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The Steemit Crypto Academy has been hosting really interesting and educative concepts for us all. This week's contest is a popular and interesting one titled Initial Coin Offering in the Crypto Ecosystem by @crypto-academy.

Initial Coin Offerings as observed are funding mechanisms that have become increasingly important to the future of the crypto ecosystem. In this article, I will be sharing my views and understanding of this concept. So let's go right into the matter of discussion.

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Detail Understanding Of Initial Coin Offering and Its Important To The Crypto Ecosystem

Initial Coin Offering refers to the event which allows beginners of a project to raise funds by issuing digital tokens that investors could buy with cryptocurrencies. It's very similar to the concept of an Initial Public Offering (IPO) where investors purchase shares of companies. In this case, the money raised from the token sales is usually used to complete the project.

Many projects have gone through this part and Hundreds of millions were raised within a few hours. Investors get the opportunity to buy this token at a lower price before the official project launching by the new cryptocurrency blockchain or network.

A company seeking to complete the expected goal of their asset would usually opt for an ICO method of introducing and attracting investors. This is done by releasing their digital assets to various exchanges, where entrepreneurs could publicly access and directly invest in them.

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Its Importance To The Crypto Ecosystem

ICOs have become the primary method of raising funds in the crypto ecosystem. By providing an opportunity to get in early on promising projects while still getting tokens at an attractive rate, they help build valuable businesses and incentivize development that benefits the community as a whole.

Instead of opting for the traditional method of fundraising like getting loans from banks and persuading investors to support ICOs have made it easy for many cryptocurrency projects to easily complete their projects without any major debt or entanglements. They give out tokens that might be very useful to investors in the nearest future.

Below are some other major ways by which ICOs have been supporting the crypto ecosystem:

• ICOs Have Helped Increase The Adoption Of Cryptocurrencies: You would agree with me that ICOs have been more popular for promoting new coins to the crypto ecosystem, as they provide ways to raise funds to bring blockchain-based projects to life.

• Many ICOs offer tokens that give investors access to a product or service (e.g cloud computing) that is built using blockchain technology. Some companies even issue tokens that can be used as currency on their platform, which has helped promote the adoption of cryptocurrencies across the globe.

• ICOs Could Help Diversify The Crypto Ecosystem: ICOs are a great way to help diversify the crypto ecosystem and can also help blockchain projects raise money. These events are like an IPO, but instead of getting stock in a company, they get digital tokens, which provide a way to invest in companies that might not be available on traditional exchanges.

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My Understanding On IEO And IDO

Are you thinking ICOs are the only initial methods of raising funds for a company or blockchain system? If yes, then you need to see these other two methods and how they equally operate. They are IEOs and IDOs, but let's simultaneously talk about them one by one.

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INITIAL EXCHANGE OFFERING (IEO)

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This is widely regarded as the new form of cryptocurrency funding, unlike the ICO method which started far back as 2013, IEO was first used by an exchange in 2019, and since then it has gathered lots of attention from crypto investors and traders around the globe, due to the benefits it offers when compared to initial coin offerings (ICOs).

An Initial Exchange Offering is a new form of cryptocurrency funding in which investors can purchase tokens from a blockchain project during the initial phase before it is listed on an exchange. Unlike Initial Coin Offerings, IEOs are executed on established cryptocurrency exchanges and require trust from both the token developer and the exchange.

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HERE'S HOW IEO WORKS

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To launch an IEO, the platform that hosts it needs to be registered with the Financial Services Agency in Japan and have approval from the Japanese government. In an IEO, the startup chooses what cryptocurrencies they want their tokens listed on and sets up a time limit for them. The investor then sends their cryptocurrency of choice at that time and gets back tokens with whatever value the company has set.

IEOs and ICOs are very similar and in most cases, people tend to get confused about the difference between the two concepts. I would say the difference lies in their investment structure, as IEOs offer the benefits of initial coin offerings without requiring your cryptocurrency.

While ICO investors buy coins that can be used on the company’s platform at some point in the future, IEOs have already created their platform and uses token sales to fund its further development.

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INITIAL DEX OFFERING (IDO)

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IDO has equally become very popular since it was first used around June 2019. It is the latest method of raising funds for initial crypto projects and industries. Many companies have chosen to run their ICOs in this way instead of the traditional Initial Coin Offerings or token sales.

This method allows investors in the Token Generation Event (TGE) to get their hands on the very first tokens created by a project. They purchase tokens at a discounted rate before the company goes public with its Initial Public Offering (IPO).

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HERE'S HOW IDO WORKS

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A company creates an offer with specific terms, including the number of shares offered, how much is being sold for each share, and how many shares will be made available in total. Investors can then purchase shares using cryptocurrencies like Ethereum or bitcoin.

Participating in an IDO is similar to investing in a traditional IPO. You will be purchasing tokens for a cryptocurrency, but this time you will be buying into the Initial DEX Offerings of projects that are just getting started. This means that it might take some time for the value of your investment to increase.

However, if you are willing to invest at the start of the project's development process, you could see exponential growth in your initial investment as more people become interested in this type of fundraising method.

