What is an IDO Launchpad? [IDO Pluses and Minuses]
The crypto asset market is constantly replenished with new tokens, coins or financial projects related to digital money. Usually, organizers use their own funds for investments and project development.
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Additional investments are attracted through the sale of project coins through a preliminary issue. This method of fundraising is called a token sale. Since mid-2019, the cryptocurrency IDO — the initial decentralized exchange (DEX) offer — has become very popular.
In this article, we will tell you in more detail what is an IDO launchpad and what its advantages are, and present several representative examples.
Previously, we’ve talked about crypto launchpads in detail here.
What is an IDO?
An IDO (Initial DEX Offering) is one of the effective mechanisms for attracting investor funds through the use of a decentralized exchange platform. For the first time, such a financing model was implemented on June 17, 2019. Within one day, 3% of the total number of Raven Protocol tokens were sold on the Finance DEX exchange. The altcoin’s price remained unchanged during the token sale and amounted to 0.00005 BNB.
Thanks to the high authority of Binance, the global crypto community drew attention to a new method for obtaining financial assets from investors. As a result, many projects have decided to raise funds for product development with the help of an initial decentralized offer. According to CoinMarketCap, as of June 2021, this type of token sales accounted for 60% of the total number of options.
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The difference between IDO, ICO, IEO, and STO
Since cryptocurrencies have existed, several schemes for attracting monetary resources have been developed. Among the most common are ICO, IEO, IDO, and STO.
At first, project organizers developed an initial coin offering model to attract money.The ICO was launched in 2013, and for four years this method gradually gained popularity since this investment approach was new for people.
The ICO peaked in popularity in 2017, when it raised more than $5.5 billion. However, at the end of 2018, due to many fake versions (more than half of the registered offers in the last quarter), the credibility of this method of attracting finance was undermined.
The second attempt to create an optimal protocol for the initial offer of digital coins was Security Tokens (STs). According to the developers, they were supposed to protect investors’ investments and give the ST-holder the right to own a share in the proposed business.
An IEO, or Initial Exchange Offer, is a sale conducted by a cryptocurrency exchange. This token sale is very similar to an ICO. The main difference is that the exchange specialists carefully check the project.
If traces of fraud, obvious technical errors in the code, or facts indicating the “dampness” of the startup are found during the audit, it is rejected. Exchanges take care of their reputation and try not to mess with an outright scam.
Many experts from the cryptocurrency world have stated that this method is most suitable for all parties to the agreement. But there are also some inconvenient points. For example, IEO implies mandatory verification (KYC) for investors, and companies launching a new altcoin must pay a lot of money to exchanges for listing.
IDO is the latest model for attracting crypto finance. Therefore, we tried to combine all the positive things from ICO, IEO, and STO during its development and avoid their shortcomings.
Who organizes an IDO, and how does it happen?
An interested visitor to a decentralized exchange can register a new virtual coin after activating a certain smart contract. After providing liquidity to the pool, the token issuer can organize a token sale. If the project passes the test (to filter out the scams), then the process of raising capital is launched directly. This can take place both on a decentralized exchange and on launchpad platforms.
How do IDO launchpads work?
The launchpad is a specialized internet platform raising money to launch crypto projects. The difference between the launchpad and the classic initial decentralized offer is that such platforms are no longer connected to the exchange.
Instead, they are represented by a community of investors who must have, convert, and deposit internal tokens of the project (for example, Polkastarter has Pols, Binance has BNB, DAOMaker has Dao Power, and BSCstarter has Start). Owning such coins allows you to participate in crowd sales and, in some cases, vote in financing certain projects.
Investing in IDOs
The main objectives of capital investments in any field are maximizing profits and minimizing the risk of losing money. The opportunities provided by IDO cryptocurrencies are very great. With the correct assessment of the next startup, it is possible to increase the initial capital several times (sometimes tens or even hundreds of times) in a relatively short time. If you choose launchpad platforms as an investment tool, this will significantly reduce the risks. In addition, some projects provide insurance against the loss of invested assets. In case of failure, the investor will not receive the expected profit but will not lose the fixed capital.
The cryptocurrency market is very young and subject to significant fluctuations. However, with a certain amount of luck and correct analytics, such conditions allow you to get high profits.
Advantages and disadvantages of investing in IDOs
As in any commercial project, participation in the token sale has its positive and negative sides.
Initial DEX Offering pluses:
- Quick listing. Token holders usually do not have to wait long for the coins to start trading on the exchange. Listing occurs as soon as the IDO of the crypto ends.
- Availability. The simplified reliability verification procedure allowed a much larger number of startups to raise the necessary money.
- Transparency. This item is not unique in the cryptocurrency environment. But it’s still convenient to be able to check the token contracts and adjust your plans.
- The downside of accessibility. Not very clear criteria for verification lead to the appearance of fictitious projects.
- Forced purchase by users of many launchpad tokens makes participation more expensive.
- Lack of coin price control mechanisms. This situation leads to the fact that is using special software (a trading bot), you can buy more coins at the base cost.
The list of IDO launchpad platforms
The IDO launchpad and incubator KickPad is equipped with anti-fraud features and supports simple transparent presales with guaranteed distribution. Liquidity is blocked on the Binance SmartChain. Smart contracts automatically add and block liquidity after the presale is completed, reducing risks and increasing investor confidence.
Users can create their own sales pools, choose which part of the revenue will be added to the KickPad liquidity and how long the project will blow liquidity. All actions are automated. KickPad also collaborates with projects, helping them with marketing, strategies, market-entry, technical advice, etc.
TronPad is the only IDO platform built based on the Tron blockchain. It provides cryptocurrency projects with the opportunity to distribute tokens and increase liquidity. It all started with the success of the BSCPad platform. The team has entered into a partnership with Tron and implemented its popular solutions with a low barrier to entry into IDO, which stimulates and rewards token holders fairly.
TronPad solves the problem that most launch sites require the purchase of a certain number of tokens for participation and automatic bots buy up the entire volume of tokens in a matter of seconds. TronPad aims to achieve honest decentralized sales. A distinctive feature is a two-round system with a public lottery without the need to hold tokens. One round is intended for lower levels of investors, the other for higher ones.
BSCPad is very similar to TronPad. But it works with the Binance Smart Chain. Moreover, it is the first decentralized IDO platform for the BSC network. It provides an opportunity for cryptocurrency projects to distribute their tokens and increase liquidity. The solution for stimulating and rewarding token holders is designed in such a way that it reduces the entry barrier as much as possible and at the same time is comprehensive.
The system gives users incentives to accumulate and store tokens and support for running projects.
The investment partner of the platform is BlueZilla. This fund specializes in promoting innovative ideas, from concept to completion, with the help of consulting, development, marketing, and legal support services.
An IDO is a convenient option for interaction between startups and investors, which significantly speeds up the transition from investing to trading or liquidity supplies.
This is also extremely convenient for the projects themselves: there are many more opportunities to configure the sale parameters than on centralized exchanges and fewer listing costs. This is another example of how blockchain technologies are changing the field of entrepreneurship and opening up new earning opportunities for ordinary users.
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