Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), and Initial Token Offerings (ITOs) are all methods of fundraising used by cryptocurrency and blockchain projects. While they share some similarities, there are key differences between these three methods.
ICO, IEO, ITO - Definitions
An ICO is a fundraising method in which a company issues its own cryptocurrency tokens to raise funds for its project. Investors purchase these tokens with established cryptocurrencies such as Bitcoin or Ether. In exchange, investors receive a share of the project's future profits and can trade the tokens on cryptocurrency exchanges.
An IEO is a fundraising method in which a cryptocurrency exchange acts as a middleman between the project and investors. The project issues its tokens on the exchange's platform and investors can purchase the tokens directly from the exchange. In exchange, the exchange takes a commission on the funds raised and ensures that the tokens meet certain criteria for listing.
An ITO is a fundraising method similar to an ICO, but instead of issuing a new cryptocurrency, the project offers existing tokens in exchange for funds. This can be beneficial for projects that have already established a user base and want to offer additional features or services to their customers.
History and Examples
ICOs gained popularity in 2017 as a way for blockchain projects to raise funds quickly and easily. Some of the most successful ICOs include Ethereum, which raised $18 million in its 2014 ICO and now has a market capitalization of over $300 billion, and EOS, which raised $4 billion in its 2018 ICO.
IEOs became popular in 2019 as a way for exchanges to offer their users access to new and promising projects. Some examples of successful IEOs include BitTorrent Token, which raised $7.2 million on the Binance exchange, and Fetch.AI, which raised $6 million on the Binance exchange.
ITOs are a newer concept, but some notable examples include the Brave Browser, which raised $35 million in its 2017 token sale, and Telegram, which raised $1.7 billion in its 2018 token sale.
How It Works
In an ICO, the project sets a fundraising goal and a timeframe for the campaign. Investors purchase the project's tokens using established cryptocurrencies such as Bitcoin or Ether. The project then uses the funds raised to develop its product or service.
In an IEO, the project partners with an exchange to issue and sell its tokens on the exchange's platform. Investors purchase the tokens using the exchange's native cryptocurrency. The exchange then takes a commission on the funds raised and ensures that the tokens meet certain criteria for listing.
In an ITO, the project offers its existing tokens in exchange for funds. Investors send the funds to the project's wallet and receive the tokens in return.
Clients, Risks, and Profits
Investors in ICOs, IEOs, and ITOs are typically looking for high returns on their investments. However, these methods of fundraising are also high-risk investments. There have been many cases of fraudulent or unsuccessful projects that have left investors with worthless tokens.
Clients who invest in these offerings should carefully research the project and the team behind it, and should be aware of the risks and uncertainties associated with cryptocurrency investments.