The Problem With IEO’s

The ICO space in the bull run of 2018 was a great space. We seen the likes of Icon, Zilliqa, Wanchain and others. In this time, ICO’s were held by the token issuers themselves. This provided a space where investors had to do research, be on the hunt for good projects, read white papers, check GitHub, join the whitelist, contact teams and communicate with peer networks. We had to DYOR. The result in many cases was an investor space built up of people who found something they truly believed in. They were invested not only on a monetary level but on a fundamental level. This creates a space where people are willing to hodl through the rough times and in some cases add more to their holdings, buying dips. It would also create strong communities as hodlers of a project would get involved in the project in some way. Getting into the ICO also worked better for everyone because the fundamental basis of an ICO is to get in early. The earlier you did your research and joined the whitelist was the better chance you had to meet the white list before the closing date or beat the rush before it was full. ICO’s truly gave the small retail investor a way to get in. It was fair and just.

In the current day, there has been a hype train of IEO’s or Initial Exchange Offerings. Where as centralized exchanges have usurped the ICO and turned it into the IEO. Taking the “best” projects and giving them a platform to hold the IEO on. For example, Binance or Kucoin may get a project and make a deal to host the IEO for them on the exchange. But this hype train is flawed in its logic to say the least.

Heres why:

1. IEO’s take away from the investor. Hands down.

The point of crypto is that it is supposed to be for the benefit of the people. ICO’s give the people a way into VC/Angel style investing, where as in traditional investing, one has to be an accredited investor to have access, in other words you have to already be rich to get richer. With the ICO it’s open to all, anywhere in the world as it should be.

2. IEO’s do not benefit projects.

It might seem like it does on paper. But in the grand scheme of things, IEO’s only harm projects, why? Because over all, IEO’s simply do not work. IEO’s are plagued with bots (of both the coded and human varieties) buying up the IEO within seconds. There is no whitelist so early investors have no way of securing a position. It ends up being a free for all for any user of the exchange. This hurts the image of the exchange but also the project as investors get frustrated both with the exchange and with the project. Market sentiment as of late is not happy with IEO’s or the exchanges that hold them. The performance of these IEO’s paint a picture of this.

Bread (BRD) Had its IEO on Binance.

BitTorrent (BTT) Had its IEO on Binance.

Celer (CELR) Had its IEO on Binance.

Fetch AI (FET) Had its IEO on Binance.

Multivac (MTV) Had its IEO on Kucoin.

And yes, we know this is in a bear market. However, there have been ALT Coins that have made good price action even in these times. The problem with some of these IEO’s is that the sentiment has turned negative after the token sales and investors are shying away from what would otherwise be great projects.

3. Not many people can get in.

And are left with bags of exchange coins which dump the very second the IEO finishes (sometimes earlier) leaving the investor to have to hold and wait for recovery which can take weeks to months. Whats worse is that now, IEO’s have been reduced to a lottery system on Binance. This is reducing the IEO investors to “lottery winners” rather than actual investors who believe in the project and know what the project aims to do.

4. It’s a huge pump and dump for exchanges.

Exchange coins have to be bought to participate in the IEO. This pumps up the price, earlier holders of the coin can then just dump on the IEO hopefuls who probably wont get into the IEO anyway. In fact, this is a growing trend where investors will buy exchange coins weeks before an IEO and dump the day of the IEO.

5. This is NOT Satoshi’s vision.

This space is supposed to be predicated on decentralization. Why are we letting centralized exchanges take this space over? ICO’s provide a significant stream of funds into cryptocurrency. It’s the reason a lot of people join the space at all. The potential to make significant gains in this space is very important to the growth of cryptocurrency as a whole. Why would we let this be usurped exchanges? I believe Satoshi would not approve. We need more DEX’s and we need projects to go back to the original format of ICO’s.

For the projects out there with ambitious teams, great fundamentals and ideas to change the world. Consider holding an ICO instead of an IEO. It’s time we threw this IEO fad in the trash where it belongs and go back to doing it right with white listed ICO’s. And to the investors, we need to boycott centralized IEO’s on greedy exchanges. They are not fixing any problems by hosting IEO’s, all they are doing is taking over something that should be open for all to join into if they can do the research and get in early.

Categorised in: Cryptocurrency Markets

This post was written by BlockAdvisor