IDO is a form of crowdfunding that allows project developers or institutions to raise funds by offering their native cryptocurrencie for sale for the first time that allows investors to get early ownership of a cryptocurrency.
An IDO is a type of ICO. IDOs, which serve the same purpose as ICOs, are considered more secure than other ICOs and have some differences. IDOs were created in response to the different security problems of ICOs. In IDO, all sales are carried out by an intermediary. This is not the case with ICOs.
How Is IDO Emerged?
In 2019, decentralized trading platforms emerged. These platforms have become popular in a short period of time. Decentralized trading platforms, or DEXs, were an alternative to centralized trading platforms. Some security problems with ICOs and the complexity of IEOs (Initial Exchange Offering) led to the development of IDOs.
IDOs have a decentralized structure. These offerings were used as a platform to raise investment through the initial sale of cryptocurrency.
What Are the Advantages and Disadvantages of IDOs?
IDOs are a sale model on DEXs. IDOs have some advantages. These advantages are as follows:
- Since they are decentralized, there is no central authority in the sale process.
- Traders can participate anonymously by linking wallets.
- DEXs are less costly than CEXs.
Some disadvantages of IDO offers are as follows:
- DEXs have lower transaction volumes than CEXs. This makes price manipulation more possible.
- Generally, DEXs have less liquidity than CEXs.
What Are the Differences Between IDO and ICO?
The main difference between an IDO and an ICO is that ICOs are run by specific projects, while IDOs are run by decentralized trading platforms. Decentralized platforms control the digital assets to be offered for sale through IDOs and check their reliability. This is not the case with ICOs. In ICO, investors' assets are controlled by the project through smart contracts. In IDO, their management depends on the platforms.
Another advantage of IDOs is the rapid listing of the relevant project assets. When an IDO takes place, the relevant digital asset is listed on decentralized trading platforms. In ICO processes, on the other hand, it may take a while for the bought cryptocurrencies to be listed, or the assets may not be listed on a trading platform at all.
What Are the Differences Between IDO and IEO?
IEO refers to an initial coin offering process favored by centralized cryptocurrency platforms. Digital assets to be offered for sale in IEOs are subjected to a detailed security review by the platforms. Platforms that organize IEOs make a commitment to investors that they will list the cryptocurrency of the relevant project. The most important difference that distinguishes IDO from the IEO model is that it is based on decentralized platforms.
IDOs do not provide as much due diligence as IEOs. Developers often prefer the IDO model. This is because it is seen as a simpler method. In IEOs, participants are subjected to a detailed security review. In IEO models, users are assured that the digital asset will be listed on a platform. For this reason, IEOs are seen as a safer harbor compared to ICOs.
When an IDO takes place, the relevant digital asset is instantly listed on a DEX. Since IEOs are conducted by centralized platforms, participants' credentials are required by the platform. IDOs can only be participated in anonymously by connecting a digital wallet.
