IDO is a new fundraising method in the Crypto industry that investors need to understand.

In recent years, the cryptocurrency and digital economy markets have seen the emergence of new fundraising methods that are safer and more transparent than traditional approaches. In this article, we will delve into the topic of IDO, which is a fundraising system that is gaining popularity among blockchain technology projects. To fully understand what IDO is, it is necessary to compare it with other methods such as ICO and IEO to see the progress and development.

Structure and Principles of IDO

Initial DEX Offering or IDO is a fundraising mechanism that emerged in late 2020 when decentralized lending systems (DeFi) began to attract market attention. This method uses decentralized exchange platforms to sell new tokens to distribute them fairly to the community.

The mechanism of IDO relies on Proof-of-Stake technology, where investors must lock their assets into a pool (Staking) to demonstrate commitment and increase their chances of participating in new services. This operational model also helps prevent rapid token sales by certain investors, which could cause initial price volatility. It is an effective way to control the token supply in the market.

Why is this an important innovation?

IDO represents an evolutionary step in crypto fundraising because, firstly, it allows startups to access funding quickly without going through complicated verification processes. Secondly, IDO fundraising is more transparent because smart contracts and all transactions are recorded on the blockchain, which can be verified by all users.

A notable example of a successful project is SushiSwap, a token exchange platform operating on the Ethereum (ERC-20) network, which has raised over $1.14 billion USD. This project demonstrates the potential of IDO to create value and generate liquidity in the market.

Comparison between ICO, IEO, and IDO

To understand how IDO is a progression from the two previous fundraising models, let’s look at the differences among them:

ICO (Initial Coin Offering) is the earliest form of crypto fundraising, where projects sell tokens directly to investors via their website or platform. The downside of ICOs is the high risk of scams and lack of third-party verification.

IEO (Initial Exchange Offering) was developed to address ICO issues by selling tokens through centralized exchange platforms (Centralized Exchange). These platforms act as intermediaries and verify projects to increase credibility, but some central control remains.

The latest development, IDO (Initial DEX Offering), offers true decentralization. Tokens are sold via decentralized exchange platforms (Decentralized Exchange) using smart contracts, with no central intermediaries, providing equal rights to all investors and maximum transparency. This makes IDO a much better option for both projects and investors.

Steps for New Investors to Participate in IDO

If you want to invest in an IDO, the process is not as complicated as it seems, but caution is essential.

First, you need to prepare a compatible digital wallet (Wallet) with the DEX offering the IDO, along with tokens for locking to participate. This is a fundamental prerequisite.

Second, thoroughly research the project, including technical documents (Whitepaper), the team, and business plans. This is a crucial decision that can help reduce risks.

Third, pay attention to using only official links and platforms, as fake products and scam websites are common. Carefully verify URLs and smart contract addresses.

Fourth, choosing reputable DEXs like Uniswap or PancakeSwap increases the chances of obtaining genuine tokens.

Fifth, carefully read the lock-up and vesting schedule (Vesting Schedule), as some tokens are locked for a long period after the IDO ends, making timing an important factor.

Risks and Precautions

Although IDO is a better fundraising method, it is not without risks. The main concern is scams (Rug Pull), which can occur if the team withdraws funds and disappears. Additionally, there is price volatility risk when tokens are launched on DEXs.

Investors should have a deep understanding of token economics (Tokenomics), including coin distribution, inflation rates, and total supply, to make informed investment decisions.

Summary

IDO is an innovative fundraising approach suitable for today’s era, thanks to decentralization, transparency, and easier access. It has become the new standard in the crypto industry. Investors interested in IDO should conduct comprehensive research and choose trustworthy platforms. Understanding what IDO is and how the system works is fundamental for developing effective investment strategies. As the DeFi market continues to grow, IDO will remain one of the most powerful and attractive fundraising tools.