How does IDO empower DeFi to win at the starting point
With its fast growth and increasing popularity, DeFi is appearing in more and more financial scenarios, from basic transactions, lending and borrowings, to more advanced options, forwards, etc. In the current bull market, multiple public offerings, from ICO, IEO, to the hot IDO (“Initial Dex Offering”), have unanimously attempted to decentralize operations on the chain.
Recently, the number of IDO projects has increased significantly. Many projects choose IDO as their fundraising method, such as UMA, MTA, API3, PREP and other well-known tokens, all of which have brought significant wealth effects.
For startups, compared with the chaos of ICO and the high threshold and transaction fee of IEO, IDO stands out for its powerful economic effects, regularity and orderliness. Besides the advantage of free listing, IDO can also complete fundraising and initial liquidity establishment in one single step. Therefore, many projects are choosing IDO to build their community and the acquire seed investors.
Such advantages have also fostered the growing presence of more niche IDO playforms. Many DeFi protocols, especially DEXes, also have begun to conduct IDO to take advantage of its popularity, such as Uniswap, DODO, etc. The Balancer Liquidity Bootstrapping Pool (LBP) helps the market to discover more valur and thus is highly endorsed by many projects.
IDO in DEX: limited function yet unfair and risky
Uniswap, an AMM-based DEXes, is one of the DeFi leaders. Its “no listing permission required” feature made it the hot choice of many projects last summer. Projects need to create a smart contract-based pool in advance and recharge tokens and reserves such as ETH or DAI at a ratio of 1:1. After that, users can freely purchase tokens in the pool. As large amounts of funds are injected to the market, the token price will be driven up according to the curve model.
This model derives the problem of “scientists’ front-running”. Users who pay higher gas fees can often complete transactions earlier and get better prices, therefore, many “scientists” will use machine algorithms and higher gas fees to get ahead of others. The market frenzy can easily cause prices to rise sharply, which is not fair to ordinary users.
The model has many negative effects. Back to the time when aircoin projects opened their trading pairs at Uniswap, the “scientists” easily drove up the price to attract investors to enter the market and then rip them off. There were also many counterfeit tokens pretended to be well-known projects to deceive investors. All these once made Uniswap known as a garbage dump.
DODO has explored IDO for fairer transactions by the crowdfunding pool model. In this model, DODO offers a certain number of tokens with prices, and investors who are willing to participate can purchase within the specified time. The entire process and progress are completely transparent. The moment the purchase ends, the open pool is automatically established, and the purchase price is used as the opening price to immediately open the spot trading market.
Through the control of purchae time and transaction time, it evenly distributes the cost among participanta. Problems like the “scientists advantages” in IBCO, and liquid mining major players “digging-dumping” are solved. It also provides projects with initial transaction depth and liquidity.
Niche IDO platforms: more professional and diverse
Niche IDO platforms like Polkstarter and Bounce can provide more services to startup projects by enabling multiple ways for investors to participate, such as fixed exchange pools, community authorized auctions, etc. They thus allow more professional and diversified auctions and fundraising which ensures fair participation in public offerings more.
Different from DEXes which allow all users to build pools, these niche platforms would review their IDO projects to ensure project quality, thus protecting investors better.
In addition, compared with DEXes, niche IDO platforms can help projects with more community building. For instance, before giving users the qualifications to participate, they can require users to forward marketing news via social media, join the community, and follow the project’s social media accounts, to increase the projects’ publicity and popularity.
As the blockchain ecology is established in multiple public chains, each network has agreements that specifically help projects to raise funds.
The new generation of IDO incubator
The new generation of fundraising platforms offer more than just fundraising service, they also provide other needed assistance in the initial stage of the project, which can be called an IDO incubator. For example, Safe Launch, which will be launched soon, can help projects conduct contract audits, market promotion, and provide incentives for liquidity mining.
Safe Launch itself has a very active community and rich industry resources. Compared with IDO on DEX, which can only be promoted in the internal community, Safe Launch can help initial projects gain more publicity in the market.
When it comes to the transaction pools of new projects, Safe Launch can also provide additional liquidity mining incentives to help projects obtain higher transaction liquidity.
The professional market services provided by IDO incubators like Safe Launch, can help projects better concentrate on product development, improvement, and innovation, which will accelerate the growth of DeFi.