What are the differences between crypto ICO and IDO? The crypto enthusiasts all over the world are always on the lookout for new ways in which they can get a new source to raise funds and bootstrap their crypto projects.
This helps the crypto users to make the best use of the blockchain technology and the crypto space so that they can solve their dependency on the crypto platforms and the respective financial models.
Two such popular models are ICO and IDO which are different by their own virtue and are necessary for every crypto user to know.
This article will let you know about them in detail and in the end you will find it easy to follow the right strategy to make the maximum benefit from this exciting crypto world.
Typically, Initial DEX Offering or IDO is an original crowdfunding method.
This technique has proved to be a successful and foolproof method for crypto projects to raise funds required for their development and growth.
It is also considered to be a worthy success of the infamous ICO or Initial Coin Offering.
8 Differences Between Crypto ICO and IDO
Though both ICO and IDO need no middlemen to make an offering, there are lots of differences between them beyond the basics that you ought to know.
It is these differences that not only affects their respective benefits and purposes but also results in some serious debates.
Such kind of knowledge will surely make you a much better crypto investor than you are at present and even let you know which among Initial Coin Offering and Initial DEX Offering is more suitable given the ever evolving landscape of cryptocurrencies.
Here they are.
The ICO or Initial Coin Offering was emulated by crypto projects when the industry became mainstream in 2017. In this process the crypto projects sell a portion of their total supply of crypto coins to the public.
The initiative was well accepted by all and became an instant hit within the industry and the crypto investors jumped to grab the immense opportunity it created within this landscape.
However, the rise in Ponzi schemes and scam projects caused a very bad collapse in the popularity of the ICOs.
Therefore, in 2018 this method of fundraising was replaced by Initial Exchange Offering or IEO in 2018 but in 2019 most of the crypto projects were driven by the decentralized nature of these exchanges.
This gave birth to a new fundraising method called the Initial DEX Offering or IDO. The IDOs proved to be a much better option to raise funds as well as launch tokens without having to deal with the complexities of the centralized exchanges.
ICOs seem to take a lot of time to raise funds for a particular crypto project mainly because the entire process involves several rounds.
Even then, in comparison, this mode is much faster in comparison to other traditional modes used to raise funds for different projects.
On the other hand, it is the speed that seems to be the Unique Selling Point in the case of the IDOs. It is due to its nature that coins to be launched are listed straight away on the decentralized exchanges on which the offering is to occur.
Since there is no waiting period in IDOs, immediate access to trading and liquidity of the coins are allowed which is not available in the case of ICOs.
3. Event Management
In an IDO project, since it uses a decentralized liquidity exchange for the launch of the crypto coin or token, it is the exchange itself that manages the entire event of raising funds on behalf of the operatives of the particular crypto project.
On the other hand, though an ICO project is supposed to be one of the easiest options to raise funds when required, the unregulated nature of it makes it quite difficult to manage by the operatives.
Still, it is quite appealing to the banks and venture investors alike. In the case of an ICO, the investors in the project receive a specific percentage of the particular coin in exchange or other cryptocurrencies as a legal tender.
4. Approvals and Exchange Fees
In the case of an ICO event, the project needs to pay specific fees to the exchange and also wait for a significant time for receiving and approval for the same from them before the coin is listed.
On the other hand, in the case of an IDO, there is no need to pay any fees to any exchange or wait for an approval because it is decentralized in nature. In fact, the approval of a project or tokens in IODs is given by the vocal community members.
The main advantage of ICOs is that it is a very simple process, though a bit time-consuming. It also needs to follow a low fundraising standard which actually helps in raising more funds fast.
ICOs also attract investors and entrepreneurs all over the globe and these development services campaigns typically last for thirty days. Within this period all investors get a chance to fund and the entrepreneurs get a chance to raise funds at the same time.
On the other hand, in the case of the IDOs, it offers very important benefits than the ICOs over and above the decentralization ethos. It is an inexpensive method to raise funds since there are no fees involved in it.
It is a much faster process since it needs no authorization from anyone. And, since the vocal community members vet the tokens and IDO projects, it allows extensive cooperation, faster access to coins, reduces listing costs and also helps in providing safe and sound wallet services.
The ICO projects usually deal with pre-mined initial coins and are therefore less transparent in comparison to the IDO projects.
Also, minting of the ICO tokens happens on the website of the company after sale. This involves a high cost because the issuer of the coin will need to have an exchange listing.
