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…