An Initial DEX Offering, also known as an IDO, is a cryptocurrency crowdfunding method that allows a blockchain project to introduce their native cryptocurrencies through decentralized exchanges.
IDO stands for ‘Initial Decentralized Exchange Offering.’ It is a technique for raising funds for new blockchain projects by selling their native altcoin or token directly through decentralized exchanges (DEXs,) prior to their token being officially listed on the exchange. It is a recent development that allows the blockchain projects’ founders to raise the pool that they needswithout needing to rely on intermediaries.
The way that it works is that the HODLers on the exchange platform are able to lock their cryptocurrency on the exchange in exchange for the platform’s tokens. This cryptocurrency will then be added to the overall liquidity pool (LP) of the project, thereby giving the tokens value. The investor will therefore need a wallet, an account with the exchange platform, cryptocurrency with which to invest in the project and cryptocurrency to cover the transaction fees.
A cryptocurrency exchange platform that allows IDOs to be launched on it will usually have a calendar announcing current, future and past IDO events. These will also sometimes include ‘earn and learn’ programs, whereby the potential investor can watch a video and complete a quiz in order to earn a dollar value worth of the associated cryptocurrency.
How Does an IDO Differ from an ICO?
An IDO differs from an Initial Coin Offering (ICO) in that operates directly through a DEX, whereas ICOs were usually centralized and therefore ran the associated risks, such as hacks or the developers actually being scam artists who would run off with the funds. Another risk was pre-minig, whereby the developers would retain for themselves a significant number of the tokens, thereby giving them more power over the platform than the other network member nodes. Additionally, the coins purchased by the buyer on a DEX will immediately appear in the wallet of the purchaser, as opposed to an ICO where the buyer would often need to wait for the ICO to be completed before they received their coins.
How Does an IDO Differ from an IEO?
An IDO differs from an Initial Exchange Offering (IEO) in that an IDO is launched on a DEX, while an IEO is held on a centralized exchange. Furthermore, whereas the coins from an IDO will immediately appear in the wallet of a purchaser, those purchased through an IEO would immediately appear on the exchange upon the IEO’s completion and the IEO would guarantee that the projects listed there would only appear after being thoroughly investigated prior to the exchange’s approval.