Our Archive

Welcome to your Archive. This is your all post. Edit or delete them, then start writing!

IDO-initial dex offering crypto exchange

An initial DEX offering (IDO) is a decentralised fundraising and bootstrapping method for crypto startups that is growing in popularity. It is in some ways a natural successor to the initial coin offering (ICO) or the initial exchange offering (IEO) that have been hugely popular in recent years.

The crypto world is still very much in its infancy, highly experimental and constantly evolving. 

As in the world of traditional business and especially startups, new crypto projects need to raise capital to fund the development and marketing of their tokens and services. 

One of the original and biggest funding methods has been initial coin offerings (ICOs), something akin to an initial public offering (IPO) in the traditional business world. 

ICOs certainly helped the likes of crypto giant Ethereum get going in their early days. 

Next came the initial exchange offering (IEO) which is a centralised form of crypto fundraising and of course, now we have the initial DEX offering (IDO), a new type of decentralised funding process used mainly by DeFi crypto startups at the moment. 

Below we briefly talk about ICOs and IEOs to help you get a better idea of what each one does and hopefully help you to make better sense of what IDO crypto is in relative terms.


Initial coin offerings (ICOs)

Initial coin offerings (ICO) provide a means for aspiring crypto projects to raise money directly via the organisations creating the new tokens/services. 

In an initial coin offering, there is no central body to verify the legitimacy of a project. The founders of the project would typically produce a whitepaper, something similar to a pitch deck, business plan or prospectus in the traditional business world and they would sell their tokens directly to people who think the idea is good and want to get in early.

In the traditional business world, it would be a little bit like a startup directly approaching investors and offering them shares in their company.

Investors wanting to get in early would take a risk and become investors/shareholders only here they hold tokens and not shares. 

It is important to note that, unlike IPOs, initial coin offers (ICOs) are not regulated and therefore even more risky. 

Whilst a huge amount of funding has come about via initial coin offerings there have also been a huge amount of frauds, scams and poor performers. 

This is due in part to the fact that just about anybody can issue an ICO. In recent years the initial coin offering has been getting less popular, paving the way for the Initial Exchange Offering and most recently the Initial Dex Offering.


Initial exchange offerings (IEOs)

This leads us nicely to initial exchange offerings (IEO), they are also unregulated, however, there is a central organisation in place (an exchange) such as Binance, Kucoin or  Huobi that performs some due diligence on the project before allowing the IEO and offers tokens to its existing user base. 

This of course makes things a bit safer for early investors. Aside from the due diligence or whitelisting process, another advantage of the IEO is the increased probability that a token will be listed on said exchange.

In comparison, with an ICO there is no certainty that a token will get listed at all and there is no independent due diligence. 

At least with an IEO, if an exchange is performing an IEO there is a more than fair chance that the token is going to get listed on the exchange and increase the chances of success and importantly, gain instant liquidity.


Unlike ICOs and IEOs, tokens are released after the IDO

Now, let’s move on to the IDO. In both of the above examples, the initial coin offering and the initial exchange offering, tokens are sold prior to the listing. Initial DEX offerings are different. They are sold and issued after.


Initial DEX offerings, what are they?

Now that you have a bit of background info and understanding of what ICOs and IEOs are it´s easier to understand what an initial DEX offering is and how it is different. 

Let’s get into IDOs and what they do.

Initial DEX offerings are in contrast decentralised and are instead promoted by specialised platforms called launchpads. 

This is one of the fundamental differences between the IEO and IDO, the IEO is a centralised exchange whereas the IDO uses a decentralised exchange but is promoted by a 3rd party launchpad. 

IDOs also tend to raise relatively smaller amounts when compared to ICOs. The ICO would be similar to a company going public via an IPO and raising a huge amount of money whereas an IDO could be similar to a company raising a few million via crowdfunding.

So, you could think of IDO launchpads like crowdfunding platforms such as Kickstarter but for crypto and instead of the IDO taking place entirely on the crowdfunding platform, it takes place on a decentralised platform. 

If a crypto project would like to raise capital they can approach a launchpad like PolkaStarter or Dao Pad. 

The beauty is that launchpads are gatekeepers and decide who can promote a project and promote an IDO on their platforms and therefore they need to ensure quality and credibility. 

For investors looking to get in really early, these launchpads and IDOs provide quite a nice and perhaps slightly safer vehicle when compared to the ICO. 

Additionally, IDOs are relatively less expensive and also make it a little easier for smaller investors to get in early. They also tend to be less expensive for the project operators in terms of fees.


How do initial DEX offers (IDO) work?

Unlike with ICOs and IEOs, IDO-issued tokens are not pre-sold, instead, prospective investors create a sort of IOU within a pool by contributing their funds in the form of crypto, say BTC or Eth. 

