DEX initial offerings are the new initial coin offerings. So what is the difference between an IDO and an ICO, besides that letter?

A lot actually.

In some ways, ICO and GONE they have more in common with each other than with initial stock offerings, which have many features of the traditional initial public offering of stock markets.

While the IDOs and IEO both are listed directly on the exchanges: decentralized exchangeso DEX, in the case of the former and centralized exchanges for the latter: IDOs are very much a DIY process like ICOs.

A big difference between IDO and ICO is the amount of money raised. No one sees a 10-figure IDO to match Block.one’s $4 billion ICO or Telegram’s $1.7 billion raise anytime soon.

Those ICOs also showcased the power of the SEC, which was generally lenient on companies willing to pay fines and issue mea culpas. Block.one, which raised $4 billion, paid a comparatively paltry $24 million fine. Telegram, which fought the SEC, ended up returning $1.2 billion of the $1.7 billion raised and shut down its TON blockchain.

IEOs, on the other hand, are controlled by exchanges, which act in many ways as the underwriters (middlemen) that get companies listed on the New York Stock Exchange or Nasdaq through the process. In IEOs, centralized exchanges like Binance Launchpad and Huobi Prime vet issuers, provide regulatory information, and know your customer (KYC) and anti money laundering (AML) and market sales, for which they charge an arm and a leg. Unlike subscribers, crypto exchanges do not buy and resell the tokens; in fact, more than a few IEO sales fail, despite the cost.

IDO vs. ICO

In both the IDO and ICO, the issuer of the token does not pay direct fees to intermediaries, which is much more in line with the peer-to-peer ethos of Bitcoin and its successors. That said, IDO launchpads like Polkastarter and Binance Launchpad are changing that as they become more common, but they don’t have the cost or control of centralized IEOs.

However, each IDO and ICO issuer is responsible for their own marketing, and each must create the smart contract used to sell tokens, including arranging audits, and conducting their own legal investigation. This likely includes outsourcing AML and KYC compliance, as well as general security offering registration requirements.

Then there is the issue of tokens. ICO tokens are often minted after the sale, which takes place on the company’s website. That comes at a great cost, as the issuer needs to be listed on an exchange, preferably a top centralized exchange. That can reportedly cost anywhere from $100,000 to several million dollars, removing a significant disadvantage for IEOs, in which the cost of listing is built into the fees.

One benefit of IDOs is that by its nature, the token is immediately listed on the decentralized exchange on which the offering was made. That said, despite decentralized finance (DeFi) booming, even the major DEXs like Uniswap or PancakeSwap have much less liquidity than the major centralized exchanges and tend to be more difficult to use, which can keep some potential buyers away.

One thing that IDOs and ICOs share is that they either rely on knowledgeable community activists to vet offerings, which creates a community and provides true decentralization, or is a serious Achilles’ heel that leaves potential buyers uninformed. depending on your perspective.

The ICO/IDO debate also has a fairness issue. IDO shares are immediately tradable; there is actually no way to enforce the lock-in periods that ICOs frequently use. ICOs often offer insiders and early investors favorable terms not available to regular buyers. That’s not feasible in the confines of an IDO controlled by a smart contract.

Which is not to say that IDOs haven’t had their faults: DeFi lending platform bZx’s mid-2020 Uniswap IDO was dominated by bots that beat out all other potential buyers and jacked up prices before selling. DeFi launch pads handle that by limiting buyers to a pre-approved whitelist with a strict maximum per buyer. But to be whitelisted, buyers must own and maintain the launchpad’s native token.

The benefits of DeFiance

That doesn’t change the reality that hot IDOs tend to run out in seconds. In April, OccamRazer, an IDO launchpad for the Cardano decentralized protocol, showed off its skills by having a highly successful IDO of its own, selling 200,000 OCC tokens in just 20 seconds. Like many popular IDOs, it was massively oversubscribed, leaving the vast majority of the 150,000 potential buyers out of luck.

While IDOs are heavily used by DeFi projects, nothing prevents centralized crypto firms from taking advantage of their cost and time advantages – the process is much less intensive, making IDOs perfect for small businesses.

A non-DeFi company going to the DO the route is based in Estonia CoinsPaid, a business-to-business crypto payment solutions company that offers a number of products. Most notable is Crypto processing by CoinsPaid, a white-label ready cryptocurrency payment gateway that accepts over 30 currencies and 20 fiat currencies, promising the best exchange rates. Its ecosystem also includes an institution-focused exchange and OTC desk, crypto processing and B-to-B and B-to-C hot wallets audited by Kaspersky Lab and 10Guards, and a cryptocurrency explorer.

Saying that security is a key in all of its offerings, Kaspersky-certified CoinsPaid noted that its business grew fivefold in 2020, giving it a 5% share of all global on-chain Bitcoin transactions.

CoinsPaid, one of the world’s leading crypto processing companies, was crowned Payment Provider of the Year at the AIBC Dubai show last month. Having secured its position in the payments niche, the fintech is in the process of expanding its services to include decentralized finance (DeFi).

Released on June 1, IDO by CoinsPaid launched CPD, a DeFi cryptocurrency that will serve as a utility token, offering 20% ​​discounts to B-to-B and B-to-C customers who pay in CPD. B-to-B customers get an additional 5% to 20% discount when staking CPD, while B-to-C customers get 5% to 30%. There is also a 10% B-to-B client promotion. Using CPD tokens at checkout gets a 50% discount on all transactions and unspecified discounts on all future products.

On the real DeFi side, CoinsPaid offers a 20% staking APY, a 10%-50% CPD bonus on performance when invested through the CoinsPaid dashboard, and a monthly token burn. The company is selling 16 million of its 800 million CPD. Token swaps are available for ether (ETH), tron ​​(TRX), Binance Smart Chain (BSC), solana (SOL), and polkadot (DOT) tokens.

Offerings coming later this year include a CPD loyalty system and media site in Q3, with a DeFi panel scheduled for Q1 2022.