IEO or ICO: The Evolution of Crypto Financing Methods and Investment Opportunities

In the cryptocurrency market, fundraising methods have been continuously evolving. From early ICOs to the now-popular IEOs, this shift reflects the industry’s transition from wild growth to regulated development. For investors, understanding these different fundraising models is crucial.

From Disorder to Order: Comparing Three Fundraising Models

Initial Coin Offering (ICO) was once the most popular way for crypto projects to raise funds. Projects sold tokens directly to investors, with a simple process and low barriers to entry. However, this open-access nature led to a surge in fraudulent projects. After 2017, with regulatory authorities stepping in—China and South Korea banned ICOs in September 2017, Vietnam’s Securities Commission declared ICOs illegal in October, India’s Reserve Bank issued a ban in April 2018, and Bolivia followed suit in July of the same year—ICOs’ credibility was thoroughly undermined.

Initial DEX Offering (IDO) emerged as a new model. This involves token sales on decentralized exchanges, offering high liquidity and instant trading capabilities. But due to the lack of centralized regulatory mechanisms, risks still exist.

Initial Exchange Offering (IEO) represents a new balance point. Projects conduct token sales through cryptocurrency exchanges, which act as both auditors and intermediaries. This model retains market openness while introducing necessary oversight.

The Core Logic of IEO: Who Endorses the Project?

The popularity of IEOs hinges on the credibility of the exchange. When a project launches on a particular exchange’s platform, that exchange essentially guarantees the project’s basic trustworthiness.

This process typically includes the following steps:

Project Review Stage - The project team submits comprehensive business plans, technical whitepapers, team background information, etc. The exchange’s professional team conducts in-depth evaluations, including feasibility, team execution capability, market demand, and other dimensions.

Compliance Check - The exchange ensures the project complies with legal requirements in its operating region, conducting KYC (Know Your Customer) and AML (Anti-Money Laundering) procedures.

Fundraising Structure Design - Key parameters such as fundraising goals, token price, and allocation ratios are determined.

Launch and Trading - After the IEO, tokens are immediately listed for trading on the exchange, ensuring liquidity.

Why Choose IEO: Five Core Advantages

Significant Security Enhancement - Compared to the disorderly ICOs, IEOs greatly reduce fraud risk through strict exchange vetting. Exchanges are motivated to select quality projects, as failed projects damage their reputation.

Immediate Liquidity - Tokens are listed for trading immediately after sale completion, allowing investors to access liquidity without waiting for the launch date. This facilitates better price discovery and market liquidity.

Compliance Assurance - Many IEO platforms strictly adhere to KYC/AML standards, providing legal protection for investors.

Project Quality Filtering - Exchanges tend to favor projects with real use cases, strong teams, and clear tokenomics. This filtering helps reduce information asymmetry for investors.

Market Exposure - Well-known exchanges have large user bases. Conducting an IEO on such platforms enables projects to quickly gain market attention and user support. For example, a popular project launched in 2023 attracted nearly 250,000 participants.

Historical Examples: Which IEOs Became Models?

BitTorrent Case - This classic example was launched in 2019 via a top-tier exchange platform, raising $7.2 million in minutes. Two key factors contributed: BitTorrent’s large user base and the credibility of the launch platform. The token immediately gained liquidity and trading opportunities post-launch.

Polygon (formerly Matic Network) - Another success story, launched through a major exchange, raising about $5 million. Its core strength was providing a clear technical solution to Ethereum’s scalability issues, addressing a real market pain point.

Multiple Innovative Projects - Major launch platforms continuously introduce new projects. Although these vary in scale, they all benefit from the platform’s strict screening, attracting concentrated investor attention.

How Should Investors Evaluate IEO Projects?

Deep Dive into the Project - Don’t just chase hype. Investigate what problem the project solves, whether the technical solution is feasible, and the background and track record of the team members. Focus on specific implementation details in the whitepaper rather than just the vision.

Examine Token Economics - What is the total supply? How much does the project team retain? What is the unlock schedule? Excessive token holdings outside the chain by the development team could lead to future price pressures.

Assess the Exchange Itself - Not all exchanges are equal. Choose platforms with good records on security, compliance, and project screening standards.

Market Demand Analysis - Does the project’s solution meet real market needs? Are there alternative solutions? What does the competitive landscape look like?

Beware of Warning Signs - Avoid projects with low transparency, exaggerated promises, teams lacking verifiable backgrounds, or those avoiding legal compliance issues.

Lessons from Failures Are Equally Important

Not all IEOs succeed. Common features of failed projects include:

Weak Fundamentals - Some projects pass review but lack real use cases or innovative value. Without a solid foundation, long-term growth is difficult.

Execution Problems - Even with good ideas, if the team cannot effectively execute the roadmap, the project may fail. Token listing is just the beginning; subsequent product development is critical.

Poor Market Timing - Launching an IEO during a bear market or low market sentiment can lead to poor reception, even for good projects. The market environment post-funding significantly impacts initial performance.

Regulatory Changes - Sudden shifts in regional regulatory attitudes toward crypto projects can harm certain IEOs. This underscores the importance of monitoring policy risks.

Risks of IEO Investment Checklist

Price Volatility - Post-listing, tokens can experience significant price swings, leading to potential short-term losses. Don’t expect immediate profits.

Project Failure Risk - While exchange vetting reduces fraud, it doesn’t guarantee success. Technical issues, market rejection, or team changes can still cause project failure.

Liquidity Traps - Although IEOs often ensure initial liquidity, long-term liquidity is not guaranteed. Trading volume decline can make selling difficult.

Regulatory Uncertainty - The evolving regulatory landscape may impact token legality and usability in the future.

Information Asymmetry - Even after exchange review, investors may still lack full project understanding. Hidden information or unforeseen risks may remain.

Future Directions for IEO Development

Institutionalization - As global regulatory frameworks improve, IEOs are likely to become more standardized, attracting more traditional institutional investors.

Technological Integration - Advances in blockchain technology will create more complex tokenomics, with future IEOs incorporating innovative incentive mechanisms.

Asset Diversification - IEOs will expand beyond utility tokens to include more security tokens representing real assets (real estate, stocks, etc.).

DeFi Integration - Combining IEOs with decentralized finance will offer participants more options and greater autonomy.

Cross-Chain Deployment - Projects may conduct IEOs across multiple blockchains simultaneously, increasing accessibility and liquidity.

Conclusion: Rational Perspective on the IEO Era

IEO represents a move toward more mature and secure crypto financing. While not perfect, it offers better risk management compared to early ICOs.

For investors, participating in IEOs presents both opportunities and risks. The key is thorough research—deeply understanding projects, analyzing tokenomics, evaluating team capabilities, and monitoring market sentiment. Avoid FOMO (Fear of Missing Out) and base investment decisions on fundamental analysis.

In the IEO ecosystem, the credibility of the exchange becomes increasingly important. Choosing platforms with a good track record of project screening can significantly reduce risks. Remember, no fundraising method can completely eliminate the inherent risks of crypto investing—wise investors always conduct independent assessments rather than blindly following trends.