In other words, they pay for their tokens in advance. Once the IDO has been completed the tokens are issued and this event is called a Token Generation Event (TGE). 

Usually, within a matter of hours, they are instantly liquid when they are listed on a decentralised exchange such as Uniswap.

Uniswap is popular as currently the majority of projects are built on Ethereum and their tokens are based on the ERC20 protocol standard. 

Still, not all the action is taking place on say Uniswap/Ethereum. 

Other blockchains are growing in popularity including Polkadot, Binance Smart Chain (BSC) and Solana. 

Some projects prefer to launch their tokens on blockchains such as these to avoid the high network fees on Ethereum. 

In this case, the token would be listed on native exchanges such as BSC´s PancakeSwap as an example.


A new trend, multiple launchpads and multi-chain IDOs

As IDOs evolve, there is a trend developing towards projects launching on multiple launchpads in order to be on more blockchains and thus attract a wider range of investors. 

For example, a project could perform an IDO on an Ethereum-based platform and another or maybe even on several other platforms built on Polkadot, Solana or Binance Smart Chain as examples. 

Users can then choose where they would like to participate and the project improves its chances of a successful raise.


The instant and powerful marketing and community-building effect of IDOs

One of the major benefits of IDO crypto projects is the almost instant marketing and community-building effect. 

As in the traditional business world, if nobody knows about your startup it’s difficult to successfully raise money or grow. 

Think of crowdfunding campaigns on platforms like Kickstarter or Seedr, the successful ones almost always have a fair amount of marketing / PR / social media running behind the scenes drumming up awareness of their crowdfunding campaign. Something similar happens in IDOs but in a slightly different way.

Due to demand for IDO tokens tending to be high, the launchpad platforms can only allow a limited number of users to participants and as a result can only provide a very limited size allocation, typically only a few hundred dollars worth each. This process is called whitelisting.


Whitelisting and participation in IDOs

To this end, every single IDO out there goes through an extensive whitelisting process that narrows down the participants to a supported maximum. 

To be eligible for being whitelisted, users often need to perform various marketing tasks, which can typically include joining the projects Telegram chat, retweeting and commenting on a projects tweets and also liking a project on its social media platforms. 

This can rapidly elevate awareness of a project and community growth which can not only help a successful IDO fundraise but also help the project to more rapidly gain traction. 

It is not uncommon to see a future IDO project gathering over 100,000 followers on Twitter and as many people in their Telegram groups in just a matter of days. This is in itself pretty phenomenal.

Another whitelisting criteria can be for users to hold a certain amount of tokens that are native to the launchpad´s platform itself. 

As an example, the IDO platform PolkaStarter has two pools, one is open to everyone and the other is only for the participation of POLS holders. 

Naturally, the competition for allocations is considerably less. 

As IDOs are getting increasingly popular it is becoming clearly beneficial to be a token holder in the launchpad and have a better chance of getting in on the hottest new crypto projects. 

In many cases, the number of native tokens you hold in the launchpad can help to increase your probability of getting an allocation and also the size.



In summary, the IDO is the latest evolution in crypto fundraising and is perhaps in many ways an improvement on its predecessors, the ICO and IEO. 

Crypto is a rapidly changing landscape and this rate of rapid change, evolution and adoption of new techniques, projects and methods can make crypto very exciting indeed. 

The IDO is something that investors should certainly be aware of and can potentially offer access to promising early-stage crypto projects that are independently vetted, the IDO can be especially beneficial for smaller investors if they are able to get in on IDO projects in time and all being well, benefit from the rapid growth that will hopefully follow.

Ready to go take your SEO content to the next level? Request our free site audit

Read More

A CEX is a centralised exchange run by a 3rd party organisation that facilitates the buying, holding, exchanging and trading of crypto. 

A CEX is designed to be simple to use and in most cases makes the exchange to and from fiat currencies pretty easy and straightforward.


Okay, so you´re thinking of getting into crypto, where do you begin? 

The easiest and most convenient, especially for a crypto newbie would be via a centralised exchange also known as a CEX. 

Here you can buy your choice of crypto using a regular fiat currency like the EURO or US dollars.

Just as with a bank or a brokerage house, you have an account and in this account sits your crypto. 

The account allows you to trade that crypto with other crypto and whenever you like exchange that crypto back into a regular fiat currency.


The origins of the centralised exchange (CEX)

If you think the current world of crypto is the wild west, think again! In relative terms, we are nowhere near the kind of wild west scenario that was around in the very early days of Bitcoin. 

In order to understand the centralised exchange (CEX), we need to first go back to the genesis of crypto, Bitcoin.

When Bitcoin was virtually worthless and could be mined on a personal computer the only ways of getting it would be either via mining or by buying it from other Bitcoin holders. 

