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Initial DEX Offering - How Does IDO Work?

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Esmee
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In this post, we are going to check out Initial DEX Offering (IDO) and how does it work and where it is used. The aim is to give the simplified view of the IDOs so that anyone new to this concept can use this guide as a means to explore the essentials before diving deep.

First we will take a look at what is IDO and then we will see why do we need IDOs.

What Is an Initial Dex Offering (IDO)?

An IDO is basically a platform which is community governed and used for the crowdsourcing of funds. It is decentralized, permissionless and secure platform for acquiring funds from community.

IDOs can make use of crypto, NFTs or any other digital asset for it's crowdfunding. Think of IDOs as a progression from the Initial coin offering. Except the part where IDOs are permissionless and decentralized.

Why do we need IDOs?

The need for IDOs exists because ICOs (Initial coin offering) was limited in it's context. For example ICOs were restricting coins for it's presence. You were also limited in terms of the supply and exposure. It also required permission from existing exchanges for exposure outside. Some ICOs were not inclusive of the NFTs and the digital assets. Regulation is also likely to kill the ICOs of certain assets. All of those shortcomings are addressed in the decentralized way by IDOs.

What are the benefits of IDOs (Initial DEX Offering)?

There are many benefits of IDOs for the projects who choose to raise the funds through this model.

  1. No gatekeepers from ICO or Private would be moderating your crowdfunding.
  2. Secure fundraising and no tampering from private exchanges in funds.
  3. Less cost compared to private platforms or private crowdfunds.
  4. Quick liquidity through the platform for the initial offering.
  5. Faster trading at every step of the crowdfunding duration.

IDOs if used by the cross-chain DeFi platforms can even connect multiple assets across the blockchains. Which means bigger liqudity and easier to reach the crowdfunding pools.

What are the problems with the IDO system?

IDO is not free from economic and manipulation in the market. So here are some of the problems that are noticed so far.

  1. Whales in the market can manipulate price resulting in uncertainty in crowdfund.
  2. Trust is a big issue for anyone investing into the crowdfunding into coins released by anonymous people or even strangers having no footprint on web.
  3. Community governance is limited and so does the overall control on IDO.
  4. Fake and scam tokens can damage the governanceless crowdfunding model.
  5. Unreliable for genuine projects as it's hard to predict certainty of goal.

What are the Blockchains on which IDO can be developed?

Depending on the type of the blockchain that supports smart contracts or the ability of developing dApps, most of the blockchains qualify for the IDO and DEFI development.

Some of the blockchains that have already deployed IDOs are as follows.

  1. Polkadot
  2. Ethereum
  3. Binance Smart Chain
  4. TRON

More blockchains may follow the trend in near future. It is possible that almost every blockchain that has the DeFi hub or the SWAP functionality may make use of the IDOs for it's liquidity pools and the crowdfunding. NFTs are also likely to use this model for development of games, community funding under IDOs.

Conclusion

Initial DEX Offering (IDOs) can be a cost effective model for raising funds for your token. It can be used to back up some of the strong decentralized projects, it's tokens and also the asset based crowdsourced funding.

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