The cryptocurrency fundraising landscape expanded widely from 2012 to 2014. There are now multiple ways for projects to get their innovation backed by people and investors alike. They don’t pertain to traditional ways but rather cover modern mechanisms like crypto presale, ICO, IDO, and IEO. All of them are different ways to invest in a crypto project, with a slight difference in terms of the host platform, security, and cost-effectiveness, to mention a few.
This article aims to highlight the differences between them and help determine the best method for crypto investments.
Understanding the Basics
This section discusses the fundamental facts of all four cryptocurrency investments in terms of definition, intent, and a concise distinction.
Crypto Presale
While understanding distinctions between each form of crypto investments is important, it is equally important to identify promising opportunities within each investment type. If you are ready to move into the crypto presale world, we encourage you to review our list of best crypto presales available. The best crypto presales we published are well-thought-out projects that have substantial potential, unique use cases, and strong development teams.
ICO
ICO is the acronym for Initial Coin Offering which can be recognized globally when founders come forward for investors to exchange fiat or existing cryptocurrencies. ICO’s came around in 2013-2014, and notoriously grant an investor 30 days to invest before the deal closes. The upgraded ICO format allows investors to truly see the quality of the project and access the web interface aimed solely towards serving investors.
IEO
Expanded to the Initial Exchange Offering, the crypto investment mechanism is a better option against ICO. For starters, it is considered to be safer than ICO and more effective when it comes to accumulating recognition in the market. IEO democratizes investments in crypto projects by moving the process to an exchange platform instead of their native website, where security risks can hamper the brand image before it is established in the industry.
IDO
Known as Initial DEX Offering, it is a step ahead of IEO. IDO involved decentralized exchange platforms for token distribution. Thereby upholding the principles of decentralized finance or DeFi. Crypto tokens are launched using automated decentralized trading protocols instead of a conventional exchange platform. The token smart contract is paired with a base currency pool which could be BNB or ETH, to mention a few.
Suffice it to say that their popularity is constantly growing in the market, making it more imperative to understand what they stand for and how investors or participants can benefit from them.
Detailed Comparison of Investment Methods
Now, let’s compare each of the four types of crypto investment.
Structure and Mechanism
ICO is a direct public offering, and anyone can participate via the official platform. IEO, however, happens over an exchange platform after the project has been vetted. It does instill a sense of security by conducting verification and KYC processes. IDO integrates a DEX protocol to launch a token offering. Crypto presales are usually promoted through an official website, and tokens are allocated after the investment window is closed.
Regulatory Environment
ICOs scrutinize crypto investment projects, helping investors gain greater confidence, which is otherwise lacking in crypto presale. IEOs and IDOs are comparatively safer, though, as they are backed by the existing crypto investor ecosystem and regulatory assurance through compliance with an exchange platform.
Security and Trust
IEOs are better loaded with security and trust compliance through the KYC process. There are risks associated with crypto investment projects like scams and frauds. It is only if they are scrutinized thoroughly that the funds of investors are safe. Presales have gained a fair share of criticism due to this aspect. They continue to make improvements, but other mechanisms are already doing a better job.
Every crypto investment method has its unique features. They should be understood before any type of engagement at any level.
Pros and Cons of Each Investment Method
The table below explains the pros and cons of each investment method: Presale, ICO, IEO, and IDO.
| Investment Method | Pros | Cons |
| Presale |
|
|
| ICO |
|
|
| IEO |
|
|
| IDO |
|
|
All advantages and disadvantages mentioned above apply generally. They may or may not have specific implications.
Which Investment is Right for You?
Choosing the right investment method depends on three factors, namely risk tolerance assessment, investment goals, and market research & due diligence.
Risk Tolerance Assessment
Evaluate personal risk tolerance by analyzing the amount of funds that can be recovered in case they are drained.
Investment Goals
Investment Goals could be to only get returns or to participate in the development of the project. Getting a seat in governance, therefore, plays an important role in selecting the right investment method.
Market Research and Due Diligence
Do research about the project. This includes gathering information about the industry it belongs to and what the team of developers & founders were up to before venturing into the project. Check LinkedIn and social media platforms. Plus, participate in crypto forums to stay updated with current trends and happenings in the market.
Choose an investment method only after being satisfied. Avoid rushing into any method where sufficient understanding has not been achieved.
Future Trends in Crypto Fundraising
IGO, Initial Gaming Offering, is gaining momentum. It is an investment method deployed by blockchain game developers to allow access to in-game assets in the form of NFTs. IGO usually commences when the project is in its early stages. Other offerings in IGO could be game-specific tokens and exclusive access to the content.
Regulatory changes can affect the way presales, ICOs, IEOs, and IDOs operate. The law will only be stringent with the basic requirement to extend the investigation into a project. However, it will have a positive impact on investors, as their funds will be more secure than before. Blockchain has evolved with time and is used to raise funds. It will remain the fundamental ground for upcoming crypto projects.
Conclusion
There is only a slight difference between presale, ICO, IEO, and IDO. However, that same difference determines several factors, like safety and returns for investors. It is recommended to conduct thorough research before confirming participation in any fundraising method. Merely registering on the platform can also be damaging, as it involves sharing details like name and email address, among others.
See less
