IDO or Initial DEX Offering is a way to raise funds to finance a project that takes place on a decentralized exchange. The project creates tokens and provides them to the exchange, which distributes and sells them. The decentralized exchange acts as an intermediary between the creators of the project and investors. All investors can participate in IDO.
The IDO is used by developers to get funding to develop a project. Before launching IDO, token creators must develop a project concept, create a development plan and write a technical description. All this data is transmitted to the exchange for verification and a decision on the launch. If the project is approved, then it gets on Launchpad.
Launchpad is a platform through which investors’ capital will be attracted to the project.
During the IDO, users who take part in it freeze their assets in order to later exchange them for tokens. IDO is not a listing of tokens on an exchange. Technically, investors do not buy coins, but a receipt for receiving tokens after they are generated. For simplicity, when using the word IDO, they most often talk about buying tokens, because in the end, investors get them anyway, and all the nuances are omitted.
One part of the funds collected during the IDO is transferred to the project developers. The other is used to create a liquidity pool with the token.
The liquidity pool is the place where the tokens are held, which are used for transactions on the exchange. Typically, liquidity pools contain two coins. For example, the liquidity pool of the ETH/BNB currency pair will contain both coins. Through pools, one token is exchanged for another.
To participate in IDO, you need to register on the waiting list (whitelist).
Investors who participate in IDO receive tokens at a fixed price, which is set in advance. After the listing of the coin, the rate will change depending on supply and demand.
Before participating in IDO, it is very important to analyze the tokenomics (who, when and how many coins will receive), this can be done on the sites where the placement will take place.
HOW IS ICO DIFFERENT FROM IDO?
IDO is not the first method of selling tokens before they go public. Before him, another way to attract investments appeared – ICO.An ICO is an initial coin offering and essentially performs the same function as an IDO, but there are a number of key differences between the two.
For example, the venue for the ICO is the platform of the project. The listing is also organized by its creators, there is a commission for listing, there is also a risk of not listing. Smart contracts are also on the project.
And in IDO, the exchange deals with all of the above, there is no commission for listing and the risks are very small.