The maturation of the cryptocurrency industry as a whole has led to the creation of the initial DEX offering (IDO), one of many creative fundraising approaches. But the first fundraising approach in crypto was the initial coin offering (ICO), which in 2017 generated a lot of ill will.
What is an initial DEX offering?
IDO is a fundraising approach that pools investment capital from retail investors
- DEXs are decentralized liquidity exchanges
- They work with a DEX, as opposed to a centralized exchange
- There are limitations to this approach such as less scalable and a steep learning curve
How do crypto IDOs work?
DEXs work because they can provide immediate token liquidity.
- Most projects provide liquidity to the DEX by allocating a cut of the funds.
- IDOs can mint tokens instantly, allowing investors to cash in on their investments much quicker compared to ICOs.
Launch the token to start raising funds immediately
The project team generates a token pool
- Token pool is where investors pay for their tokens in advance
- Investors are to receive their tokens once the TGE takes place, shortly after the IDO
- In this manner, instead of setting a fixed price, the issuer can hold an auction, thereby achieving a price driven by supply and demand
How to launch an IDO
Plan the token offering to be released over a DEX by creating a strategy that makes sense
- The strategy should include the challenge the project aims to resolve, fund allocation, which blockchain the project will run on, the general marketing strategy and how to spearhead the project post-IDO
Differences and similarities between an ICO and an IDO
Unlike ICOs, IDOs do not require the token issuers to pay fees to any intermediary.
- IDOs are also viewed as fairer in giving token access for investors because IDO tokens are instantly tradable, unlike ICOs which require a waiting period for liquidity and trading.
Create marketing collateral
At the very least, marketing collateral for an IDO launch includes a website and a white paper
- A well-branded website can help push the emotional levers for investors who have already bought into the project logically
- The white paper uses facts to persuade the investor that the project is a worthwhile investment
Step 4: Create the cryptocurrency
Anyone with a little technical savvy and decent marketing skills can figure out how to launch a crypto coin.
- The challenge is in convincing investors to put their money behind the project by discerning real-world value and utility
- Upon successful completion of the IDO and Token Generation Event (TGE), the DEX lists the token for trading
