Understanding the financing in the crypto industry

Understanding the financing in the crypto industry

Over the past few years, the cryptocurrency market has shown rapid growth. According to data provided by Statista, the cryptocurrency market’s earnings are expected to reach US$51.53 billion this year, growing at a compound annual rate of 8.62% until 2028.

In this context, more and more cryptocurrency projects are launching new tokens and cryptocurrencies through IDO and ICO mechanisms.

In this article, we will explain what ICOs are, and the importance of having the correct information in their communication or marketing campaigns.

Initial Coin Offerings vs. IDO

IDOs and ICOs are known as fundraising or financing methods through which crypto project founders can raise capital for the launch of new crypto projects.

Initial Coin Offering (ICO)
ICOs are usually recognized as a financing method for raising capital by crypto project founders.

During the ICO launch process, founders typically offer new tokens to investors or consumers participating in the project launch process, in exchange for financing that can be in other cryptocurrencies or fiat money.

The ICO process has been compared to the IPO process, whereby a company goes public, becoming a publicly traded company.

Kristina Vorobeva, founder of the public relations agency Sparrow, said: “The cryptography industry is expected to reach $68.8 billion in 2027. To stand out in this rapidly growing field and demonstrate that your project is a serious business, founders must invest their resources in a public relations professional and marketing campaign. The initial public presentation often reflects the seriousness of the founder’s intentions. Clear and concise messages, transparent communication, and a mobile-compatible visual presentation are crucial to creating the right perception.”

Initial DEX Offering (IDO)

The IDO has been considered the most innovative fundraising process for crypto projects, seen by many as an evolution of ICOs. They occur on decentralized exchanges, also known as DEXs.

In an IDO, tokens are immediately available for trading on the DEX, providing instant liquidity. This method is considered more democratic and transparent because it allows immediate trading and does not require a centralized authority to oversee the token sale as is often the case with ICOs.

What are the main differences between both processes?

ICOs and IDOs usually have some key differences, which distinguish both processes, some of the main differences are:

Launch Platform

ICOs are generally launched on centralized platforms, while IDOs are usually launched on decentralized platforms such as DEXs.

Regulation

ICOs are regulated in some international jurisdictions, such as by the SEC in the United States, while IDOs are usually not regulated, which has brought great controversy and problems in various parts of the world for financial authorities.

Liquidity

IDOs provide immediate liquidity for new tokens as they are listed on a DEX right after the offer, while ICOs may have a delay before the tokens are listed on an exchange.

Investor Access

ICOs may have minimum investment requirements and could be limited to accredited investors, while IDOs are generally open to all investors on the DEX, making them more accessible.

The importance of correct information in ICOs and IDOs

During the launch processes of new cryptocurrency projects It is essential that the investors can have real, accurate information. Some of the main reasons for the importance of such information in the launch processes are:

Transparency and Trust

The crypto market has grown rapidly in recent years, with a large number of crypto projects being born, in this sense, transparency regarding who the project founders are, the project roadmap, and the white paper are fundamental to understanding how serious and realistic the project is.

Regulatory Compliance

With increased scrutiny by regulatory bodies, providing the right information ensures that marketing campaigns comply with legal standards. This not only protects the project from potential legal repercussions but also reassures consumers that the project is legitimate and serious about complying with regulations.

Market Positioning

How a project positions itself in the market through its communications can influence consumer perception. Clear, consistent, and precise messages help position the project as a leader and innovator in its niche, which can attract more interest and investment.

We can conclude by understanding that correct communication in the launch processes of cryptocurrencies or tokens is fundamental to the project’s success and to safeguard the security of investors.

-Juan Allan

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