How to avoid crypto fraud
30.03.2022
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There are many good reasons to invest in cryptocurrency. One of the things that is…
Everything you need to know about IDO
Whether you are someone who is actively investing in cryptocurrency or someone who is just more than average interested in cryptocurrency, you know for sure that cryptocurrency is a topic that introduces you to new concepts just as it is.
One of the terms that you are most likely to have become acquainted with in connection with cryptocurrency is the term IDO. But what exactly is IDO? That’s what we’ll be talking about a little more in this article.
What is IDO?
IDO is an abbreviation for Initial DEX Offering. This concept is still relatively new, so a separate english expression for it has not yet been developed. Instead, it is often called just “DEX offers”.
You have probably also heard of the predecessors to IDO. These are ICO (Initial Coin Offerings) and IEO (Initial Exchange Offerings). Many people see IDO as a new way of financing in connection with the crypto industry, because it has found the solution to several of the problems that ICO and IEO have encountered in connection with financing.
Thus, it can be said that IDO is a door opener for a number of new projects and for new people who want to become crypto investors. This is a concept that has been made available all over the world.
Here you get an animated explanation of what IDO is
Ethereum kickstarted it all
The road to today’s IDO has been long, and it was the cryptocurrency Ethereum that kickstarted it all in 2017. It was thus in 2017 that the development of ICO – one of the predecessors of IDO – began.
In the case of Ethereum, you have probably heard of ERC20 tokens. Before these tokens appeared, project financing had been quite difficult, but this development also made project financing much easier and more convenient, because you did not have to go through the same process with every single transaction.
ICO was considered a type of crowdfunding, and it made it much easier to find investors in connection with cryptocurrency compared to the traditional financial markets. In the traditional financial markets, there are very limited opportunities for such crowdfunding.
ICO – not that big
But ICO never became that big . As it became easier for investors to invest, there was of course an ever so small explosion of projects.
Many of these projects were – not surprisingly – financed by small investors. Not that it needs to be negative in itself, but very many of the investment project were also quite junk.
Most of these projects have slowly but surely stagnated or disappeared as fast as they came. In practice, this led to the ICO gaining a relatively bad reputation in the crypto market. Despite this, it is still the case that ICO was the start of decentralized crypto-financing.
IEO was to solve ICO’s problems
It is not to be underestimated that the ICO led to many problems. And these were of course problems one had to solve, and the solution was Initial Exchange Offerings (IEOs), which is one of two predecessors to IDO.
There is no doubt that IEO did what they were meant to do. The purpose of developing IEO was to sort out the problems that ICO had created for investors. They wanted better structure and more security in connection with their investments, and that was what IEO gave them.
Nevertheless, it was not possible for IEO to fix all the problems that were in the system. IEOs were centralized in exactly the same way as the other crypto exchanges, so they did not get rid of the middleman in the process either.
Instead, the middleman played a very important role. It was they who decided which projects to invest in, and it was also a service that investors had to pay for. It was the exact opposite of the idea of decentralization.
ICO became IEO, then IEO became IDO
Now, however, IEO has been further developed into IDO, and IDO undoubtedly has many similarities with IEO.
In connection with both IDO and IEO, new tokens are introduced through an exchange. In addition, both of these are automatically listed on the crypto exchange. But there are also a number of differences between them:
- When issuing tokens and thereby implementing an IDO, the investor does not have to pay fees to the crypto exchange in the same way as they must if the tokens are issued in connection with IEO.
- Many crypto exchanges use IEO frequently to market their project. However, this is not the case with IDO. This is not a central part of marketing at all. The issuer must instead use an IDO launch pad.
- As mentioned above, both IEO and IDO are automatically listed on the crypto exchange, but if it is a popular centralized crypto exchange, then it is not inconceivable that you will have to pay for your place on the list. In connection with IDO, the process tends to take place at a slightly faster pace.
However, it was not in connection with cryptocurrency that IDO appeared for the very first time. It was actually in connection with the training system for Al where IDO appeared for the first time. To be exact, it was in connection with Raven and Protocol and its launch.
What is IDO launchpad?
As mentioned, the intermediaries could not do the same with IDO as they did with IEO. IDO requires the use of an IDO launch pad, and this launch pad plays an important role in this process.
The purpose of an IDO launch pad is to implement what an intermediary is usually responsible for – that is, to compare projects with several investors and find out who works best together. Thus, the wings of centralized crypto exchanges are cut to a small degree.
As mentioned, the intermediaries could not do the same with IDO as they did with IEO. IDO requires the use of an IDO launch pad, and this launch pad plays an important role in this process.
