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Guide on Crypto Fundraising in 2019

by Pragati Shrivastava
, Guide on Crypto Fundraising in 2019

From ICOs to STOs and IEOs, crypto fundraising is a changing landscape with new developments every few months. An increasing number of projects are inclined to raise funds in evolved ways and exchange platforms have become a part of the process with the launch of the latest method of fundraising – IEOs. Top global exchanges like Binance, Huobi, Coineal, and Bittrex are leading the way with their launchpad platforms.

ICO

ICOs have become a thing of the past. Back in 2017, ICOs were the most popular method of fundraising. In 2017, 875 projects raised over $6 Billion in funds through ICOs. However, the end of the historic bull run led to a decline in interest in ICOs.

The vast majority of projects that received funding didn’t enter the phase of development, and an even larger number failed to achieve the milestones mapped in the roadmap. In 2018, 1253 ICOs raised around $8 Billion, and in 2019, only 84 projects managed to raise a total of under $350 Million in the first three-quarters of the year. ICOs in 2017 and even in 2018 were controlled by greed and speculation to a great extent. Most people were looking at the industry as a get-rich-quick scheme while companies realized that they had the ability to generate hundreds of thousands in funding by just plagiarizing white papers and promising unrealistic returns to their investors.

However, ICO’s aren’t dead and the narrative that they have become obscure is overrated. There have been major ICOs even in 2019. Blockchain firm Algorand raised over $60 million in a token sale this June while Tron Game Global raised about $80 million in its ICO.

STO

STOs started replacing ICOs in 2018, but they came with unrealistic requirements to participate in one. Investors must be considered accredited by the United States Securities and Exchange Commission (SEC) to participate in STOs. Though STOs are backed by real assets, there is a high barrier of entry and SECs have drafted regulations that are nearly identical to a traditional initial public offering (IPO). However, STOs are more cost-effective than IPOs.

IEO

The popularity of IEOs in 2019 is the same as ICOs in 2017. Binance’s launchpad offered BitTorrent tokens in January and this inspired many exchange platforms to offer the same service. Post the ICO craze of 2017, retail users started to become wary of ICO scams. Users were looking up to established brands in the cryptocurrency industry to vet through the projects before they would participate in token sales and exchanges found it profitable to fill this demand of vetting through the projects before token sales. Users are outsourcing due diligence process to exchanges.

IEOs provide a fair playground to new and old players alike and the biggest advantage of IEOs is that users understand how the token works and its pros and cons.

Are VCs still funding crypto projects?

Venture Capital Investment has been coming in since the ICO craze of 2017. Notably, massive crypto projects like Circle and Coinbase received funding through VCs. In fact, in 2018 alone, VCs invested close to $3 Billion in crypto and blockchain-related projects. Despite blockchain’s decentralized nature, VCs haven’t stopped investing.

What’s next after IEOs?

Akin to IEOs, decentralized exchanges offer IDOs. RAVEN conducted an IDO on Binance DEX. However, IDOs have less traction compared to IEOs. Binance DEX itself has a daily trading volume of a little under $2 million.

The Crypto Fundraising Ecosystem

ICOs had many drawbacks and this paved the way for STOs and IEOs. IEOs are just ICOs with a new layer of intervention and regulation that attempts to ensure value and lower risks for participants. A decline in investor interest in ICOs can be attributed to the fact that there are several associated risks. However, IEOs are a middle path to ICOs and STOs.




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