DeFi (decentralized finance) is changing the world of finance, pushing some trends that will probably stay here with us forever. Tokenization of money, real assets, and non-exchangeable tokens (NFTs) is becoming increasingly common as governments around the world consider the adoption of digital currencies by central banks.
According to the technology description on Coinmarketrate.com, the decentralization of finance is destructive for banking system since it returns control over resources to the hands of a person and not a monopolistic central structure. These are people’s finances for people, creating a very flexible and democratic system that allows anyone with Internet access to access financial services easily, cheaply, fairly and safely.
For innovators, joining DeFi is no longer an option, but a necessity.
IDO: A ticket to decentralized financing
One of the main trends of decentralized financing in 2020-2021 has become IDO – a new frontier of crowdfunding in the world of cryptocurrencies.
Short for Initial DEX Offering, (initial offering on a decentralized exchange), IDO refers to a project that launches a coin or token through a decentralized liquidity exchange. This is a type of cryptocurrency exchange that depends on a liquidity pool in which traders can exchange tokens, including cryptocurrencies and stablecoins.
The first in the history of IDO was the Raven Protocol in June 2019. A project that is considered successful. Raven Protocol is working to provide fast and cost-effective solutions using blockchain to transform the artificial intelligence (AI) and machine learning sectors, which are currently dominated by large multinational corporations. With the native Raven token, IDO participants are rewarded for sharing computer resources, while a useful token is used for AI training.
Another successful launch of the IDO project, despite the fact that there were problems at the beginning, is the Universal Market Access (UMA) protocol, which allows DeFi developers to create synthetic assets and which in April last year began selling its tokens through the decentralized Uniswap exchange. Or SushiSwap, a decentralized cryptocurrency exchange built on Ethereum that competes with Uniswap.
IDO, ICO or IEO? Differences
IDO can be considered a cousin of the more famous ICO (Initial Coin Offers) and IEO (Initial Exchange Offers), although there are some important differences between them.
But why should the team choose IDO instead of ICO or IEO to raise funds? There are some advantages.
One of the advantages of IDO is that the token is immediately listed on the decentralized exchange where the placement took place, unlike ICO tokens, which are often issued after sale. In IDO, it is a third-party platform that controls the exchange, and the sale of tokens takes place in a decentralized manner, everyone can launch their own project, and there are no high commissions that need to be paid.
In addition, compared to ICOs and IEO, which involve an initial waiting period, IDOS offer immediate access to liquidity and trading, as well as a better user experience due to the secure support of various types of wallets and a trading platform built into one interface.
In fact, IDO promotes the launch of new projects, facilitating their interaction with users. Direct, open and peer-to-peer communication: The best features of decentralization underlying the popularity of cryptocurrencies are taking shape in IDO.
How IDO is developed
Now that we have seen what IDO is and how it works, let’s try to understand how the development of the proposal and the launch of the initial DEX proposal takes place.
The project is presented to the public and launched through platforms specializing in the initial offerings of decentralized exchanges. Interested parties, under certain conditions, can purchase tokens before they appear on the market. The IDO token is launched on DEX.
There are two different types of public sales:
- The Issuer issues trading limits for sale at various levels of appreciation.
- The Issuer conducts an auction at which the sale price is determined by supply and demand.
Listing is carried out on the same DEX based on an automated market maker (AMM), such as Uniswap or balancer. The issuer creates a liquidity pool using tokens and proceeds from the sale to create a liquid secondary market for tokens. Liquidity incentives refer to a wide range of programs that a token issuer can use to launch a product or service. Liquidity mining (i.e., a way to profit from “freezing” coins within a project to ensure liquidity) is very popular and can create a driving force for people supporting the platform.
An example of this is CoinsPaid.
One of the successful companies that firmly believes in the power and tools of decentralized finance and has made them its banner is CoinsPaid, a fintech company specializing in the creation and processing of cryptocurrencies and other solutions for the B2B and B2C sectors. The company is one of the recognized industry leaders, accounting for more than 5% of all Bitcoin transactions on the network. The company’s goal is to bring simplicity to the world of crypto payments by providing cryptocurrency payment solutions in synergy with traditional tools.
CoinsPaid, operating under the management of Dream Finance OU, develops crypto-payment solutions for the B2B sector and offers a wide range of products, including crypto-processing, OTC Desk, White Label, Plug&Pay, B2B and B2C wallets and much more. The CoinsPaid ecosystem, tested by Kaspersky Lab, supports more than 30 cryptocurrencies and more than 20 legal currencies, and the list is updated monthly.
How to protect yourself from fraud
Although the method of fundraising in decentralized financing is better protected from fraud than its predecessors, it is still worth being careful and recognizing unscrupulous developers. There are a lot of tips coming from experts on how to protect yourself from possible fraud hiding behind IDO, but here is the most important of them: one of the most popular methods of making easy money using IDO is placing fake contract addresses. Usually, for every new cryptocurrency entered into IDO, three to four fake cryptocurrencies are registered under the same name. It is very important to repeatedly check the addresses of contracts, verify their identity on social networks and on websites. Different addresses mean fraud.