An IDO launch pad also plays a very important role in connection with bad projects. The launch pad has a built-in feature that makes it easier to filter out which projects are good and which are bad, thus protecting investors from being scammed.
How to get into Launchpads :
There are different launch pads
However, it is not as simple as the term “launchpad” referring only to a specific launchpad. On the contrary – it is a collective term that includes a number of launch pads:
Pole starters
Polkastarter was one of the first launch pads to be developed. Because of this, this is a launch pad that many no doubt have great confidence in.
DAO Maker
It’s not just Polkastarter that has a relatively good reputation. It also has the launch pad DAO Maker.
DAO Maker also gives you the opportunity to return tokens, which in practice means the risk of being exposed to fraud. If you get a bad stomach feeling after the investment is made, then just reverse the trade – and then the problem is (hopefully) out of the world.
The sum of this makes DAO Maker a launch pad that gives Polkastarter tough competition.
DuckDAO
DuckDAO has many similarities with DAO Maker.
DuckDAO has all the features that DAO Maker has, including that customers have the option to return tokens that they have purchased should they regret it. It is very convenient to have this opportunity, because it minimizes the risk of being scammed.
DuckDAO joins the ranks of launchpads that also have a good reputation.
How to start an IDO
How to start an IDO will vary slightly depending on which launchpad you use. But the main features of the process will still be quite similar:
- The criteria for the relevant launch pad must be met by the relevant project (it is important to remember that it is not uncommon for different launch pads to operate with different criteria)
When it turns out that the project meets the launchpad’s criteria, a “liquidity pool” was set up. Through here, the information is sent to the investors, and this is also where the prepayment of tokens takes place.
Even if this is done, investors will receive their tokens immediately. Instead, they receive a certificate of ownership that is exchanged for actual tokens after they have been generated. The process usually does not take longer than a couple of hours.
Once the tokens have been generated, investors are free to trade on IDO.
Investment in IDO
Investing in IDO is a comprehensive process in which the launch pad plays an important role. It is also important to remember that the procedure may vary slightly in connection with which launchpad you use – as we have also mentioned before.
But here too it is the case that the steps in the process will be quite similar. We will take a closer look at this below.
KYC / AML procedure
In recent years, the rules in connection with cryptocurrency have become a little stricter. Among other things, it has flirted that launchpads should carry out a KYC / AML procedure for their potential investors.
As part of this process animal, a “whitelisting” is carried out, which is simply about feeling a little closer than you normally would, for example on Twitter.
Launchpad tokens
Several launchpads have different prerequisites, and one of them is often that you have to buy a stock of their tokens to be able to join IDO.
It is also not unlikely that your stock of tokens helps to assess how much you will have the opportunity to buy in connection with an IDO.
Web 3.0 Wallet and DEX
For interaction to be possible, the launch pad depends on the Web 3.0 Wallet for it to happen. It is this technology that governs IDO. In practice, this means that you need such a wallet to be able to engage in this form of investment.
After a while, you may want to start trading the tokens you have previously purchased, and then you are dependent on a DEX. Think long-term and get to know how the DEX works.
Like launch pads, there are several types of DEXs, so it can be difficult to figure out which one to use. Uniswap is a very popular DEX, so maybe you can use this for a transition period?
Advantages and disadvantages of IDO
The biggest advantage of IDO is that IDO has got rid of many of the problems that ICO and IEO offered. In addition, there are no high fees if you want to list a project through an IDO.
IDO is also considered to be much more secure than previous methods in connection with the purchase of tokens. The reason for this is that IDO makes it possible to send the inventory directly to the buyer’s crypto wallet.
But one also has to be aware that IDO does not provide the same support that a centralized crypto exchange will do in connection with the issuance of tokens.
With that said, it is important not to forget that launchpads have taken over this role to a very large extent. Thus, it is not certain that it is of such great importance.
Therefore, you should invest in IDO
IDO is without a doubt a relatively new project. Believe it or not, but this is actually one of the reasons why one should invest in the project. It can actually prove to be very beneficial for you at a slightly later time?
For some, however, this may be a little too vague. It’s simply easier said than done. In practice, there are very many who are very skeptical of projects that are so new, and it is only natural, simply because you often take a risk, because there is simply no one who knows what happens next, and it can of course be a little scary.
But just as it can be used as an argument against doing so, it can be used as an argument for doing so. For new projects can also prove to have great potential, and then there is no doubt something you can make a lot of money on later.
So feel free to invest in IDO now – but that presupposes that you have familiarized yourself with the project and know a little about it in advance.
