In 2019, about 3,782 ICOs were launched and added a significant amount to the $11.4 billion raised last year. It is undeniable that the concept of ICOs received immense popularity since its birth and has seen some huge implementations by leading firms. However, as the year progressed, the crypto world saw the birth of new crowdfunding models.
The major setback faced by ICOs was of safety. The hackers had hacked them in search of lucrative investments and a lot of investors had to bear the consequences. The New York-based Statis Group LLC proclaimed that 80% of the ICOs are a scam and only 8% manage to reach the trading stage.
IEO could be considered a viable alternative for ICOs, but what is an IEO? In technical terms, an IEO is still an ICO, with the only difference lying where the token or the coin Is being offered. An Initial Exchange Offering (IEO) is offered to the investors through a partnering exchange company, unlike the ICO where the exchange takes place directly.
ICO Funds May Go Missing
The cybersecurity company, Carbon Black, researched in June 2019 and found that a whopping $1.1 billion worth of digital currency was stolen in the first half of the year. It is through the dark web that the criminals are facilitated to perform large-scale cryptocurrency theft.
In Vietnam, an ICO raised $660 million before the team disappeared, creating the largest ICO scam in history. Their technique was to offer a considerably large return on your investment if you referred the ICO to other people. More than 30,000 investors received the blow in this scam and had nowhere to go because the listed office wasn’t owned by the team.
LoopX claimed that they have created a unique algorithm to transform the way trading takes place in the crypto world. The team raised $4.5 million before deleting all the data and disappearing. The Denaro ICO aimed at improvising the transaction system; they were able to scam the investors a total of $8.7 million.
Exchanges Give Credibility to the Venture
Despite being represented by two huge celebrities – Floyd Mayweather Jr. and DJ Khaled, the Centra ICO was termed fraudulent by the U.S. Securities and Exchange Commission. The project was able to raise $32 million and promoted partnerships with Visa and Master Card. Despite the attachment of such big names, the company was misleading the investors.
An exchange platform follows a legal structure and protects the startup from regulatory affairs. If you associate yourself with a renowned exchange, you will receive legal advice as well. You can hire reputable companies like icospeaks to carry out the marketing and promotion of the IEO so that its credibility reaches a wider audience.
For a regular individual, analyzing an ICO can be daunting and time-consuming. Specific skills and business acumens are required to assess an ICO and declare its reliability. On the other hand, the exchanges analyze the ICO thoroughly before listing and only entertain high-quality resources. An exchange will observe due diligence as its reputation will be at stake.
Aggregation of Blockchain Projects
Accessing a wide variety of blockchain projects through a single platform provides a better chance for the user to know more about the crypto market. Not only will this save time and effort but the potential investors are going to make an informed decision based on the content available to them.
Being associated with an exchange company also saves the coin or the offering from questionable practices. Savedroid, based out of Germany, tried to pull off a marketing stunt by pretending to vanish. The concept was to tell the investors how easy it is for a company to launch an ICO, collect funding and then disappear. This went well neither with the crypto community nor the general public. Instead, a lot of negative attention was drawn to the project because of this.
The Bottom Line
A report by TechCrunch revealed that more than a 1000 crypto projects were already dead by the mid of 2019. The investors are more aware and would only trust a new offering if a dependable name is attached to it. Launching an IEO needs to follow a set of stages religiously so that the effort becomes fruitful as the project progresses.