Cryptocurrency is a nascent industry packed full of a wide variety of individuals. Trading veterans, investing newbies, genius developers, marketers, product designers and much more. It’s a crazy but wonderful place.
What cryptocurrency is really about though is innovation. This technology is new, and there are so many new developments and applications yet to be found and applied. Fortunately, crypto is an excellent accelerator for innovative ideas, because it has numerous ways for project founders to raise capital and start working on their brain baby.
In this article we’re going to look at the many ways that crypto projects can use to raise funds, and then weigh up the options.
Initial Coin Offering (ICO)
The most famous, yet now the least prevalent way to raise funds in crypto. ICOs were part of the reason cryptocurrency got so much attention in 2017. Due to Ethereum, anyone could create their own blockchain and host an ICO to raise money. It’s just a straight up transaction – the team sells a set number of tokens to token buyers at a fixed price.
People bought into ICOs to back the products the teams were building, with the hopes of the token becoming widely used and thus being in more demand. ICOs have largely died out now, since they have a negative reputation after many ICOs scammed, and many more failed to build any product of use and their token went to zero.
Initial Exchange Offering (IEO)
IEOs were the natural progression from ICOs. They are very similar to ICOs, but they are hosted on exchanges. The main difference is that there is a degree of due diligence that goes into IEOs, since the exchange has a reputation to uphold. They don’t want to be associated with projects that scam people that buy their tokens.
IEOs are still somewhat notable today, but there are other fundraising alternatives that get more attention these days.
Initial DEX Offering (IDO)
An IDO works much like an IEO or ICO, except it’s hosted on a decentralized platform. When a token is hosting an IDO, they put up a certain amount of tokens and set the sale price. Then, once the IDO starts, it’s a free-for-all. The tokens are available to buy for the set price until they run out, after which the token hits the market and starts to trade based on supply and demand.
Initial Uniswap Offering (IUO)
IUO is a term that’s been thrown around quite a lot recently, but it’s not as closely related to the other fundraising methods. Generally, when projects are raising money they set the token at a set price until it sells out or interest dries up.
Instead, with an IUO the project puts up a pool of tokens and sets the initial list price, and then the market opens and the price moves based on regular market mechanics, mainly influenced by demand. Thus, investors are more likely to end up paying a premium if they try to enter an IUO. It’s more so just a regular token listing when compared to the other options.
With investor interest clearly shifting to decentralized alternatives, it seems like it’s a good time for a new way to come about that makes fundraising better and more fair. Polkastarter could be the product the market needs right now.
Polkastarter is a permissionless decentralized exchange that’s been specifically built to host cross-chain token sales and auctions. It’s a great way for decentralized projects to raise or exchange capital efficiently and cheaply. Much like IEOs, Polkastarter has a suite of features available for project teams to choose from that can change how they host their token sale such as password protected private sales, investment limits, permissionless listings and more.
What’s best for the market?
It’s clear that interest is shifting from centralized solutions like ICOs and IEOs to decentralized solutions like IDOs. However, they don’t seem to be meeting the market needs.
Furthermore, there are many problems with existing on Ethereum right now, especially the high gas fees and slow transaction times. These also make participating in an IDO a pain. Gas wars and expensive transactions are inevitable. You may also find yourself losing out due to gas problems, wasting your time altogether.
With a new solution like Polkastarter, decentralized projects will be able to to raise or exchange capital efficiently and cheaply. Furthermore, the users will be able to participate in token sales and similar capital raising events in a secure, compliant environment using a variety of assets, not just the current ERC20 standard. By leveraging Polkadot’s tech, Polkastarter will be able to support multiple assets across blockchains, which is a powerful feature not yet available with other decentralized fundraising methods.
It’s likely that all of these fundraising formats will continue to exist in some form. ICOs, for example, do still happen, they just don’t have the prevalence they once did. Ultimately it will be on the retail investors to decide. Whichever method generates the most investor attention will naturally be the most used method. In this regard, Polkastarter seems to be the solution designed for the future.
*This article has been sponsored. The Daily Chain encourages you to carry out your own research before you make any form of investment and educate yourself about how to stay safe in the crypto space. The above article does not represent financial, investment or trading advice and we do not recommend the purchase of any cryptocurrency or product without consulting a financial aid. The Daily Chain strongly encourages you to do your own research before making any investment decisions.