The main feature of IDO is the lack of clear rules, which radically distinguishes the investment mechanism of IDO from ICO or IEO. This feature is related to the token issuer setting the rules that allow the token owner to participate in the development of the project and vote when discussing further development plans.
IDO (Initial DEX Offering) and IDO launchpad platforms have appeared as promising ways to attract funding and facilitate the development of the cryptocurrency area. Nowadays, this safe and efficient method of fundraising is popular among decentralized projects.
What are the special features of IDO?
When talking about IDO, the main problem for the investor is that they have to look for information about each investment project by themselves, in contrast to IEO, where a centralized platform examines the quality of the project while preparing for listing. No algorithm available to control asset prices is another important point for the investor.
If a token becomes popular, only the first buyers will be able to buy it at an adequate price. That is why it is necessary to carry out certain marketing procedures before listing the tokens to prevent a very rapid decline in customer activity afterward. It also increases the risk of manipulation. The first traders can buy certain amounts of tokens while expecting the main audience to become more active and then sell the assets, earning on the margin yet destroying the investment attractiveness of the project.
It should also be noted that the relatively simple way to list tokens causes the main problem of IDO – lower security. Despite the great popularity of DeFi protocols, the number of cybercrimes and the amount of funds lost by investors through IDOs is much higher than in any other area of digital investment. These peculiarities make the decentralized finance market more accessible but also more dangerous for investment.
In addition, like any fundraising on cryptocurrency platforms, listing a token on a decentralized exchange does not guarantee a large amount of investment and the growing popularity of the token. Therefore, when attracting funds through the IDO procedure, it is necessary to take into account the high risk of possible lack of demand and price increase.
Despite the risks, placing tokens on decentralized platforms is in high demand due to their simple rules, low requirements, and high speed of launching a project. Their popularity is also fueled by the rapid development of blockchain technology, which contributes to creating decentralized platforms and helps attract a record number of users.