Initial DEX Offering IDO A Detailed Guide for Beginners

By leveraging the decentralized nature of DEXs, projects can raise funds, gain exposure, and build a community around their tokens. Liquidity refers to the ease with which cryptocurrencies can be bought and sold. IDO projects typically lock a part of the funds raised to form a liquidity pool, which later provides investors with instant liquidity if they decide to https://www.xcritical.com/ sell the tokens. The lock-in also ensures reduced volatility and lesser chances of slippage.

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ICOs gained popularity in 2017 but were plagued with issues such as lack of control, investor protections, and numerous scams. The negative reputation of ICOs what is an ido in crypto cast a shadow over the crypto industry, deterring potential investors. Rather than lock their tokens directly, investors must first stake in a Decentralized Finance (DeFi) LP to earn LP tokens. For example, a project wanting to sell its token for BNB in an IFO on PancakeSwap will require investors to stake BNB and CAKE in the BNB-CAKE LP.

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With public offerings or private companies, you have to wait several years (at least) before you can sell your options. Due to this lack of validity, many unqualified and poorly designed projects get through the cracks. The intention of these projects is to scam their investors, grab as much money as possible, then disappear. As a result, it’s important to do your research before you invest in any crypto project. To help drive trading on the platform they’re using, many projects will allocate a portion of their funds to the DEX itself. This helps drive liquidity and has become standard for nearly all IDOs.

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Once the funds are received, the contracts facilitating the IDO distribute the number of tokens that participants bought, and the network confirms their transactions. Launchpads also provide smart contract auditing services to ensure that trader orders can be executed on-chain when the token sale goes live. Examples of DEX launchpads include Ignition for PancakeSwap, MISO for Sushiswap, and the Balancer Labs Incubator for Balancer. Lastly, CEXs are better established in regions home to more crypto users. DEXs can onboard more users faster by granting more straightforward and restriction-free access to trading services. DEXs don’t require KYC registration, giving anyone with a hot wallet and an internet connection access to trading services.

What Is an IDO (Initial DEX Offering)?

The IDO is a creative and decentralized crowdfunding model that addresses the shortcomings of its predecessor, the Initial Coin Offering (ICO). There may be a delay in when you get your tokens, or they could even be staked and locked for some time. Almost anything is possible depending on the project’s tokenomics, and you should thoroughly understand them. It’s much easier for an unreputable project to distribute their token through an IDO than it is through an IEO with a large, regulated exchange.