of the first few IEO platforms to be launched in the industry, with many rival exchanges quickly following suit. The biggest advantage of these offerings is increased transparency and trust. As the token sale is conducted by a trusted cryptocurrency exchange, the chances of fraudulent activity and scams are less likely than through ICOs — with reputable platforms performing their own due diligence into a project before offering it to users.

Token issuers are not tasked with managing the crowdsale security under an IEO, and they can also benefit from the exchange’s extensive client base to solicit greater investor interest. Know Your Customer and Anti Money Laundering processes are also conducted by the exchange rather than by the token issuer — and they’ll often get assistance when it comes to marketing their businesses. 

Although deemed more credible than ICOs, IEOs can involve high costs for start-ups in return for increased safety and visibility.