What is an IDO anyway?
In the crypto universe, there are multiple ways to launch a project. Ten years ago, the word of mouth was the most effective way to promote and launch a new blockchain project. Three to five years ago, ICOs were really popular and some projects raised millions of dollars with successful ICOs (Initial Coin Offerings). In fact, in Q1 2018 alone, 6.8B dollars were raised by means of ICOs. More recently, IEOs (Initial Exchange Offerings) have been popular. They consist in partnering with an established crypto exchange to launch a new coin by offering the exchange users to purchase the coin in presale at an advantageous price. IEOs are still popular today. Even more recently, IDOs (Initial DEX Offerings) are a must for new projects. Some projects have raised their funds in a matter of seconds thanks to well-planned IDOs. So what is an IDO anyway?
You may be familiar with crypto exchanges like Binance or Kucoin. They are called centralized exchanges (CEXes) because all funds are managed by a central authority, the exchange itself. Users send their funds to the exchange and can trade their coins or avail of other services provided on the exchange. CEXes have many benefits. However, one goal of the blockchain is decentralization, that is to eliminate the need for a central authority. In the pursuit of this goal, DEXes, Decentralized Exchanges are becoming more and more popular. Pancakeswap is one example of a very popular DEX with 17M users. Users can keep their funds in a wallet and interact with the exchange by authorizing transactions one by one with the exchange.
DEXes are so popular that many new projects are looking to launch their coin or token on such exchanges. To this end, many DEXes have developped automated fundraising mecanisms, often called Launchpads, or IDOs, or Initial DEX Offerings. Projects running a launchpad on popular exchanges have been scrutinized for security and reliability. They go through a rigorous selection process to reassure users that they are investing in a sound project. And users participating in the IDO also submit to various requirements, such as whitelisting or holding a certain amount in the exchange token. This is important so that users have a fair chance to purchase the tokens. This is especially important knowing that some projects have sold out in seconds.
