What is an initial DEX offering or IDO in crypto?

The crypto industry is famous for its fundraising capabilities, with $10.7 billion raised from venture capitalists in 2023 and three times that amount the year before.

Of course, you don’t have to be a venture capitalist to invest in crypto. There are many different types of crowdfunding methods at play in crypto, with one of the most common forms being an initial dex offering, or IDO.

Table of Contents

• What is an initial DEX offering?
• How does an IDO work?
• Are IDOs legal?
• What are the top IDO platforms?
• How to find new IDOs in crypto
• FAQs

What is an initial DEX offering?

An initial DEX offering is a method crypto projects use to raise funds through decentralized exchanges, also called DEXes. These are crypto exchanges where users can buy and sell crypto, but unlike a traditional exchange, there is no centralized authority or team in charge of the project.

Crypto trades are handled automatically using smart contracts, and the community of a DEX provides the necessary liquidity by staking their own funds for rewards. An IDO allows crypto projects to list their project token on one of these DEXes, with proceeds from the sales going towards funding the project. Users typically buy these tokens in the hope that they will increase in value as the project grows.

Of course, this practice buying an asset in the hopes that the associated project will increase in value and therefore pay out dividends to the investor falls under murky regulatory territory, with the US SEC often viewing IDO tokens as securities.

You might also like: EU securities watchdog: 10 exchanges dominate 90% crypto trades

Nevertheless, IDOs are a popular fundraising vehicle. A recently established IDO launchpad called Enjinstarter saw significant ROI for its users, highlighting the use case for the IDO in crypto.

How does an IDO work?

IDOs work by selling tokens on a decentralized exchange to fund a crypto project.

Here’s a step-by-step breakdown:

1. The project lists a token on a decentralized exchange and announces a sale
2. Users can find the sale on an IDO launchpad or simply by visiting a decentralized exchange
3. Users buy the token directly from the launchpad or DEX by connecting their crypto wallet to the platform
4. The proceeds of the token sale are then added to the project funds
5. In some cases, users may receive rewards for purchasing tokens, such as an airdrop reward in the future
6. IDOs also help increase the circulation and popularity of a crypto token

An added benefit to the project team is that it’s typically cheaper to list a token on a DEX than on a centralized exchange, which charges fees. It’s worth noting that IDO tokens sold outside of launchpads are often sold after the main IDO has taken place, potentially offering less favorable prices for investors.

For this reason, IDO launchpads are most commonly used.

An initial DEX offering can be a great way to raise funds if no regulatory issues are encountered. However, this is not always the case.

Are IDOs legal?

Whether or not an IDO is legal depends on the project and the regulators in each jurisdiction where tokens are sold. Regulators tend to view IDOs on a case-by-case basis. If a project can prove that a token has a utility beyond simply generating project revenue and potentially enriching investors as the project grows, the token will not be classed as a security.

Otherwise, regulators may deem that the project team is selling securities, and if they haven’t registered to do so, this is illegal and punitive action may be taken against the team, and potentially against investors as well.

What are the top IDO platforms?

Here is a list of the most popular IDO platforms and launchpads where people can participate in IDOs.

Oxbull

Oxbull is currently the top ranked IDO platform with $29.54M in 24 hour volume an a total ROI of 5.78x at the time of writing. Oxbull is a tech incubator that offers a suite of services including hosting IDOs.

Fjord Foundry

Fjord Foundry is the second most popular IDO launchpad with a 1.35x return on investments to date. The company connects investors to prospective crypto projects in order to facilitate initial DEX offerings.

DAO Maker

Styled as a launchpad for crypto founders, this project currently has an ROI of 0.77x and a 24 hour volume of $197 million.

Ape Terminal

Ape Terminal is another of the top IDO crypto platforms. This launchpad for IDO projects has a 3.38x ROI at the time of writing.

Polkastarter

Polkastarter is an IDO blockchain launchpad specifically focused on raising funds for projects in the Polkadot network ecosystem.

How to find new IDOs in crypto

Checking any of the aforementioned launchpads is a great way to find IDOs that may be of interest. From there, you can buy IDO crypto tokens and build out your portfolio.

It’s a good idea to check the regulatory and legal status of any project you’re interested in before taking action, as investors can potentially be held liable for purchasing unlicensed securities if a regulator rules against a crypto project.

You can also find new IDO crypto projects in online communities on Telegram, Reddit, and Discord. As always, take extra care when mentioning or inquiring about crypto projects on social media, as online scams are ever present in the industry.

You’ll find many projects on any IDO crypto list that could be of interest. Savvy investors typically read the whitepaper of any project, including IDO projects, before making an investment, as well as assessing the reputation and viability of the project online.

You might also like: Going Beyond an IDO: What it Takes to Launch and Sustain a Successful IDO

FAQs

What are the advantages of IDO fundraising?

IDOs are typically cheaper for crypto projects to organize due to the lower fees paid to decentralized exchanges. In many cases, there are no fees, whereas a token listing on a centralized exchange can be hugely expensive. End users do not necessarily have an advantage in going with an IDO over any other type of crypto fundraising.

IDO vs ICO: what is the difference between ICO and IDO in crypto?

An ICO is an initial coin offering. This method, or perhaps simply the use of this term, has fallen out of fashion due to the many scams that occurred at the height of ICO fundraising in 2018. The US SEC determined that at one point, two-thirds of ICO projects had no working product and were likely scams. The only distinction between an IDO and an ICO is that IDOs list tokens on decentralized exchanges.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

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