Initial DEX Offerings (IDOs) are the newest way for crypto projects to get their tokens out to the public. Participants who bought into IDO tokens have made an average of 2,036% gains, and some are even far more. Crypto startups are stacking up to launch their IDOs on DEX platforms like Polkastarter, DuckSTARTER, SpacePort, BSCPad and a few other leading platforms. In other words, the Cambrian explosion we see today in DeFi has birthed yet another newer way of crowdsourcing funds if your business model has a token as part of its offering.
However, before the recent rising popularity of IDOs as a crypto crowdfunding model, there was ICO and later IEOs. Crypto projects rode these earlier fundraising vehicles to raise $13 billion and $1.7 billion for ICOs and IEOs, respectively.
Before we look at the opportunities and promises the IDO model offers crypto startups bootstrapping their projects using that means or even how better a model the IDO is over ICOs and IEOs, let’s hobnob a bit down memory lane.
Most ICOs were outright scams. A hefty sum of them was nothing but fugazis. As Satis Group LLC, a New York-based ICO advisory firm reported, 80 percent of ICOs were scams. Only around 8 percent of ICO projects went on to trade on the designated cryptocurrency exchanges most flagrantly displayed on their websites. Of these 8 percent that traded, 4.4 percent were classified as Dwindling, while 1.8 percent were labelled as Promising, and the rest 1.9 percent turned out to be Successful. Less than a 2 percent success rate? Another research by Ernst & Young found that 86% of leading ICOs launched in 2017 were below their listing price by October 2018.
Agreed, the ICO story wasn’t particularly one with a happy ending. A lot of people were burnt. And following crypto’s fast pace style, stakeholders in the space quickly introduced newer models. As it became clear that there was no headway through ICOs, even Vitalik Buterin observing the spate at which scams unravelled proposed a much better approach. Buterin advocated a rather decentralised ICO approach but with funds not released all at once. Notwithstanding, ICOs were not coming back.
Big centralised exchanges like Binance quickly capitalised on the constant search for a better funding approach and their vast user base to popularise the IEO model. Binance organised a series of IEOs on its launchpad, with many trader investors complaining of not getting their opportunity to buy in. Project tokens were sold out in literally seconds on Binance Launchpad, sparking off the rage of IEOs by 2019. OKEx introduced Jumpstart, Kucoin released Spotlight, Huobi released Prime. All these fancy name platforms were all in a bid to cash in on the IEO mania.
From large pre-mine to centralised exchange racketeering requiring huge listing fees, lengthy due diligence process, and whatnot, ICOs and IEOs were fraught with many irregularities that eventually led to their becoming less popular.
How about an ICO but this time launched on a DEX? That seemed like a better approach. As the DEX revolution gained ground, IDOs are now the best route for crypto projects. Raven Protocol initiated the first-ever IDO in 2019, shortly followed by projects such as Compound, UMA, and Curve. These have gone on to become household names as projects in their hundreds now launch IDOs on other platforms like Polkastater, SpacePort, DuckSTARTER etc., regularly.
IDOs are preferred because they provide projects with the opportunity of frictionless liquidity, immediate trading, significantly lower listing costs etc. No intermediaries mean a more open, transparent, and fair way to launch a new crypto project than the pre-mined ICO models of the past that rewarded founders to the detriment of token buyers.
But still, and as expected, no system is perfect. Even though it is miles apart better than its predecessor crowdfunding models, the IDO system still has its flaws.
Some of the existing IDO platforms are not entirely as decentralised as they preach. Some ask that you accept a mandatory lock-in period or even force you to accept specific token pairs. Many of them are not particularly easy to use, especially in terms of interface and UX. And of course, since IDOs are conducted on DEXs, some IDO participants have had to endure rug pull experience: a situation where project owners suddenly pull off liquidity for the token resulting in the sharp crash of such token prices. How about post-IDOs? Well, even after crowdfunding through an IDO, some of these projects still require a hands-on propping up if they even stand a chance of becoming an established project. How many projects listing and conducting their IDOs on giant DEXs as Uniswap gets noticed? Not exactly many. Let’s even say some of these projects are exploring popular DEXs like Uniswap to conduct their ICO To remedy these flaws, these IDO platforms are leading the charge.
