The cryptocurrency market is expanding at a breakneck pace. Investors are intrigued by the cryptocurrency industry’s upside potential and risk reduction. There are various tactics and procedures for distributing tokens to attract more investors. The most recent iteration of token offering procedures is Initial DEX Offerings, which are held on decentralized exchanges.
As a result, we’ll go over the IDO method and how to build the Initial DEX Offering in this post. According to Coindesk, the TVL (total value locked) in DeFi increased from less than $1 billion in January to more than $16 billion in December 2020, and coming years are also expected to make higher profits.
What is IDO (Initial DEX Offering)?
The initial DEX offering, also known as the IDO, is a type of fundraising. The IDO coin/token is distributed via a decentralized liquidity exchange that uses liquidity pools to allow traders to exchange tokens. The liquidity pool is made up of crypto-asset pairs and stable currencies. A liquidity pair is, for example, USDT/ETH. Traders can switch between crypto-assets and stable cryptocurrencies based on market conditions.
IDO can be used by any community member to distribute tokens, and these tokens can represent any asset stored on a decentralized market. IDO is appealing to exchange users with a more cost-effective token sale approach. Because of the available liquidity pools on DEX, IDO, for example, can provide quick liquidity with little slippage. DEXs that offer IDO services include Binance DEX, Polkastarter, and Uniswap.
Why Is IDO Popular?
The Initial Dex Offering concept is a decentralized crowdfunding concept that allows the project owner to launch a fundraising campaign in a decentralized liquidity exchange. The key here is IDO token development. In the IPO, IDO tokens are sold to the public instead of shares or stocks.
These tokes have an initial value that increases with demand. When these tokens are purchased in exchange for a cryptocurrency or fiat currency, the funds raised will be used to further the development of the project. And, at the end of the development, buyers or investors who hold the token receive a special benefit from the product or service.
The benefits of an Initial DEX Offering to investors and project developers are numerous. Some examples are provided below.
- During the IDO, investors can purchase IDO tokens at a lower price, which will rise once the project is launched.
- They will have immediate trading options for their tokens as soon as they purchase them. This improves the security of their assets.
- This immediate trading also introduced a new trading practice of tokens, allowing crypto traders to generate passive income.
- The Decentralized Exchange platform, where the IDO will be launched, will improve token liquidity more than other concepts.
- The dex platform allows project holders to easily reach their target audience.
- When an investor purchases a token, its value increases. This is when demand rises and the value or price rises in tandem.
- The project owners will be able to whitelist investors for the token sale.
- There are additional advantages that make it a superior crypto crowdfunding concept to its predecessors, ICO and IEO, as well as the funding models that emerged after it.
How Does One Go About Establishing an IDO?
Let us now discuss the development of the Initial DEX Offering. Projects are promoted to the general public through launchpad or IDO-specific platforms. Under certain conditions, investors like you and me can buy tokens before they become available on the market. The IDO token is now listed on DEX. There are two kinds of public auction procedures:
1. The issuer places a limited number of sell orders at increasing price levels.
2. The issuer holds an auction, which results in a sale price determined by supply and demand.
For listing, automated market maker (AMM)-based exchanges such as Uniswap and Balancer are used. An issuer uses its tokens and sales proceeds to create pool liquidity in order to create a liquid secondary market for a token.
The term liquidity incentivization refers to a variety of initiatives that the token issuer may use to encourage people to use their product or service. Mining is common nowadays, and it can provide significant incentives for individuals to support the platform.
The Future of the IDO
An IDO strategy has emerged to address the shortcomings of its predecessors, the ICO and IEO. Because the DEX approach does not require permission to organize the fundraising event, it does raise donations. So far, only DeFi projects have received IDO funding.
There’s no reason why projects in another crypto ecosystem couldn’t use this method to raise funds. These projects, on the other hand, will need to convince existing DeFi users to invest in the project’s tokens.
IDO is a more appealing capital-raising option for startups. Despite the fact that this concept requires further development, IDO has the potential to succeed in the market. Furthermore, an increasing number of examples confirm the model’s effectiveness. As a result of IDO platforms with governance mechanisms and price-fixing in the liquidity pool, the popularity of the Initial DEX offering may increase. As a result, if we keep developing the Initial DEX Offering, we will soon achieve parity.
What Are The Top Benefits of the IDO model?
Open and Equitable Fundraising
Fundraisers who use the IDO model do not always need to start with traditional private investments. The token sale is open to the public, and investors can buy a large number of tokens at a low cost. They will profit greatly from reselling these tokens to the general public. Furthermore, because there is no CEX or approval required to begin fundraising, anyone, not just private investors, can organize or participate in IDO.
Instant Availability
With IDO, project coins gain liquidity quickly. The liquidity pool ensures that liquidity is always available and that no price slippage occurs. Many altcoins can only be acquired via a DEX, which allows for low-volume transactions. IDO increases financial inclusion by expanding the number of ways to distribute project tokens.
Real-Time Trading
When a project’s token is released, investors can begin trading. As a result, traders try to buy a new token as soon as possible and then sell it at a higher price during the IDO. When the UMA protocol raised funds, for example, the original token price of $0.26 skyrocketed to around $2.
Cost-Effectiveness
DEX is a self-executing smart contract-based decentralized exchange. When a project uses DEX directly, it must pay the “gas” fee for the installation of a new smart contract that manages the liquidity pool and the asset’s token. Even so, DEX charges a low fee for exchanges like Uniswap, typically around 0.3 percent.
Reliable Transactions
DEX executes transactions and records them on the blockchain using smart contracts, enabling secure transactions. DEX is also less likely to be hacked because it does not keep your money.
Why Choose The IDO Platform To Launch?
IDO Launchpad development is the best option for you because of the benefits it provides to investors, making IDO a go-to concept for quick passive income. The launchpad can be created for a variety of purposes, including cryptocurrency tokens and the release of a music album. Since the advent of blockchain in the last few years, there have been numerous projects launched, making this the ideal time to launch yours. If you are interested in launching your own IDO platform, it is the right time to start. Therefore don’t delay collaborating with an expert IDO development company to grab the better opportunities.