This initial buying and selling was somewhat risky and far from straightforward. It would usually require communicating via a forum like Bitcointalk which was set up by Satoshi Nakamoto, the mysterious inventor of Bitcoin. 

On that forum, early bitcoin enthusiasts could discuss, buy and sell bitcoin but there was no proper exchange in place. 

Of course, in those early days the stakes were low as bitcoin was virtually worthless, for example in 2010, Bitcoin peaked at $0.39, I´ll let that number sink in for a moment!

As bitcoin grew in popularity the need for some kind of centralised exchange was recognised and the seed for the first exchange was planted paving the way for the centralised exchanges and the crypto world that we know today. 

Interest in Bitcoin continued to grow and new ways of getting it started to appear. A core bitcoin developer, Gavin Andreson created a Bitcoin “faucet” ( a tap in British English).

It was a website that would give anyone with a Bitcoin address five bitcoins for free. It was around this time that the first bitcoin exchanges emerged. 

Bitcointalk launched Bitcoin Market in 2010, it offered a floating exchange rate for bitcoin and buyers could purchase bitcoin by sending another user US Dollars via Paypal during which time Bitcoin Market would hold the sellers’ Bitcoin in Escrow until the seller received their money. 


This got the ball rolling…


Things began to heat up and before long crypto highway robbers made their first appearance!

As crypto increased rapidly in value, the criminal elements began to take an interest, after all this was indeed a wild west environment with no regulation, no armed security guards or secure infrastructure in place, easy pickings!

A notable example of one of the first major crypto heists was Mt.Gox, an early centralised exchange created by Jed McCaleb in 2010 who would later go on to co-found both Ripple and Stellar. 

McCaleb sold Mt.Gox in 2011 and in that same year one of the first major crypto heists occurred on Mt.Gox where an account with a significant holding was compromised, allowing the hacker to sell the crypto causing the price of bitcoin to fall from $17 to $0 within a few minutes. 

The hacker also stole personal information forcing the exchange to temporarily go offline. However, by 2013, Mt.Gox was in full force handling 70% of all global bitcoin transactions.

Mt.Gox was the first of many crypto hacking victims, other major centralised exchanges to be hacked included Binance, Bithumb, Bitfinex, Poloniex and ShapeShift. 

The vulnerabilities of centralised exchanges to hacking attacks gave rise to the well-known and used mantra “not your keys, not your crypto”. 

What does that mean you ask? Well, very simply, unless you hold and secure your private keys yourself, your cryptocurrency is potentially vulnerable to criminal hacks. 


Let´s look at the centralised exchanges (CEX) of today

Some of the most popular centralised exchanges of today include Coinbase, Binance, Kraken, CEX.IO, Gemini and Bittrex. 

Compared to the early days of bitcoin where the trading volume was pretty tiny, these days we are talking massive numbers, in 2021, centralised exchanges recorded in excess of 2 trillion US Dollars in trading volume. 

That’s pretty amazing when we think that bitcoin and crypto only appeared on the scene in 2009!


The centralised exchange (CEX) as a physical marketplace

To look at the centralised exchange in a non-technical way we could imagine it like a physical marketplace owned and operated by a central 3rd party. 

People would store their goods in a large warehouse and the marketplace owners would facilitate trades between the owners of the goods in exchange for a fee. Pretty straightforward. 

If the warehouse was broken into by thieves they could make off with all the goods leaving the owners of the stock quite vulnerable. 

For small traders, perhaps it wouldn’t be too risky, but with large traders with a lot of stock, it could be a bit too risky. 

To reduce this risk these big traders could keep the majority of their stock in their own private warehouse and just add more stock to the central marketplace as and when needed. 

This would be a lot safer as not all their stock is at risk, however, the downside would be that they would not be able to immediately trade the goods that are sitting in their private warehouse. 

Well in crypto-centralised exchanges, something similar exists in the form of hot and cold wallets.


Custodial hot and cold wallets

With a centralised exchange (CEX), the crypto is held in what are known as custodial wallets, in simple terms this means that the centralised exchange is responsible for your wallets and the crypto you hold. 

As a customer, you do not hold a private key and therefore have no direct control over your crypto and its security. 

Think back to the “not your keys, not your crypto” scenario. Security of your assets is of course a major consideration and to make things a little less risky many centralised exchanges offer what are known as hot and cold wallets.

A hot wallet is directly connected to the internet, the “hot” and could potentially be vulnerable to outside attacks from hackers. 

Hot wallets however are fast as the crypto is immediately available for trading. On the flip side, a cold wallet is not directly connected to the internet, the “cold” and in the event of a hack, the attackers cannot get access to the cold wallets private keys which makes things a lot safer. 

There is a downside though, that is time and timing is pretty crucial in crypto trading due to the immense volatility. 