To participate in an IDO, you need a wallet that is ERC-20 compatible, and you will also need Ether (ETH), which you can purchase with dollars, credit cards, other cryptocurrencies, or from any exchange that trades in ETH.

Platform That Utilizes IEO

Security tokens are gaining in popularity, and an Initial Exchange Offering (IEO) has become one of the most popular ways to trade these crypto tokens.

So many company projects have been put up for sale using this IEO, and it has been producing profits as more cryptocurrency projects tend to adopt this method.

Four major platforms are used for IEO. These platforms include Binance, Huobi, Kucoin, and OKEx. All four of these exchanges have a wide variety of cryptocurrencies available to trade on their platforms and so far, a lot of funds have been raised for the various companies.

Example Of A Platform That Used IEO And How It Worked For The Coin Offering

One good example of a platform that has used IEO is the Kucoin Exchange. It has a section that is referred to as Kucoin Spotlight.

This is a section in the Kucoin exchange where new and improving cryptocurrency projects are developed. The exchange uses this section to announce and put a particular asset into the spotlight, which would then attract entrepreneurs to invest in the promising asset.

Details on Kucoin Spotlight IEO	List of IEO projects on the spotlight

As seen in the screenshot above from crypto rank. io, there are many tokens currently ranking in the Kucoin spotlight. So far, about $23.63 million worth of Funds have been raised from the various projects being launched on the platform.

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My IEO Participation And Experience

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I have not financially invested in any IEO project in the past, nevertheless, I have followed and carefully observed how some of these IEO projects conducted their fundraising schemes and the results that followed. One such token is the Victoria VR. This project seemed promising from the beginning, and it was on my watchlist, as its roadmaps and team members were legit and open with their goals.

It first caught my attention when KuCoin announced the token sales of the project to be held on 29 November 2021, Virtual Reality (VR) always gets me excited, lol. On the 21st of December, it conducted its first land sale event, which was a massive success, as in less than a week, it became number 1 in the Kucoin spotlight.

Kucoin announces project on twitter	Victoria VR celebrates no:1 on twitter

It was really exciting, as the project currently has a Market Cap of about 13.71 million, ATH ROI of 212.78x, and it raised a total of $13.87 million on the day of its IEO(29 November 2021).

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A Project That Has Successfully Performed An ICO And The Result Of The Event

When it comes to Successfully ICOs projects, one particular project always tends to cross my mind and that is the Tezos project, which raised a whopping $232 million from about 10,000 participants around the world in July of 2017.

This project's event is still regarded as one of the most successful ICO events in history. According to the Tezos’ website, they claim to be a decentralized blockchain that is aimed at governing itself by establishing a true digital commonwealth. In its first three days of accepting funds in Bitcoin and Ether, Tezos raised the equivalent of $88 million, according to Kathleen Breitman, co-founder, and CEO of Dynamic Ledger Solutions Inc.

The money raised from its ICO was huge and as such attracted many reactions and remarks from around the world. Some investors even went as far as suing the company for securities fraud, claiming the company still has not delivered on its promises.

Matthew Green's opinion on twitter

This tweet from popular crypto enthusiast Matthew Green, caught my attention, as he was expressing his dissatisfaction with the project goals. He thinks the money was too much for an ICO event. It was even more interesting to note that the money was later worth over 1 Billion dollars due to appreciation in price.

MERITS AND DEMERITS OF INITIAL COIN OFFERING

Although the first blockchain-based cryptocurrency, Bitcoin, was introduced in 2009, the adoption and use of ICOs began in 2017, when companies began to take advantage of Initial Coin Offerings (ICOs) to raise capital and fund their business endeavors. You would agree with me that they have been some challenges thus far.
Below are some of the Advantages and Disadvantages of ICOs.

MERITS OF INITIAL COIN OFFERING

• It allows upcoming companies who are seeking more funds to develop their projects.

• In some cases, Investors who have held tokens over time, get 2x and more of their invested tokens, thereby increasing their profits and expanding the targets.

• ICOs present investors with opportunities to diversify their portfolios, and increase the adoption of cryptocurrencies across the globe. As many new tokens give access to other companies outside the crypto space.

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DEMERITS OF INITIAL COIN OFFERING

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• One of the biggest challenges of ICOs is that they are not regulated, which means that no federal authority or government protection is put in place to guide
  and assure confidence in a project, whether it succeeded or goes bankrupt.

• They do not offer or guarantee equity or voting rights for a company, which means even after participating in their ICO, you might still not have any say in the way the company is operating.

• Not all countries support or approve of the sale of ICOs, which means citizens of such countries won't be allowed to participate in ICO events.

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CONCLUSION

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You would agree with me that ICOs, IEOs and IDOs, are becoming concepts to be conversant with, as they become even more popular everyday. To understand what's involved, it's important to know the pros, cons, and every possible detail before participating in one.

Generally, this has been an interesting concept and I and glad I participated in it. Kudos to the organizers of this contest. Am inviting @mariami, @sahmie, and @mjoedavid to check out this contest.

Thanks for your time here.