The development of the initial DEX offering (IDO), one of several innovative methods of fundraising, is a result of the maturation of the cryptocurrency market as a whole. The initial coin offering (ICO), however, was the first method of acquiring money in the cryptocurrency industry and it caused a lot of controversy in 2017. Many early investors became millionaires overnight as a result of it as well.
What Is an Initial Dex Offering?
Initial dex offerings, or IDOs, are when a startup releases a token throughout a decentralized liquidity exchange. IDOs are tokens that represent any sort of asset maintained on a decentralized exchange (DEX). Cryptocurrencies, music collections, and aether-powered warships are just a few of the items for which IDOs can be created. IDOs give companies a tool for including their community in an economic system that enhances their goods and services while also enabling them to manage their assets profitably.
The fact behind a successful Initial DEX Offering
Immediate liquidity and Instant trading
IDO gives project coins instant liquidity. At all price levels, the liquidity pool ensures slip-free liquidity. Only DEX gives users access to various alternative currencies, enabling low-volume transactions. IDO expands financial inclusivity and provides more options for distributing project tokens.
A project’s token can be traded by investors the moment it is made available. As a result, traders try to buy new tokens as quickly as possible during the IDO in order to resell them for more value. For instance, the original token value of $0.26 in the UMA protocol fundraiser soon increased to over $2.
Lower costs and Reliable transactions
DEX is built on self-executing smart contracts. When a task requires DEX directly, they simply have to pay the “gas” charge for launching a new contract that manages the availability pool and the token for the asset. And yet, DEX only levies a little fee—roughly 0.3%—for transactions like Uniswap. Smart contracts are used by DEX to conduct trades and put them to the blockchain, facilitating safe transactions. Additionally, hackers are far less likely to target DEX because it does not keep your money.
More Precautions Needed
Decentralized exchanges lack a control mechanism, thus traders must only use reliable launchpad platforms that conduct Know-Your-Customer (KYC) checks and anti-scam vetting. Because of its decentralized structure, DEX lacks this strong security. Some DEXs give marketing support akin to that offered by centralized exchanges to reduce risk. However, it is always advised to investigate the tokenomics and security of a project before investing.
Oversubscription on IDOs
IDOs are more interested in smaller token sales than other techniques are. Large and well-known IDO projects are typically oversubscribed as a result, making it challenging for small people to invest. This is why numerous IDO launchpad systems use pre-established whitelists to set a participation cap. Investors have two options for getting involved: they either play the lottery or buy launchpad tokens first.
Bot attacks and Poor tokenomics
Bots may cause a pump-and-dump even if the business doesn’t secure an effective market-making following listing on a DEX. Early investors may quickly see price decreases if the token harvesting schedule isn’t set up properly and they dispose of their tokens in big quantities. On the other hand, a locking schedule that is too strict may deter token buyers. Contact us to get advice on strategy for the project and IDO
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