Since its inception, blockchain technology has positioned itself as the decentralized answer to brick-and-mortar gatekeepers at the helm of nearly every industry. From its increased role in trade finance, issuing securities, and even lending, distributed ledger technology (DLT) is helping replicate the tools of traditional finance in a much more open format that eschews intermediaries and rentiers.
Even the initial public offering (IPO) has been reimagined for the blockchain arena, with the latest iteration known as the Initial Exchange Offering (IEO). Earlier versions of IEOs, known as initial coin offerings (ICOs), were launched with varying degrees of success. However, the unregulated nature of these offerings and lack of any meaningful oversight made it ripe for abuse and fraud. (See TipRanks’ IPO calendar)
ICO websites were frequently compromised by hackers changing wallet addresses and absconding with investor funds. Moreover, many offerings were shams, posing yet another fraud vector. In response to the misuse, crypto exchanges pioneered the self-regulatory IEO mechanism to give greater assurances to investors by incorporating due diligence and KYC (Know Your Customer) processes. Just like any IPO must undergo an underwriting process, an IEO faces similar hurdles.
With an IEO, the exchange (or exchanges) acts as the counterparty, meaning that any investor buys a project’s token from the exchange directly instead of using a smart contract. Exchanges already feature a captive user base, making the marketing of these new listings that much more straightforward.
Projects can therefore leverage the exchange’s scale while also benefiting from their embedded KYC protocols. With the exchange shouldering the KYC burden, individual projects don’t need to handle customer verification and compliance. Most importantly, exchanges feature much more sophisticated security protocols, adding assurances for investors seeking access to new token listings.
The Leading Launchpads
In response to demand for IEOs, exchanges and other platforms have answered the interest with “launchpads,” which effectively represent crowdfunding destinations used to launch these new token offerings. Although the field is growing increasingly crowded, some of the listing destinations are highly promising.
For example, Lemonade is one of the first projects launched under the Jigstack DAO (decentralized autonomous organization) umbrella. This DeFi-focused token launchpad is permissionless and designed to automate the process. The idea is to minimize the complexity, enabling excellent accessibility for users with limited technical understanding while also removing unwanted intermediaries from the process. Besides this aspect and automated whitelisting feature, the platform safeguards investor and project funds through smart contracts and a third-party token bank.
Another promising launchpad is SuperStarter. Operating as SuperFarm’s native launchpad, SuperStarter is an entirely decentralized protocol that helps projects facilitate presales and public IDOs (initial decentralized exchange offerings) that are secure and compliant. Its decentralized project approval process adds a layer of due diligence that benefits the community’s investors. In addition to token offerings, SuperStarter supports projects with access to marketing, development, and advisory tools. One of the best advantages is its compatibility with multiple networks, including Ethereum, BSC, Polkadot, Cardano, Polygon, and Solana.
A newer entrant, TRONPAD, is still in the development phase and the product of a collaboration between BSCPad (the largest Binance Smart Chain-based IDO platform) and TRON. Designed for the TRON network, TRONPAD will support projects that wish to list on the network. The platform aims to be as inclusive as possible while maintaining a high degree of security and fairness.
PolkaStarter is another good choice. Designed to support cross-chain token auctions, PolkaStarter is a purposefully designed platform for projects seeking to fundraise on a Polkadot-based environment. This decentralized exchange helps many different protocols and blockchains communicate and transfer value between them. Besides permissionless listings, there is a full KYC integration and a forthcoming DAO governance model. Ultimately, this architecture delivers added value and scalability for users, and its prowess has been evident after the platform hosted multiple successful token listings.
Lastly, DAO Pad is a good choice for DAO Makers. To support DAO Maker community members, investors can stake DAO tokens to participate in multiple types of fundraising events hosted on the DAO Pad launchpad. By connecting a wallet and undergoing the KYC process, potential investors can register for token sales hosted on the platform. Individuals who want to participate in an auction are selected based on a lottery. Those who stake a more significant amount of DAO tokens improve their odds of winning a token allocation.
A Better Way
IEOs offer a safer way to invest in tokens, significantly reducing the likelihood of being scammed in the process. This most important advantage of this new trend is the sense of trust it engenders.
Disclosure: Reuben Jackson held no position in any of the digital assets mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell blockchain or its related products.