Over the past 12-month IEOs (Initial Exchange Offerings) have replaced ICOs (Initial Coin Offerings) as the fund-raising method of choice for blockchain companies. There are undeniable advantages to IEOs compared to ICOs.
One of the biggest advantages is there’s a reduced risk of investment funds being siphoned from a hacked website. One example of this happening to an ICO is the Etherparty hack whereby hackers discreetly modified the Ethereum address displayed on the ICO website to reroute incoming investments to a Hacker’s Ethereum address.
The barrier to entry to launch an IEO is also significantly higher than an ICO, which is beneficial to investors. Trusted exchanges will (in theory) only list reputable projects after they perform extensive due diligence. Compare this to ICOs, many of which copy and paste existing whitepapers, create fake founder LinkedIn profiles, and then advertise to unsuspecting investors using Google Adwords.
In this sense, IEOs are a much better alternative to ICOs. Investors have a much easier time both accessing the fundraising opportunity as well as funding the investment. This is provided in a safe (but unregulated) environment as provided by the exchange. Different exchanges offer differing parameters for listing an IEO. For instance, we noticed much higher quality IEO listings with market leading exchange Binance, and Kucoin, versus some of the smaller exchanges such as LAToken and Yobit.
While IEOs provide financial benefits to both the host exchange and startups, the same cannot be stated for the financial benefits that are offered to investors. From crunching the numbers IEOs have to date performed poorly.
In researching this article we reviewed IEOs from all major exchanges. Over 50% of the IEOs on smaller exchanges were not listed on CoinMarketCap.
Nonetheless, there were some surprises. While the majority of IEOs performed poorly and provided negative returns on the majority of exchanges, Binance was the odd exchange which actually had a higher number of tokens outperform the market. This was especially true for IEOs launched in 2019.
Below we track the launch date of several IEOs on the Binance exchange, the amount raised, as well as the IEO sale price of each token and the current market value of each token. The reason we do not use market map is that this number is very misleading for investors, as the total market cap includes the entire value of a token project, versus the IEO tokens which were initially sold to investors.
These numbers are based on publicly available data and may not be 100% accurate.
|Company:||IEO Date:||Raise:||Initial Token USD:||Current Token USD:|
|Celer Network||March 2019||4M||0.0067||0.005940|
|Perlin||August 2019||6.7M||0.07743 USD||0.060321|
Unfortunately, other exchanges did not fare so well. Some exchanges performed so poorly with the IEOs that they offered, that we could not find the market value of the tokens listed anywhere.
In conclusion, what is currently more important than the actual project being listed, is where the project is listed. We anticipate that once regulated security tokens increase in popularity, that IEOs may be an enticing option to list these security tokens on regulated exchanges. This would be similar to how stock exchanges currently operate.
Disclaimer: While I have previously held BRD & BTT tokens, in September 2019, I did not hold any of the IEO tokens as profiled in this article.
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