Bitfinex and Beyond: IEOs Are Blowing Up
Bitfinex CTO Paulo Ardonio published a tweet just the other day in which he stated that the controversial exchange had successfully raised $1billion worth of funds within just 10 days, as part of a private IEO (Initial Exchange Offering) sale which had concluded on the 11th May.
These funds, according to Ardonio, came from a combination of “private companies, giants in our industry and outside” who each made investments of “> 100m each.” The crypto is dubbed ‘LEO tokens’ and investments were secured through a combination of soft and hard commitments.
. @bitfinex is able to raise 1b USDt in 10 days, in a private sale. Private companies, giants in our industry and outside, made investments for > 100m each. A legion of inside and outside users made investments for > 1m each.
— Paolo Ardoino (@paoloardoino) May 13, 2019
Bitfinex is far from the first organisation to conduct an IEO, as it is a trend that has been growing of its own accord since 2018. However, f the news true – this would make this instance quite possibly the greatest amount of funds raised to-date (as published publicly) by this type of model.
Many, including regular CCN contributor Joseph Young, have observed that: if not entirely causative, it is at the very least a significant take-home that Bitcoin’s value jumped after the announcement.
It can't be definitively said that the Bitfinex $1 billion fundraising is raising the confidence of investors in the crypto market but as soon as it was announced by the CTO of Bitfinex, bitcoin surged $200+. pic.twitter.com/AOAxp3wXeM
— Joseph Young (@iamjosephyoung) May 13, 2019
IEOs Arose From the Ashes of ICOs
ICOs represented the be-all and end-all of cryptocurrency investments due to the lack of definition presented by any alternatives – and as such, suffered the consequences of association with the negative aspects of all cryptocurrency fundraising in general.
This means that whilst ICOs may not be dead by definition, the term is unlikely to re-emerge in the investment zeitgeist for a considerable time to come due to the stigma attached.
The drop in token values last year was, in hindsight, strongly correlative with a bubble-like phase which the digital-assets investment sector witnessed as a result of the largely unregulated and unchecked nature of ICOs.
Since the demise of the ICO, STOs and IEOs have become two of the most popular forms of digital-assets fundraising – however the recent successes of Bitfinex, as well as others, appears to have driven the popularity of the IEO to the extent that it is trending at a similar level on Google. For information on more IEOs, please take a look at my previous articles on Paytomat (PTI) and TOP Network (TOP) – in addition to VlaSem’s ‘What is an Initial Exchange Offering (IEO)?’.
An initial exchange offering (IEO) cannot be described in few greater words than its namesake, and they originated from the very same problem which inspired the creation of STOs. That problem is that ‘ICOs’ have developed a significant reputation of infamy following the 2018 cryptocurrency market crash – along with a largely negative stigma. For several reasons.
Examples of IEO type platforms include Binance Launchpad, and Huobi Prime.
Why Initial Exchange Offerings?
Overall, the IEO process is not all that dissimilar from an ICO with the key difference being the attribution of responsibility (and a large amount of the marketing) to the exchange. As such, they are arguably most relevant / interesting when paired with a reputable exchange.
For an IEO, a cryptocurrency trading exchange takes the burden of responsibility and management of the token sale, particularly marketing and advertising. This is rather than being managed the the organisation and / or team responsible for creating said token.
IEOs, like STOs, attempt to separate themselves from the furor of ICOs – however, they have recently been accosted by the likes of (the aforementioned) Bitfinex who are supposedly even trying to launch an IEO in spite of critical fraud accusations.
In (further) comparison comparison to ICOs, Initial Exchange Offerings are immediately tradable upon launch due to exchange guaranteed liquidity. Finally, there is no need for the token operators to use a smart contract for their token sale.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.