How blockchains disrupted traditional fundraising methods?

Hello, world!

We have witnessed enormous amount of funding raised by ICOs and IEOs back in 2017–18. Some of you might have even participated in ICOs. Let’s try to explore the history of fundraising on the blockchain.

ICO was the prominent method of fundraising on the blockchain. Cryptocurrency developers and companies basically organize an ICO to actually sell their concepts in the form of their native coins or tokens in the form of widely known cryptocurrencies like Bitcoin, Ethereum or Neo. It became a hotspot of the crypto space because of providing immense returns on investment.

Process:

  • Projects come with a whitepaper or MVP on blockchain
  • They deploy smart contract for distributing native tokens in return of investment
  • Public joins whitelisting events to be able to participate in ICO
  • A landing page is created for swapping native tokens

Whitelisted people send their funds to smart contract address and receive tokens immediately (FCFS only).

The very first ICO was created for Mastercoin in 2013 and made ICO term extremely popular. However, it has major issues. The projects didn’t use to list on exchanges right after the public sale. There was no custody of tokens involved, the community wasn’t satisfied because of FCFS methodology. Besides, most of them turn out to be scam because of poor lack of transparency.

But centralized exchanges came together to empower fundraising on blockchain. As it was centralized, exchanges were used to perform due diligence before taking projects on their launchpad. For that matter, IEO is still popular to the current date. Let’s explore how IEO works.

IEO is an improved method of fundraising in blockchain ecosystem proposed by centralized cryptocurrency exchanges. As centralized exchanges are established with the highest security standard, they strictly check project coming on their launchpad. Because they do care about their reputation, right? As a result, they significantly reduced scams — but not entirely.

Process:

  • Projects with MVP of strong application applies on the exchange’s launchpad
  • A centralized governance accomplishes due diligence and approve/reject receive applications
  • If approved, a public sale date is announced with token swap rates
  • Some of the exchanges allow native token holders to participate in token sales while some of them establish whitelisting process
  • A landing page is created with simple token trade mechanism on exchange itself
  • People invest with predefined cryptocurrency on FCFS basis.
  • Project lists on the same cryptocurrency exchange within a week

The very first IEO was created for FICE in April 2019 by Idax. Yes, it was enhanced version of ICOs as it deals with the highest security standards, unlike ICOs. And, it gains popularity and ICO trend converted to IEO now. However, it has limitations as well.

First, there was not involvement of fairness in participation method. On other hand, exchanges weren’t completely transparent. For example, hyped projects used to get sold out in a few seconds but none knew who actually participated in IEO. Besides, project chosen by exchanges were not 100% legit otherwise those IEO projects would have appeared in 2021.

That’s where blockchain faced DeFi revolution. Decentralized Finance has completely disrupted the way of investing, earning, lending and borrowing. But it also disrupted the fundraising process entirely. Based on transparent tokenomics, fair size of hard caps, VCs’ due diligence, active involvement of community, instant public listing etc., we can somewhat say that IDO method of fundraising is here to stay.

It is an improved version of both — ICO and IEO which works on concepts of DeFi. The very first IDO was launched by Raven Protocol in June 2019. As usual, projects started appearing with IDOs on Ethereum chain. But due to network congestion and unaffordable fees, we have had a better solution — BSC. It was not perfect though. Overall, IDOs provided fair investment opportunities to public indeed.

Process:

  • Projects with MVPs or disruptive ideas close seed and private rounds with fair hard caps
  • Once finished, they apply for fundraising on IDO launchpads
  • Centralized governance makes an approval/rejection decision based on various factors. Or, community is provided chance to make a decision here
  • Upon approval, public sale dates announce based on price mentioned in tokenomics
  • Launchpad’s token holders and general public provided a chance to participate in early-stage investments
  • Within hours of public sale conclusion, it gets listed on decentralized exchanges making it accessible to public instantly

But development of multiple blockchains, a variety of IDO launchpads started appearing. That left one question — What is the blockchain project should go with? Because, creating a unique idea on established, faster and scalable blockchain from the beginning is always a good idea. That having said, we, as a project, have chosen Polygon (previously Matic) as our native blockchain to help projects fundraising for the next generation of ideas.

Why did we choose Polygon?

Stay tuned for the next article to know more about us…

More info:

Website: https://maticlaunch.org

Join Discussion: https://telegram.me/maticlaunch

Twitter: https://twitter.com/maticlaunch

A fully decentralized fundraising platform for the next generation of ideas built on Polygon.