An initial exchange offering us used to release a token that can be later redeemed at the exchange for various services. During the IEO the exchange raised funds in order to support their development. After an investor bought the token it can be used for reducing exchange fees, participating in the ICO-s held on the exchange, and for many other useful features.
Differences between IEO-s and ICO-s
1. Technically speaking, IEO is a form of ICO (Initial Coin Offering). The major contrast, however, lies in where the token or coin is offered. In an ICO, tokens, and coins are offered directly to investors in hopes to fund a project, which can be anything. But the initial exchange offering, coins or tokens are offered by the exchange itself to fund itself.
2. Another key difference is that before a token or coin is offered, the exchange conducts a robust security procedure before listing the token. Unlike ICO-s, IEO-s usually have to maintain a higher level of credibility. Also, they go to extra length to ascertain the viability and value of the coin by offering real cash-flow to the investors by either staking or burning the tokens periodically.
3. With initial exchange offerings, coins or tokens are instantly available for trading in an exchange market unlike with ICO-s.
ICO problems: is IEO investing the answer?
1. High-risk level: Despite the heavy funds pumped into ICO-s, there is no certainty that it will succeed, and when it fails, investors bear all the risk; meaning investors could lose their money. There is simply no accountability and even if a project succeeds it might take years before the token starts to appreciate in value. This is however not the case with IEO-s, because the exchange bears some risk by having to burn some of the tokens, which reduces the token supply.
2. The value proposition in an IEO is much clearer. The exchange creates cashflow by its normal operation. The investor is repaid indirectly with this cashflow for participating in the IEO. Methods of indirect payout consist of: Token buybacks, Token burn, Exchange fee reduction, fixed price for tokens when used on the exchange for services and being accepted as currency during ICO-s at a multiplied pricing.
Benefits of the Bitpanda Ecosystem Token
The reasons IEO-s are preferred over ICO-s are numerous at this point. The Bitpanda Ecosystem Token functions as the stereotypical token released during an IEO. This could make it an excellent investment even now if you decide to buy it on the secondary market.
During the initial exchange offering, investors have the opportunity of investing in the exchanges directly. The number of scams during these IEO-s is fairly low. Cryptocurrency exchanges are much more likely to produce cash flow and to be legitimate.