Beginner’s Guide to Initial Dex Offering (IDO)
With KSM Starter’s first IDO just around the corner, the team wants to offer a deep dive on all things IDO so that newbies and beginners can be empowered to join in at the frontier of decentralized finance.
Let’s take it from the top:
Introduction to the IDO
Short for an Initial Dex Offering, the IDO is one of blockchain’s newest and most innovative forms of project crowdfunding. Practically, it can be broken down into two phases.
The first phase is contained within a launchpad, which is a platform dedicated to incubating, promoting, and facilitating fundraising for brand new crypto projects. Due to their professional network and large community base, launchpads are able to offer infrastructure for high impact, high growth early project development and project launches.
From the investors perspective, holding the launchpad’s native token grants access to projects before they hit the open market on decentralized exchanges. Through the platform, launchpad community members get exclusive access to tokens at a floor price, set by the first public funding round.
The second phase of an IDO is marked by the token’s migration to a decentralized exchange, such as Uniswap on the Ethereum network or Acala on Kusama. At this point, the token becomes publicly tradable and available to the entire retail market, who often scoop up the launched token as fast as possible, pumping the price sometimes to triple digit returns. For launchpad participants, this is the most exciting part because it bears all the profitability that comes with buying-in first.
Differences between ICO vs IEO vs IDO
To understand the benefits of an IDO modeled raise, it’s helpful to put the IDO in its proper context as an evolved improvement on the earlier ICO and IEO crowdfunding models.
When cryptocurrency first penetrated mainstream attention at the tail-end of the 2017 bull run, the frenzy of blockchain based development brought with it a host of new projects looking to capitalize on the fervor and potential funding opportunities within the blockchain ecosystem. Unlike IDOs, which are decentralized by nature, ICOs — or Initial Coin Offerings — were highly centralized and run by the launching projects themselves, in-house. With no third party oversight nor blockchain based accountability, ICOs were ripe for false starts, rugpulls, and outright scams. Very few ICOs gathered enough funds to launch on exchanges while many more simply disappeared, taking with them millions of dollars.
IEOs, or Initial Exchange Offerings, rose up to improve on the ICO model by introducing regulation and accountability. As the name implies, via an IEO, a project launches straight to a centralized exchange, in which it is immediately tradable on the open market. The primary benefit of the IEO is it’s accompanied vetting project in which the team and their tech is highly scrutinized for the sake of all investors. The primary drawback is that IEO’s are extremely expensive and pose an unnecessarily high barrier to entry; so high, that many projects needed an alternative.
In 2020 the Goldilocks of crypto crowdfunding entered the world arena via the IDO model, which introduced accountability and transparency via blockchain technology and made project development more accessible through decentralized fundraising. The IDO launch model allows projects to navigate around expensive listing fees, and launch straight away to investors on decentralized exchanges. Other benefits of the IDO/Launchpad model include a more efficient launch process, and most importantly, a fair and open source fundraising avenue, verifiable on a public blockchain.
In contrast to ICOs and IEOs, in which the tokens launched are frequently pre-mined and often pre-sold, IDOs do not bar small investors from early stage investing, and from enjoying the largest share of returns. Decentralized fundraising platforms, like KSM Starter, make investing in IDOs accessible to all levels of investors through a tier system, while simultaneously limiting the allocation of tokens to allow for sustainable price growth.
Disadvantages of IDO
Less Regulatory Oversight: Like all things in crypto-land, it is crucial to do in-depth research on potential investment opportunities. This is definitely true for launchpads, which lack the regulatory scrutiny offered by centralized exchanges. A key indicator of a launchpad’s integrity can be verified by confirming that they provide anti-scam vetting, Know Your Customer (KYC,) and anti-bot protection measures at launch. As an investor, it is also wise to select launchpads with sustainable tokenomics and responsible security hygiene, such as routine audits.
Oversubscribed IDOs: Due to popular demand and the tendency to offer smaller token sales than ICOs and IEOs, IDOs are often hugely oversubscribed and difficult to participate in. Traditionally, whitelisting procedures and capping IDO allocation via a tier system is used to mitigate the raw demand for participation, but KSM Starter offers an innovative new solution: it’s Auto-Invest Feature, which allows it’s upper tier members to automatically participate in IDOs via a pre funded wallet without having to stress over FCFS gas wars.
Two Types of Launchpads
At a high level, launchpads can be broken down into two categories: generalists and ecosystem specific.
Generalists launchpads, which predominated when IDOs were mostly confined to Ethereum, launch individual projects unrelated to one another, and uncategorized according to their role within a blockchain ecosystem. Each project launched exists individually, on the merit of their capabilities, with little in-built relationships to other launches.
Ecosystem specific launchpads, on the other hand, incubate their launches with the specific intention that they will go on to function within a network of other projects on a shared blockchain. The underlying intention is to bolster each project’s prospect for long term success by utilizing synergy and network effects.
KSM Starter belongs to the second class of launchpads, and has conscientiously baked synergy into a core ingredient of its infrastructure. Any projects that undergoes an IDO on
KSM Starter earns membership in the KST Ecosystem Council, which is composed of both established projects and emerging projects built on Substrate. The ecosystem provides early support for emerging projects through the expertise of the established projects and from incentivized community building. On top of holding the KST token, IDO participants are incentivised with a higher allocation win rate by holding any of the previous IDO tokens in their wallet. This is designed to create an ecosystem of IDO projects that can benefit from each others’ success, fostering a community of collaborative contributors.
Participating in an IDO
Getting involved in an IDO investing event is relatively straightforward: Simply purchase a launchpad’s native token according to their tier system, and register for the IDO via their whitelisting form.
For instance, KSM Starter’s tier information is above, and lists the required amount of tokens needed to qualify for each investment size allocation. The more $KST tokens that an investor has, according to the tiers, the larger their investment allocation size is. This creates the opportunity for significantly higher profit returns. The Phoenix tier, for instance, will grant community members the option to invest 250x more than the Dove tier, and make an impressive 250x more in returns.
While all other tiers have guaranteed allocation, KSM Starter’s Dove tier enters investors of this category into a lottery in which they draw for allocations dedicated to this tier. The odds of winning an allocation in Bird tier will vary according to how many other investors whitelist for the IDO.
Once you have purchased the $KST token, participating in an IDO requires that the investor stakes their tokens, which registers them with the platform.
To do so, simply:
- Visit KSM Starter’s official app and staking page: app.ksmstarter.com/staking
- Through the Ethereum network, connect with a non-custodial browser based wallet.
- Input the amount of $KST tokens to be staked, according to the Tier system.
- Press the “Stake” button.
- Approve the transaction via the wallet.
With the tokens staked, the final step in IDO participation is to fill out the registration form, called a whitelist, which will go live when the first IDO is announced.
To ensure that this announcement goes unmissed, stay tuned to KSM Starter’s official social channels, linked at the bottom of this page. The team has been busy organizing a slate of IDOs that will prove pivotal in the growth of Kusama, and they are extraordinarily excited to reveal them in the coming weeks.
About KSM Starter
KSM Starter, the primary launchpad on Kusama, is built to provide early-stage support and public funding for projects building on Substrate. KSM Starter’s incubator modeled launchpad is driven by the community and shared values of fairness, transparency, and decentralized organization. Unique to the KST ecosystem, community members are incentivized to participate in the pre IDO selection process through higher allocation rewards. Also unique to KSM Starter, collaboration is fostered among launched projects by incentivizing community members to support previous launches by awarding them with improved lottery odds. This along with the KST Ecosystem Council generates a synergistic network effect that empowers all projects to succeed and leave a lasting impact on Kusama.
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