The objective of decentralized blockchain and digital currency models is to offer users more power over their money. These models are designed to overcome the challenges users face while using centralized financial platforms. While users yearn for more decentralized financial solutions, they encounter centralization challenges at exchanges. The good news is that Initial Dex Offering (IDO) has come to help you to surmount issues of centralization at the exchanges. Wondering what IDO is all about? Please keep reading for in-depth information about this model and the main perks of using it.
What is an IDO?
When an entity wants to raise funds to finance its projects, it has various choices. The standard choice is to approach banks and other financial institutions for loans. The emergence of digital currencies has created more fundraising options for startups and established entities. Businesses can use BTC, ETH, and other virtual currencies to raise funds through token sales. This strategy enables a company to create virtual tokens and distribute them to the public in exchange for BTC and other digital currencies.
Entrepreneurs in the digital currency world have been using different fundraising approaches, such as ICO, STO, and IEO. The elephant in the room about the strategies mentioned above is that they’re carried out at exchanges that operate in a centralized manner. And this beats the logic of the whole concept of financial decentralization. Furthermore, financial exchanges are prone to hacking and internal fraud by the employees of the company. And this is how IDO comes in. Initial Dex Offering (IDO) has become a popular way of issuing tokens to raise capital in Decentralized Finance (DeFi).
IDO is a current fundraising technique that provides excellent convertible assets for digital tokens. Unlike its predecessors, the IDO method is quick, transparent, and fair.
Although in some aspects, IDO resembles ICO, STO, and IEO, it’s distinguishable because it’s grounded on DeFi technology. The DeFi technology provides robust, scalable, and creative open funds. Through this technique, businesses issue their IDO coins in a decentralized liquidity exchange. A decentralized liquidity exchange is a virtual currency exchange that depends on liquidity pools, enabling businesspersons to swap tokens.
Many digital currency fundraising methods depend on centralized exchanges. However, IDO overcomes this pitfall by relying on a decentralized exchange that isn’t owned and run by a specific entity. The decentralized exchange that IDO uses is Uniswap, which depends on a model known as an automated protocol.
The Uniswap exchange is developed on the Ethereum blockchain and conforms to ERC-20 tokens. It’s open-source, giving users the freedom to copy the code and use it to form their decentralized platforms. Through the Uniswap platform, users can freely list their tokens. And this is a big advantage for traders because the standard centralized exchanges are profit-motivated, charging exorbitant fees to list new coins.
Being a decentralized exchange (DEX), Uniswap lets users be in charge of their financial assets all the time. This is contrary to the centralized exchanges that require traders to surrender their private keys for easy management of orders on an internal platform instead of the blockchain. Besides being expensive, the act of submitting private keys comes with great risks of losing assets through hacking or playing fast and loose by some exchanges.
Why do an IDO?
There are multiple perks of using IDO to raise funds. The main ones include:
- Transparency and fair fundraising: While using various token offering methods at the centralized exchanges, private entities tend to purchase massive quantities of the token at a lower price. These investors resell the tokens to the public at higher rates, thus making a kill. However, with the IDO strategy, startups don’t require a centralized platform to commence their fundraising activities. And the good news is that the tactic allows anybody to participate or organize fundraising. So, private investors don’t enjoy more perks than the rest.
- Quick trading: if you’re looking for the fastest fundraising method, then IDO is the best for you. The strategy enables investors to purchase coins immediately upon launching the project. Soon after, the investors can resell their coins when their value starts to go up.
- Improved liquidity: liquidity is the easiness with which you can sell or purchase in the marketplace. It’s also the ability to access your cash quickly. The level of liquidity has an impact on the project’s success. Poor liquidity means reduced coin prices. Luckily, IDO’s projects access money promptly, which positively impacts the token’s value. One of the attributes of IDO is that it uses an automatic market maker to compute the demand for a coin. The formula focuses on the collateral supply in liquidity pools on the DEX.
- Reduced cost of listing: introducing a coin and listing it in the market isn’t a walk in the park. Most centralized exchanges require millions of money as charges for listing your tokens on their platforms. Furthermore, there’s a screening procedure for coins that traders must bear its cost. The good news is that the IDO model entails listing with liquidity platforms. The fundraising project pays a paltry gas fee for executing a smart contract on the DEX. The main role of a smart contract is to manage liquidity pools and task tokens.
- User acceptance: Because of the improved liquidity and lower costs of launching token projects, many users embrace DEX. So, using this model is likely to boost your fundraising efforts than the traditional CEX methods.
Contact TokenMinds for your IDO Launch
Many startups struggle to find the best platform to help them in raising funds to finance their enterprise activities. So, if you’re looking for top-notch solutions in this field, please stop your search and contact us immediately. You’re lucky to find us because we will be glad to assist you. At TokenMinds, we promise to deliver a truly first-class IDO service because our professionals have unmatched skills and knowledge in this field. We boast of multiple successful projects that we have provided to our clients in the past. We shall offer you the best marketing advisory to enable you to strategize your token launch successfully.