IDO has been one of the easiest and most profitable ways for both Crypto beginners and veterans. Nevertheless, not everyone is able to understand IDO deeply in detail. That is why in this article, Coin98 will introduce you to IDO as well as its numerous aspects.
What is an IDO (Initial DEX Offering)?
IDO (Initial DEX Offering) is the way a cryptocurrency project raises funds through a DEX (Decentralized Exchange). The project will sell its token to IDO investors before TGE (Token Generation Event) in exchange for initial capital to bootstrap the product.
How does an IDO work?
The process of an IDO can be described as:
Step 1: The project and the IDO platform come to an agreement to launch the IDO.
Step 2: The details of the IDO, the project, and the token will be given out to investors.
Step 3: The IDO begins. Investors will start participating in the IDO via the IDO platform, following its rules.
Step 4: The IDO ends. Investors will receive their bought tokens when the TGE happens. At the same time, the token will be listed on an announced DEX.
Understanding IDO (Initial DEX Offering)
Advantages of IDO
- Helps projects raise capital at early development stages in an easy way. Therefore, they can grow their products better.
- High return on investment (ROI) since IDOs happen pre-TGE. Investors can buy tokens at almost guaranteed lower prices compared to the secondary market.
- More cost-efficient with a faster procedure process compared to IEO.
- Offers investors high-profit investments at pretty low risks as IDO platforms have filtered the most quality projects before listing their IDOs.
⇒ All participants including the projects, the investors, and the IDO platforms benefit.
Disadvantages of IDO
- As IDO has the aforementioned advantages, lots of IDO platforms and projects have appeared to gain massive profits in a short period of time. This led to a large number of low-quality projects as well as fraudulent ones.
- May have to own a large initial fund to get involved.
- May have to go through the KYC (Know Your Customer) process which is not really private.
Differences between an IDO and ICO, IEO
Even though these three are all ways of crypto fundraising, they have a few differences as follows:
How to launch an IDO
If you are working on a new project or product, you may want to consider launching an IDO to raise funds. Here are a few things you need to do for launching an IDO:
- Develop a product for your project.
- Design a suitable token and tokenomics.
- Choose a blockchain and IDO platform.
- Reach out to an IDO platform with your project and token’s information in order to request a listing.
For your request to go through, you should prepare the first 2 steps carefully.
How to participate in an IDO
The process of participating in an IDO may vary depending on the IDO platform. The typical way to participate in an IDO is:
Step 1: Own the IDO platform's native token. Buying directly via DEXs or CEXs is the easiest way. For example, if you want to enroll in IDOs on DAO Maker, you have to buy its token DAO. Similarly, if you want to enroll in IDOs on Polkastarter, you have to buy POLS.
Step 2: Sign up an account and pass the KYC.
Step 3: Select an IDO to participate in. Carefully check all the details and requirements before entering.
Step 4: Confirm your payment within the given period.
Popular IDO Platforms
At the moment, there are over 70 IDO platforms across various blockchain networks. Some of the most popular ones are:
- DAO Maker (Multichain).
- Polkastarter (Multichain).
- BSCPad (BSC).
- Avalaunch (Avalanche).
- AcceleRaytor, Solanium (Solana).
In the next part, I will introduce you to some of these platforms as well as how to participate in their IDOs.
DAO Maker is a platform for retail ventures to invest in startups and projects at an early stage. In other words, DAO Maker is a launchpad that acts as an intermediary between the retail investors and the protocols during the fundraising process.
DAO Maker solves the risk of participating in token sales nowadays. When the product is still under development and the developer team has little to no credit, investing in the project can be a bet.
Learn more: How to participate in IDOs on DAO Maker
The vision of Polkastarer is to be integrated into Polkadot to take advantage of the high scalability of the ecosystem.
Built on Polkadot, Polkastarter can leverage its cross-chain swaps, enjoying the high throughput of the native blockchain while still staying connected with other blockchains for liquidity. While waiting for the Polkadot’s mainnet, Polkastarter has already run on Ethereum, Polygon, and Binance Smart Chain.
