If you’re thinking of launching a crypto project, you may wonder how to raise money to fund it. One option gaining popularity is an Initial DEX Offering (IDO). An Initial DEX Offering (IDO) is an innovative way to crowdsource funding for your crypto project. In an IDO, a Web3 project launches a token on a DEX to generate funds from retail investors. Before launching a crowdsale for your project, it’s essential to understand the nitty gritty of a successful IDO. This article will outline five crucial steps for a successful IDO. Read on to learn more!
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What is an Initial DEX Offering?
IDOs allow businesses to usher their communities into an economy that both enhance their products and services and allows them to make sound business decisions about their assets. Individual investors fund initiatives that issue IDOs similar to traditional businesses that acquire venture cash before launching. In contrast to an IPO, investors in IDOs never possess any stock in the enterprise. This lets businesses raise funds without giving up any ownership share while allowing investors to profit immediately from the project’s success.
Rather than giving up equity or selling tokens to VCs, these companies can now raise funds by selling tokens directly to the community. As a result, IDOs are an attractive option for both businesses and investors, and they are likely to play an increasingly important role in the future of fundraising.
In return for investing early in a project, token holders receive a discount on the eventual price of the tokens when they hit exchanges. IDOs have already attracted a great deal of interest from both businesses and investors, and they are poised to become the future of fundraising.
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How do IDOs work?
An IDO is conducted entirely by the team behind the token in a trustless manner on the blockchain.
Typically, IDO allows investors to lock funds into a smart contract before the launch of a project’s token. After the launch, these new tokens are distributed to investors in exchange for the locked money. These funds are then released to the projects.
Each IDO’s rules and phases vary according to the underlying smart contract and the DEX that runs it. Nonetheless, the majority of IDOs follow a similar procedure:
Due Diligence
The DEX team verifies the projects before they are launched on their platform. This prevents fraudulent projects from launching and safeguards investors.
Price Control
After the DEX approves the project, it specifies the number of tokens and their initial price for the IDO.
Whitelisting
An exclusive list of recognized and validated individuals, companies, software programs, or wallet addresses is typically used to launch tokens. To be added to the list, investors may register their wallet address, join a Discord forum, or execute marketing tasks – whatever the project requires.
Investing
Once added to the group, whitelisted investors can deposit their funds in a smart contract on the DEX. In exchange, they will receive the project’s tokens as they are issued.
Some projects may lock a portion of the funds for a specified period. Similarly, the project may also freeze some of the tokens distributed to investors for some time. This is known as the vesting period and is done to prevent pump and dump from whales.
Token transfer
Next, the project tokens are transferred to the investors’ wallets. Project owners may deposit some portion of the funds in liquidity pools with the project’s token on the DEX. This guarantees trade liquidity even for small projects from the beginning. The remaining funds are allocated to project development.
Trading
Once tokens are exchanged for funds, the liquidity pools become available for trade. The price is determined by the market’s forces of demand and supply.
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What are the advantages of IDOs?
IDOs have significant advantages over other fundraising methods, which is why they are widely used.
Fair fundraising
When the token sale becomes public, whitelisted investors in an IDO acquire the cryptocurrency at a lower price than the listing price. They make a profit by reselling these tokens to the general public. Furthermore, because no CEX or clearance is required to begin fundraising, anybody, not just private investors, may organize or participate in an IDO.
No slippage
An IDO gives project coins instant liquidity. At whatever price level, the liquidity pool ensures liquidity without slippage. As a result, an IDO increases financial inclusion and provides more options for project token distribution.
Fast trading
From the day a project’s token is issued, investors can begin trading it. As a result, traders try to buy a new token as soon as it is released and then sell it at a higher token price later.
Lower costs
A DEX runs on self-executing smart contracts. When a project uses a DEX smart contract controls the asset’s liquidity pool, thereby significantly less “gas fee.”
Secure transactions
A DEX conducts trades and adds them to the blockchain using smart contracts, allowing for safe transactions. Furthermore, because a DEX does not keep cash, undesirable actors are less inclined to target it.
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How to launch tokens through IDOs?
Now that you have learned in-depth about an IDO, let’s dive into how to execute one. Below are the five steps:
Create a business plan
A guiding strategy is a must before launching an IDO or any other fundraising for that matter.
- Intricately lay out the problems the project intends to solve, the financial distribution, technological factors, and marketing methods.
- Identify how many tokens will be released and at what price.
- You should also develop a strategy around maintaining the token price momentum once the IDO is over. Once this is sorted, you will have solid foundations for your IDO.
Choose a blockchain network
The most popular blockchains to launch an IDO are Ethereum, Solana, and Polkadot. Before picking a network, it’s vital to evaluate its pros and cons. It is best to choose an interoperable blockchain for broader reach and liquidity. Remember, you can issue your token on a different network from the one you launched the IDO. For example, launching the IDO on Ethereum and issuing the tokens on the Polkadot blockchain.
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Develop project literature
What is an IDO without a marketing strategy? And Website and whitepaper are crucial marketing collaterals.
Create a user-friendly website with relevant information for authenticity and investor confidence. Also, the website should be visually appealing. Without a website, project owners struggle to create a brand image.
Also, develop a whitepaper that captures the critical aspects of your project. The whitepaper should ideally cover:
- the problem the project aims to solve
- how do you intend to solve the problem
- the blockchain you intend to use
- project’s native token
- the utility of the token
- the tokenomics
- the team behind the project
Identify your target group
Once you have a plan and a promotional strategy, the next step is to identify your target audience. You need to consider the kind of investors the project needs. Here you’ve got three options: retailers, newbies, and experienced investors who understand what IDO means in crypto.
Proper targeting helps attract individuals who have faith in your project. Such individuals will help market your crypto IDO and hold the token for a long time.
Evaluate your chosen IDO Launchpad
Once you’ve chosen your network and determined the audience, your next step is to verify your hosting platform or the Launchpad. Depending on your target audience, you can select either established or upcoming ones.
When it comes to choosing IDO launchpads, AdLunam stands out as an innovative option. Along with the regular IDO launchpad service, the platform comprises a seed pad and an Engage to Earn “Proof of Attention” model. In AdLunam, investors are allocated based on their Attention Rank. The Launchpad also allows upcoming projects to raise capital for their seed and private rounds.
Hence, if you’re looking for an IDO launchpad with some added benefits, AdLunam is worth considering.
Final words
In this blog post, we discussed IDOs and how they can be used to fund a blockchain project. We went over what an IDO is, the benefits of launching one, and how to launch a crowdsale using an IDO. So if you want to raise capital for your crypto project, you can go the IDO way!
