Initial Exchange Offerings (IEO) and Initial DEX Offering (IDO) are two versions of launching a token. In an IEO, centralized exchanges help issue a token providing a market on their exchange platform at the same time of the launch. IDO platforms, also known as crypto launchpads, specialize in launching new currencies or crypto projects and raising liquidity. Launchpads have an essential role in the ecosystem, enabling crowdfunding through cryptocurrencies. They provide a stage for new projects, allowing them to raise funding and help build their community by promoting to a broad audience. They are typically built around an ecosystem token that can be used as an entry ticket to the projects launched on the platform. Users need to own a certain amount of said tokens to be whitelisted to invest in upcoming projects.
There are various options for projects to choose from and many ways in which tokens can be sold. For example, there is the Dutch auction, a market structure in which the price of something offered is determined after taking in all bids to arrive at the highest price at which the total offering can be sold. In this type of auction, investors bid for the amount they are willing to buy in terms of quantity and price. Another way would be the fixed swap, an auction with a fixed price. When the user buys, he has to make a deal with the auctioneer based on a set price. Lastly, there are closed bid auctions, where all bids are automatically filled in the smart contract. The filling goes from the high price to the lowest until all tokens in the pool have been sold.
Quality control is a major factor for launchpads. They want to ensure that the investors make money on the projects launched on their platform to attract more investors and pursue other projects.
Many launches turn out not as successful as an investor might hope after the initial hype of a project dies down, which is one of the reasons many people feel dubious when looking at some launchpads. Community engagement and long-term investors are what projects aim for to reduce these pump and dump schemes from happening.