The crypto in a cold wallet is not immediately accessible for trades, the funds need to be first transferred to a hot wallet for trading. This could pose a disadvantage if the crypto is sitting in a cold wallet and you need to trade out really fast.


The centralised exchange (CEX) has a permanent bullseye on its back

As we have seen above, centralised exchanges are big business, over $2 trillion to be precise, this is naturally going to draw the gaze of both criminal organisations and governments as they are in many ways a perfect target. 

Centralised exchanges are a very attractive target for criminals for both the theft of crypto but also the theft of user data. Governments on the other hand, scrambling to find ways to maintain control over the money system and trying to bring about regulation would naturally make centralised exchanges their first stop. 

This is naturally quite disconcerting for the users of these exchanges, especially if they are holding large amounts of crypto.


What about alternatives? CEX vs DEX

Well, an alternative exists in the form of DEX, a decentralised exchange. 

Firstly, crypto is itself decentralised, but the buying, selling and trading of crypto is centralised when you use a CEX. 

A DEX, however, is decentralised, there is no central entity to hack and no central entity to seize by governments. 

Well, that fact has not been lost on the crypto community and decentralised exchanges are flourishing and not only that, challenging the established centralised exchanges pretty heavily.

In May 2021, the leading DEX, Uniswap processed over $76.9 billion in trading volume. Sushiswap did $23.4 billion and Ox Native did $12.8 billion. 

No small numbers. Overall centralised exchanges are still way ahead but the decentralised exchanges are growing fast. 

Aside from the vulnerability from criminals and governments, there is also the plain risk of the centralised exchange failing or the owners running off into the sunset with a huge chunk of your crypto. 

This centralised aspect and associated risk make the decentralised exchange appealing, after all, one of the appeals of crypto itself is the fact it is decentralised, why then have a central figure in the middle? 

Decentralised exchanges also tend to have lower fees. The downsides of decentralised exchanges can be a poor user experience.

Also, ironically there is a lack of any legal oversight or protection as transactions take place using smart contracts which are bits of code and quite importantly, decentralised exchanges trade crypto to crypto, there is usually no fiat on-ramp to make it easy to convert your Euros or Dollars into crypto. 

Lastly, there is the issue of liquidity, centralised exchanges are generally way more liquid and allow quick and easy trading in and out of different crypto. 

Decentralised exchanges on the other hand do not tend to be as liquid and this can be a definite disadvantage. 

The primary takeaway when thinking about centralised exchanges vs decentralised exchanges is that centralised exchanges have total control over your assets when trading whilst with decentralised exchanges the user has control over their assets and centralised exchanges tend to have greater liquidity, fiat currency on-off ramps and a better user experience.


Centralized Exchange (CEX): Pros & Cons

Below is a brief summary of the pros and cons of centralised exchanges (CEX)


First the pros

High Trading VolumesThis means liquidity in short. Centralised exchanges make it easy and possible to trade in and out of crypto assets fast which is a very good thing in the highly volatile world of crypto.

Fiat/Crypto and Crypto/Fiat Currency ConversionsCentralised exchanges tend to support fiat to crypto on and off ramps which means that you are able to buy say bitcoin with euros or US dollars.

Greater capabilitiesSetting aside the huge array of crypto assets that CEXs support, they also offer features such as margin trading, crypto derivatives trading, exchange staking, margin lending and more.

Ease of UseThis is one of the greatest benefits of CEXs, ease of use. Nowadays crypto traders are not all techies, they are non-technical people too wanting to get in on the crypto craze. They need an app-like experience, similar to that of their online banking or Uber to get things done. CEXs are designed with this universal ease of use in mind.


Now the cons

Whilst overall centralised exchanges offer many advantages and ease of use, especially for those looking to buy and trade crypto using fiat currencies there are some disadvantages too 

A requirement for Know Your Customer (KYC) policies – for those that would like to trade anonymously a CEX is probably not the best choice as most if not all major centralised exchanges will require proof of ID before you are able to trade. For most people, it doesn’t pose a problem but for those wanting absolute privacy, it’s not the way to go.

You are not in complete control of your crypto – centralised exchanges (CEX) have custodial wallets, meaning that they hold control over your crypto, not you! If they disappear, your crypto disappears too.

Greater risks of hacks – as mentioned above, centralised exchanges are a prime target for criminals. There are centralised exchanges that have managed to avoid being hacked however, the risk is ever present and will continue to be well into the future. 



The above hopefully helps to explain why centralised exchanges exist and continue to thrive despite the inherent risks. 

Decentralised exchanges are nipping at their heels though and it’s not inconceivable to think that decentralised exchanges will soon catch up and eventually be able to offer the best of both worlds. 

For now, at least, centralised exchanges are big business and the easiest and most convenient way to get yourself onto the crypto superhighway!

Ready to go take your SEO content to the next level? Request our free site audit

Read More