On the other hand, the IDO projects are more open in comparison to the ICOs and offer frictionless liquidity and an immediate access to the trading of the coins. IDOs also have a pretty shallow market cap in contrast to ICOs subsequent to the public listing.
This is due to the vesting period for the private crypto investors. Also, the fund raised in actual Initial DEX Offering is quite small because each participant normally takes a small allocation.
In terms of the immediate tradability of the IDOs, there are some issues that result in an ongoing debate. One of the most significant issues is that there is no way in which you can impose a lockup period, which typically is used frequently by the ICOs.
On the other hand, the ICOs too are not free from their own share of criticisms. One of the most significant ones in their case is that the ICOs offer the insiders and the early investors much more sympathetic terms but does not offer anything as such to the regular buyers.
However, in the case of the IODs, such things are not doable due to the limitations and control of a smart contract.
8. Some Other Differences
According to the definition of the two, an ICO refers to the portion of the entire supply of a crypto coin that is sold to the people independently but on the other hand, as for IDOs it is usually done via a decentralized exchange launchpad.
In terms of smart contract management, as for the ICOs it is also done by the project issuing the coins and, in contrast, as for the IDOs, it is collectively managed by the project issuer and by the launchpad.
In terms of marketing, a lot of money needs to be spent by the project issuing the ICO to promote their product but, once again, for the IODs it is done by the project and the launchpad both.
Which is Better – Crypto ICO or IDO?
There are lots of ways in which a crypto company or a project can raise funds that it needs to grow and develop.
However, all these models are not created equal which is evident from the differences between Initial Coin Offerings and Initial DEX Offerings as mentioned above.
In such a situation, it is really difficult to say which is better but going by the advantages offered by both these fundraising techniques it can be safely said that the Initial DEX Offerings fares much better in comparison to the ICOs.
It is for this reason it is seen that the IDOs are now becoming the new and most effective event in the crypto market.
It is all due to the number of advantages that it provides to the projects in comparison to the ICOs and even the IEOs.
Typically, Initial Coin Offering is the predecessor of Initial DEX Offering, which, however, is considered to be the new ICO.
If you want to know the differences between IDOs and ICOs in a much better way and to their entirety, you will also need to know the things that are common in them.
Ideally, there is one significant thing that is common in them. It is that the vetting of offerings made is typically done by a knowledgeable and reliable group of activists.
This however, leads to another related issue that is also quite significant. It may either provide real decentralization and build a community or leave the prospective buyers with limited information.
Well, it however, depends mostly on your particular perspective.
Also, each of these offerings need to create and use a smart contract to sell tokens as well as carry out their legal vetting and arrange for audits.
These processes may include outsourcing Know Your Customer and Anti Money Laundering compliance, and general securities offering along with other registration requirements.
Apart from the advantages mentioned above, typically, there are two benefits of an IDO in comparison to the ICOs which attracts people towards it.
One, the platform shares several different marketing efforts instead of emerging from the project alone.
Two, IDOs are considered to be more stable in comparison to the ICOs which is due to the reason that the investors do not get all the coins at once and it, in turn, reduces the size of the sell-offs.
However, this does not mean that the IODs do not come with any drawbacks. One of the most significant glitches of the DeFi platforms is that many a time it is seen that exchanges are dominated by bots.
This can raise the prices and drive away a prospective buyer.
The DeFi platforms deal with this issue by limiting the choice of the buyers to a whitelist that is pre-approved as well as a maximum buying limit imposed for each buyer.
However, the problem is that the buyers need to own and hold the native token of the launchpad in order to get whitelisted.
However, this does not change the fact that IDOs are hot and happening now and can sell out in seconds.
It offers a lot of advantages to the users in terms of cost and time.
It is also a process that is much less intensive as compared to the ICOs which makes it a perfect option to raise funds especially by the small companies.
It is just a matter of time that the launchpads will work towards overcoming the challenges pretty soon and more and more projects will take on this type of fundraising technique making its future pretty bright.
This will not only ensure that more and more projects rely on this particular technique to raise funds for their growth but will also ensure that the confidence and interest of the investors in crypto coins or tokens is also enhanced.
This will benefit both them as well as the crypto space on the whole.
Ideally, IDOs and ICOs are two good techniques to raise funds but there are lots to know about them for projects to choose between them. This article will help you in that to ensure that you are better positioned to reap the benefits offered.