A Detailed Guide on What Is Initial DEX Offering

An initial DEX offering (IDO) is a strategy utilized by crypto projects to generate funds via decentralized exchanges (DEXs). In these crypto exchanges, users can purchase and sell crypto, but different in traditional exchanges, a centralized team or authority in charge of the project does not exist.

Smart contracts are utilized to handle crypto trades automatically, and a DEX community stakes funds to offer the needed liquidity. An IDO permits crypto projects to list their project on one of the DEXes, with sales earnings being used to fund the project.

Users purchase the tokens, hoping their value will rise as the project grows. Purchasing an asset hoping that the associated project’s value will rise and thus pay dividends to the investor is under gloomy regulatory territory. In this case, the United States Securities and Exchange Commission primarily views IDO tokens as securities.

IDOs are a famous fundraising tool. Enjinstarter, a recently created IDO launchpad, experienced considerable ROI for its users, underscoring the use case for the IDO in crypto.

How an IDO Functions

IDO functions by selling tokens on a decentralized exchange to finance crypto initiatives. The steps involved are described below: 

1. A token is listed on a decentralized exchange, and a sale is announced.
2. Users visit a decentralized exchange to get an IDO launchpad’s sale. 
3. Users purchase the token directly from the DEX or launchpad by linking their cryptocurrency wallet to the platform.
4. The token sale’s earnings are added to the project funds.
5. In some instances, users may acquire rewards, for instance, a future airdrop reward, for buying tokens.
6. IDOs also aid in boosting a crypto token’s popularity and circulation. 

An extra advantage to the project team is that it is cheaper to list a token on a decentralized exchange compared to a centralized exchange that charges fees. Further, it should be noted that the sale of IDO tokens outside the launchpads mostly happens following the occurrence of the main IDO, possibly providing less favorable prices for investors.

Thus, IDO launchpads are utilized more often. An initial DEX can be an excellent means to generate funds in case regulatory problems are not encountered. 

Legality of IDOs 

An IDO’s legality relies on the projects and the regulators in every jurisdiction where tokens are sold. Regulators often view IDOs on a case-by-case basis.

In case a project can demonstrate that a token comprises a utility beyond generating project revenue and potentially enriching investors as the project expands, the token will not be considered a security. Otherwise, regulators might believe that the project team is selling securities and in case they have not registered, this is unlawful, and a penalty may be awarded.

Main IDO Platforms 

Examples of the most famous IDO platforms and launchpads where individuals can participate in IDOs include:

Ape Terminal

At the time of writing, the launchpad for IDO projects had a 3.38x return on investment (ROI).

DAO Maker

The project’s present ROI is 0.77x and a 24-hour volume of $197M.

Fjord Foundry

This is the second most famous IDO launchpad, with an ROI of 1.35x. The firm links investors to potential crypto projects to facilitate initial DEX offerings.

Polkastarter

This IDO blockchain launchpad mainly focuses on generating funds for initiatives in the Polkadot network ecosystem.

Finding New IDOs in Crypto

Checking the above launchpads is an excellent means to find IDOs. Afterward, you can purchase IDO crypto tokens and develop a portfolio.

Prior to taking action, a person should confirm the legal and regulatory status of any project they are interested in. Investors can potentially be condemned for buying unlicensed securities if a regulator rules against a crypto initiative.

IDO crypto projects can also be found in the Reddit, Telegram, and Discord communities. One should also be wary of online scams when making inquiries on social media.

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