To ICO or to IDO? That is the question

Initial DEX offerings are the new initial coin offerings. So, what’s the difference between an IDO and an ICO, other than that one letter?

A lot actually.

In some ways, ICOs and IDOs have more in common with each other than they do with initial exchange offerings, which have more than a few features of the traditional initial public offering of stock markets.

While IDOs and IEOs are both listed directly on exchanges — decentralized exchanges, or DEXs, in the case of the former and centralized exchanges for the latter — IDOs are very much a do-it-yourself process like ICOs.

One big difference between IDOs and ICOs is the amount of money raised. No one sees a 10-figure IDO matching Block.one’s $4 billion ICO or Telegram’s $1.7 billion raise anytime soon.

Those ICOs also showed the power of the SEC, which generally went easy on companies willing to pay fines and issue mea culpas. Block.one‚ which raised $4 billion, paid a comparatively paltry $24 million fine. Telegram, which fought the SEC, ended up returning $1.2 billion of the $1.7 billion raised and shutting down its TON blockchain.

IEOs, on the other hand, are controlled by exchanges, which act in many ways like the underwriters — middlemen — which lead companies going public on the NYSE or Nasdaq through the process. In IEOs, centralized exchanges like Binance Launchpad and Huobi Prime vet the issuers, provide regulatory and know-your-customer (KYC) and anti-money-laundering (AML) services, and market the sales — for which they charge an arm and a leg. Unlike underwriters, crypto exchanges do not buy out and resell the tokens — in fact, more than a few IEO sales fail, despite the cost.

IDO versus ICO

In both the IDO and the ICO, the token-issuer pays no direct fees to middlemen, which is much more in line with the peer-to-peer ethos of Bitcoin and its successors. That said, IDO launchpads like Polkastarter and Binance Launchpad are changing that as they become more common, but don’t have…

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