What is an Initial DEX Offering (IDO)? A Beginner’s Guide to IDOs

Introduction

Where investing in different and better ways is growing day by day, it’s important to be informed and experimentative about what’s an emerging and a better form of investment. IDOs rightly fall in this category of investments. IDOs represent a form of early-stage investment within the digital assets domain, sharing characteristics with venture capital while also having unique features that make them a distinct investment category. Let’s find out more about what IDO means and how to participate in an IDO.

What is an IDO?

An Initial DEX Offering (IDO) is a way for new digital money projects to raise money. Unlike traditional fundraising methods, IDOs happen on decentralized exchanges (DEXs), which are like online marketplaces and platforms for such projects. 

It is similar to how traditional startups receive venture capital before launching. IDO offers the new vendor in the market financing from the customers (individual investors). However, unlike Initial Public Offerings, the individuals do not gain any equity in return. 

To make this process easier and smoother when it comes to multiple currencies across borders, TransFi’s ‘Ramp’ stands strong as your medium of payments. 

How does IDO work?

IDOs (Initial DEX Offerings) let digital currency projects raise money in a decentralized way. Projects create their own token and list it on a Decentralized Exchange (DEX). Investors can then buy these tokens directly through the DEX. Smart contracts (self executing contracts) handle the distribution of tokens and manage the funds automatically.

A big plus point of IDOs is that the tokens are usually tradable on the DEX right after the IDO is finished, giving investors quick access to liquidity. This makes IDOs a more accessible way to invest. However, it's important to remember that IDOs also come with risks like scams, price swings, and potential technical problems. So, doing your research is really important before investing.

Also Read: What is a Blockchain Fork? Soft fork vs Hard fork

How to participate in an IDO

Step 1 : Research and Due Diligence 

Research. Reading about the token is the foundation of any investment. Make sure you are thoroughly educated about the team, their white paper - a document about their conceptual brief, goals, strategy, long term plans. Take into consideration their roadmap, token economies and the problem they aim to solve.

You can do this by also joining the community channels that talk of the same on Discord, Twitter, Telegram. Be active, ask questions and engage with the community.

While you are doing this, beware of the risks involved, the potential that the token has as well as the market volatility it brings with it.

Step 2 : Choosing the right IDO platform

• Reputation - Be wise in choosing a reliable platform with a good history of success, experience and a strong portfolio. You wouldn't go to just any market for your fruits right?
• Project Alignment - Choose a platform which aligns with your goals and interests and the types of projects you want to invest in.
• Platform Tokens - Some platforms require you to hold their native tokens to participate in IDOs.

Step 3 : Prepare Your Wallet and Funds:

You do need a separate wallet to exchange and invest, setting it up is the next step.

• Set up a Web wallet compatible with the blockchain/token used by the IDO platform.
• Acquire the digital coin required for the IDO participation (e.g., ETH, BNB). Quick tip - TransFi makes it easier and faster to acquire your target digital assets!
• Connect your wallet to the IDO platform. 

Step 4 : Participate in an IDO

• Whitelisting: You may need to register with the platform and get whitelisted and sometimes complete KYC/AML checks in order to start trading.
• IDO Rules: Get thorough with the specific rules of the IDO, such as the token price, allocation limits, and participation period.
• Token Purchase: During the IDO, purchase the tokens using your connected wallet and the required digital coin. 

Step 5 : What's next?

•  After the IDO and the listing, claim your purchased tokens from the platform.
•  Once the token is listed on a decentralized exchange, you are all set to begin the trading.

Conclusion

Conclusively, this is a good chunk of information to get started with IDO investments. Over to how TransFi stands with you in your process of beginning with your IDO projects while starting out and along the way - to say the least TransFi is quicker and covers the widest payment methods. Through transFi you can start working on your digital asset aspirations right away with simple small steps like validating your account, choosing your currency and choosing your payment method.

Here! It’s as implementable as it sounds and wherever it seems complex, TransFi is here to make it seamless!

Frequently Asked Questions (FAQs)

1. What’s the core difference between ICO, IEO and IDO?

ICO (Initial Coin Offering)

This is the earliest form where there are no middlemen or the platform to sell. The vendor (project team) is entirely responsible to sell its product and the token. This gave much more freedom to the team as its directly sold to the customers (investors). However, it results much riskier for the other side. If the project team fails, the investors lose all of their money. There are also the risks of scams involved. 

IEO (Initial Exchange Offering)

This is the way supermarkets come into play. The vendor decides to go for the big fish in order to ensure more reliability and increase security for the customers (investors) to buy more. The supermarkets (digital exchange platform) however take a standard fee for handling the sales in return. It is better for the product’s marketing, but costs more for the project team as it is centralized. 

IDO (Initial DEX Offering)

IDO aims to combine the best of both of the aforementioned worlds, offering decentralized access with increased transparency and liquidity. Vendors (project team) set up a stall at a local market (IDO platforms) but without no middlemen fees. It is a more organised way giving the project team their freedom as well. 

It does come with a less set of regulations and that is why scams can still happen. 

2. What to keep in mind while investing in IDO?

Research - Make sure you fully research and know the project team and the token. It's important to read their conceptual brief, goals, and strategy which is called a ‘white paper’ in order to be fully satisfied with the product. In short words, ensure to check whether the project team is a trusted one and experienced. 

Beware of scams -  Be aware of projects promising unrealistic returns or a lack of trust and transparency. Do not fall into lucrative traps.

Start small - You should not take bigger risks when you are starting. Do no invest more than you can afford to lose. 

Diversify - Scatter your resources and investments across different platforms to ensure risk free and secure investments.

Protect your wallet - Use a secure and reliable wallet to make all the transactions.

Be Patient and stay informed - Do not rush into decisions, understand, keep up with the latest news and keep reading about the latest trends.

3. What are IDO launchpads?

IDO launchpads are platforms that help digital coin projects raise funds by conducting Initial DEX Offerings (IDOs). They act as a bridge between projects seeking capital and investors. Basically they are the local markets that the vendor as well as the customers can approach to exchange. 

4. What are the best IDO platforms for beginners

• Seedify.fund: This platform is known for its focus on blockchain gaming projects, It can be a fun and engaging area for newcomers. They have a good reputation for vetting projects and provide a user-friendly interface. 

• Polkastarter: This platform supports cross-chain IDOs, which means you can find projects building on various blockchains. Offers a versatile platform for decentralised funding. Polkastarter has a transparent process and offers a good selection of projects.

• BSCPad: If you're interested in projects on the Binance Smart Chain (BSC), BSCPad is a solid option. It was one of the first launchpads on BSC and has a large community. It  has a great reputation, having a solid portfolio and access to a good database.

5. How to participate in an IDO?

Participating in an IDO requires careful research and several steps. First, thoroughly investigate the project, team, tokenomics, and whitepaper. Choose a reputable IDO platform and create a compatible crypto wallet, funding it with the necessary cryptocurrency. Some platforms require KYC/AML verification. Connect your wallet to the platform and participate in the IDO during the designated period, being mindful of any contribution limits. After the IDO, claim your tokens. Be extremely cautious of scams and never share your private keys. Remember that IDOs are high-risk investments, so only invest what you can afford to lose. Be aware of gas fees and potential slippage.