Polkastarter is probably the hottest IDO launchpads at this time. With some of its success stories, including ExeedMe, Fire Protocol, and MahaDao, a report by BDC Consulting shows that IDO tokens from Polkastarter can realise as much as 2,700 percent ROI just by holding for a few days after the IDO event. In addition, the Polkadot-based DEX accounts for at least 26 percent of the IDOs listed on Coinmarketcap’s page. Although the DEX launched in December 2020, Polkastarter now has up to amassed 200,000 users, funded well over 40 crypto projects and its POLS token realising over $120 million fully diluted market capitalisation. Polkastarter IDOs are generally open to anybody, but you’ll need to hold at least 3,000 POLS to participate in the exclusive POLS-holders pools.
There's a limit on how many tokens IDO participants can buy (usually around $300 to $500 worth). Users have to be whitelisted to gain with each IDO allowed a maximum allocation; let's say $500,000 hardcap. As a highly sought after launchpad, the number of whitelisted addresses usually exceeds the number of IDO allocations necessitating a first-come, first-served (FCFS) basis.
SpacePort is a democratised open IDO launchpad built by Plasma.Finance. Launched in June, it is already gaining traction with one IDO conducted already, and many more queued up to take place in the coming weeks. In just four steps, blockchain projects can easily set up and launch their own initial DEX offering (IDO) on this truly decentralized IDO launchpad.
PlasmaFinance made sure to enshrine radical transparency into the design of SpacePort. Unlike most IDO platforms, you can see every single detail about the IDO displayed with real-time accuracy from on-chain data sources.
Recall earlier I mentioned the rigidity of most IDO launchpads, well, with SpacePort, the case is different. Crypto projects enjoy the wide leverage of customising their IDO and tuning it to their taste. IDO projects can use SpacePort’s Factory tool (a plug and play feature accessed directly from a dashboard) to create on-chain contracts that specify things like IDO stages and durations, vesting periods, and locked amounts. Projects can even maximise their IDO setup turnaround time even further by copying existing IDO templates on SpacePort. They enjoy the latitude of forking existing repositories on Github to retain their settings and tweaking a bit to suit their needs.
Research has shown that large presale investors who obtain tokens at a discount often flip part of their allocation shortly after ICO events to the detriment of smaller investors. Crypto startups offering IDOs on SpacePort and smaller investors wouldn’t have to worry about this kind of dumping scheme. Vesting and lockup periods are pre-built into SpacePort’s launchpad smart contracts preventing private sale investors from going rogue and selling against agreed terms (usually in stipulated time frames). This adds a layer of assurance and safety demonstrating to potential participants their willingness to commit funds and liquidity for the long term.
SpacePort also allows projects to open DEX pools for multiple funding rounds and setting the unique parameters for each of the rounds with ease. And as long as the soft cap is raised, project owners can close any of their IDO stages and immediately open a pool on PlasmaSwap and claim the raised funds.
In any case that the soft cap is not met, the smart contract will automatically refund users to prevent any losses. With the hands-on support I spoke about earlier, SpacePort interestingly offers an Incubator program where selected projects will enter the pre-IDO incubator and enjoy added services such as Advisory, Marketing/PR, Tokenomics and Tech Audit reviews.
DuckSTARTER is DuckDAO’s crypto launchpad for projects interested in crowdsourcing funds using the IDO model. After successful incubation, crypto projects can launch a token sale on DuckSTARTER and list their tokens on DEXs like Uniswap. The DuckSTARTER launchpad incorporates a deflationary mechanism for the DDIM token. Projects wishing to use DuckSTARTER will pay a small fee in USDC (the amount varies between projects). The USDC is then used to buy back the DuckDAO’s DDIM and DUCK tokens.
Since its launch in February this year, it has gained considerable traction. Bondly and Base Protocol are examples of crypto projects that launched through DuckSTARTER and became instant hits. Another project that launched through DuckSTARTER is Shadows ($DOWS), going ahead to generate a maximum return of 42.9x for participants.
The trajectory of the IDO model is proving to be a better approach for decentralised fundraising. Although it is still relatively new, it’s been 2 years since Raven Protocol conducted the world’s first-ever IDO, and it’s looking like the IDO space is just heating up.
More projects are looking to raise their next funding round through this model especially with the vast leverage and transparency it offers the stakeholders. One clear path for the further popularity of IDOs is the continuous growth of DEXs, which are the gateway to decentralised finance. As DeFi keeps growing and DEXs volume continues taking root to rival their CEXs counterparts, IDOs will gain more steam. It already offers a better and superior method of fundraising than ICOs and IEOs and now looking to outlive them.