Move Over ICOs, IEOs Model is Here: KuCoin Spotlight Joins Multiple Exchanges With Own Launchpad
After all the hype it received in 2017 and early 2018, the ICO (Initial Coin Offering) model started seeing less and less usage as a number of issues damaged the model's reputation. The model made it easy for anyone to launch a new token and sell it to investors. However, while this was practical, it was also highly risky.
The model was based on trust, and the hype allowed it to attract billions of dollars from investors around the world. With such high amounts of money being exchanged for any old token that emerged, scammers quickly found an opportunity to fill their pockets by selling fake coins. In addition, weak projects with no real plan or hope to grow faired pretty well also. Before long, the regulators took notice of the new trend and cracked down on it heavily.
By mid-2018, the ICO model was believed to be close to its death, if not completely extinct already. However, this was a wrong impression, and the model is not gone at all. It was simply rebranded, and it returned strongly as an IEO (Initial Exchange Offering). While Binance may be the best-known user of this model thanks to its Binance Launchpad, it is certainly not the only exchange to employ it. Many others did the same, including Huobi, OKEx, Bittrex, and Bitmax, and now even Kucoin joined the trend with its Spotlight platform.
ICO evolved Into IEO
IEO came as a hot trend of 2019, and Binance Launchpad is one of the main reasons why. Back in January, the exchange announced that its platform would hold token sales throughout 2019, with one new coin being sold each month. However, the new coins would only be available to Binance's users, and it can only be purchased via Binance Coin (BNB).
This caused the exchange's native cryptocurrency to surge, while other platforms quickly followed Binance's example. In less than two months, numerous exchanges developed their own token-launching platforms, inspired by Binance Launchpad.
As things are now, Binance Launchpad faces competition from eight other platforms, including Bittrex IEO, OK Jumpstart, Bitmax Launchpad, Kucoin Spotlight, Probit Launchpad, Huobi Prime, Exmarkets Launchpad, and Bgogo Apollo. The combination of exchanges and token-launching platforms significantly increased the exchanges' trading volume, as well as the demand for their native tokens.
Meanwhile, projects that will be launched on these platforms are about to get massive exposure to existing investor pools, with the exchanges doing all the work when it comes to promotion and bringing liquidity. Finally, the investors themselves benefit from this, as they can now easily access a verified token, without having to worry whether it is a real project or not, as the exchanges do the background check as well.
Of course, the risk that IEOs will end up as ICOs remains. Token sales on Binance Launchpad saw massive success, but when they were first launched, BL was the only platform offering coins. As such, it offered a rare opportunity for investors to get quality coins made by good quality projects. As the number of token-launching platforms grows, the quality of featured projects is very likely going to drop, which is pretty much what happened to ICOs, unless the exchanges set up a certain standard.
But, that is something that the exchanges have to deal with themselves. Meanwhile, we would like to examine these different platforms and try to determine which aspects are the strongest on each platform, what rules they set up, and how investors may participate in following token sales.
1. Kucoin Spotlight
Kucoin Spotlight is the token-launching platform developed by Kucoin exchange. The platform allows the purchase of new tokens only through its native coin KCS. This is nothing new, as Binance already offers tokens in exchange for BNB, as mentioned earlier. However, similarly to BNBm KCS also surged in value since Spotlight came to the spotlight.
The platform already started launching projects, and the first one was Multivac — a flexible, new blockchain solution for dApps that includes sharding. Apart from Spotlight, Kucoin has also been working on a derivatives platform which will also use KCS token as its native crypto. Needless to say, the exchange has been very busy as of late, and business appears to be blooming.
2. Bitmax Launchpad
Bitmax is a young exchange, and the launch of a token-launching platform will likely significantly help its growth. It also has its native token, BTMX, which has been performing significantly better in the last month. However, this token is also controversial, which might have an impact on its future.
Even so, as mentioned, the coin saw significant growth in March, with traders seemingly being more interested in this token than in the ones that are to be launched on the platform. The community does not seem to be particularly excited about the coins that are being launched, which raises a question whether there will be any winners at all, and what will happen to the coins' prices once they get listed. But, considering how young Bitmax still is, it is possible that things might change in the future.
3. Bittrex IEO
Bittrex IEO came as an exciting move for its community, and the exchange is already different from the previous two due to the fact that it does not have a native token. Its reputation seems flawless, however, and many think that its decision to join the IEO trend seems less cynical compared to others.
The platform was supposed to launch a token called Raid, but the launch was called off in the last minute. The supposed reasons for this move was a misleading partnership claim. However, the result is that IEO remains untested to date, but the excitement about it is still far from gone.
4. Huobi Prime
Huobi is another exchange which stands out from others, mainly because it started calling its IEO service a ‘Direct Premium Offering,' or DPO. All purchased tokens will be sent to participants' accounts directly, and they will be able to trade them right away, at least against Huobi's native coin, HT. So far, the exchange has promised a rigorous selection of tokens it plans to launch, to ensure that only the best ones end up being offered.
It also guarantees early access to coins, and at prices below the market value at that. Finally, the exchange promised to grant entry to retail investors as well, and not only VIPs and professionals.
The first project on the platform is to be TOP Network, a messaging and file-sharing startup from Silicon Valley. Users wishing to participate will have to have a fully verified account on Huobi Global, as well as an average holding of 500 HT per month.
5. OK Jumpstart
There is still not a lot of details known about OKEx's Jumpstart, apart from what the exchange shared in a recent blog post. However, it is likely that the platform will only offer new tokens in exchange for OKB, OKEx's native coin. However, this is a non-blockchain asset, meaning that it cannot be used outside of the exchange.
OKEx also mentioned that they are risking their credibility by approaching IEOs, as it has no control to what the projects' team might do, or even deliver. This is why the exchange will be extremely strict while assessing the project prior to the IEO.
6. Bgogo Apollo
Bgogo exchange decided to join the trend as well, creating its own launchpad called Apollo. Apollo will use Bgogo's native token, BGG, and its first project was Armors (ARM), which focuses on blockchain security. However, those who wanted to participate in a token sale had to go through a certain ‘entrance exam,' where they had to prove that they are familiar with the project they are about to invest in.
These six exchanges are among the first ones to launch their IEO platforms, and all of them require investors to own verified accounts. The participation is based on the ‘first come, first served' method. However, while these are among the first and largest exchanges to follow Binance into an IEO era, they are certainly not the only ones.
Many others are also picking up on the trend, with the likes of Probit, Exmarkets, and Exmo already coming up with their own platforms. Meanwhile, Binance is making changes to its own Launchpad, with the recent update introducing a lottery system where participants who hold a certain amount of BNB for over 20 days will be the only ones allowed to buy coins — and even that will come only if they end up being lucky enough to get the right lottery numbers.
The important conclusion to draw from this is that token sales continue to live, in one form or another, and that the ICO model, while very different from its original form, is far from being dead. Instead, it simply evolved with the rest of the market.