Learn more: How to participate in IDOs on Polkastarter
AcceleRaytor is an IDO launchpad by Raydium that focuses on accelerating the growth of the Solana ecosystem. New projects can register to AcceleRaytor to raise capital via the token sale on the platform. It receives strong support from the Raydium community network.
To participate in IDOs on the platform, users need to have RAY tokens staked to participate in the IDOs. This will raise the demand for the RAY token. In addition, the more RAY you stake, the more lottery tickets you’ll have when there is an IDO. At the moment, 18 Solana-based projects have been launched on the platform. Those IDOs were filled with hundreds of percentages.
Learn more: How to participate in IDOs on AcceleRaytor
Cardstarter is a project accelerator that helps new projects launch their IDO token sale on Cardano. Basically, its primary goal is to connect investors with new ideas deployed on Cardano. Investors can participate in low-risk opportunities backed by the Cardstarter insurance treasury. This means projects launched on the platform have to make a commitment in case of failure.
In the past, it was easy to lose money in most initial coin offerings (ICOs). ICO participants distrusted new projects, which made it hard for real projects to raise funds. Cardano’s ambition is to help projects with sustainable growth paths.
Learn more: How to participate in IDOs on Cardstarter
How to invest in IDO properly
Investing in IDOs often returns you high profits, but can also cause you to lose a lot of money if you do not understand it correctly. Here are some tips so that you can participate in IDOs in a better way:
- Investing in IDOs requires you to buy the native tokens of the IDO platform most of the time. You should not buy such tokens at moments when they increase dramatically in price.
- You should participate in IDOs on quality and prestigious IDO platforms. You can use this list as a reference.
- Enrolling in IDOs can be extremely beneficial in bull markets. On the contrary, in bear markets, most IDOs return little to no profits.
- You should DYOR before investing in any project’s IDO. An excellent project will have its token going up in price, while the opposite will result in you losing money.
Future of IDO (Initial DEX Offering)
Even when IDO has been a pretty all-rounded fundraising method, it is still evolving. IFO (Initial Farm Offering) is the innovative version of IDO by PancakeSwap.
Instead of buying the native tokens of IDO platforms, PancakeSwap allows users to enroll in token sales by simply providing liquidity to the platform. In this way, users only have to bear Impermanent Loss rather than price changes, which are often more erratic.
In the future, different methods may evolve from IDO and/or IFO, bringing more benefits to its participants. Such innovations can come about as instead of separate platforms, they can be integrated into DeFi-suite products and perform their own token sales within 1 multi-functional platform, similar to PancakeSwap with IFO.
Some IDO FAQs
Can US citizens participate in IDO?
Whether US citizens can participate in IDOs or not depends on the IDO platform. However, it can be seen that most IDO platforms do not allow US citizens to get involved, and they conduct the KYC process to ensure that.
Nevertheless, Crypto prioritizes decentralization and privacy, and it should remain that way. Implementing KYC, to some extent, go against that vision. As a result, there are still some IDO platforms that do not require users to KYC or provide personal information.
US citizens should be able to participate in such IDO platforms.
Is IDO a sure-win investment?
As mentioned above, IDOs usually return investors massive profits. Even if the market is not healthy, most IDO platforms and projects have to maintain investors’ profits at a minimum level in order to attract more IDO participants.
Nevertheless, IDO is not always a sure-win investment, as the tokens investors buy are directly correlated to the project. In case the project fails/ scams/ rug pulls/… the token will have 0 value, leading to you losing all your money.
You should be aware of such risks before investing in IDOs.
And that is all you need to know about IDO. In this article, I have included its definition, its advantages as well as disadvantages, and also how it works. I hope that after reading this article, you have understood clearly about IDO and how to invest in it.
If you have any questions about IDO, don't hesitate to leave a comment below, the Coin98 team will answer your questions as soon as possible!