How to invest in IDO
An interested visitor to a decentralized exchange, after activating a certain smart contract, can register a new virtual coin
Participation in ido is a type of investment that is gaining momentum. Many IPO investors dilute their portfolios by buying ido tokens, where high asset returns are driven by the cryptocurrency boom. In this article, we will analyze what ido is, how to participate in ido, how to choose a project to enter, what launchpads are, and what are the strategies for participating in ido.
Who organizes IDO and how
An interested visitor to a decentralized exchange, after activating a certain smart contract, can register a new virtual coin. After providing liquidity to the pool, the issuer of the token can organize a token sale. If the project passes the test (to filter out the scam), then the process of raising capital is launched directly. This can take place both on a decentralized exchange and on launchpad platforms. Another in-demand option is NFT launch IDO which combines the opportunities of IDO and non-funginble tokens.
What is IDO
Launchpad are specialized Internet platforms aimed at raising money to launch crypto projects. The difference between the launchpad and the classic initial decentralized offer is that such platforms are no longer associated with the exchange. They are represented by a community of investors who must have, circulate and deposit the project’s internal tokens (for example, Polkastarter has POLS, Binance has BNB, DAOMaker has DAO Power, and BSCstarter has START). Owning such coins allows you to participate in crowdsales, and in some cases, vote in the financing of certain projects.
Investment in IDO
The main objectives of investment in any area - to maximize profits and minimize the risk of losing money. The opportunities provided by IDO cryptocurrencies are very large. With a correct assessment of the next startup, it is possible to increase the initial capital several (sometimes tens and even hundreds) times in a relatively short time. If you choose launchpad platforms as an investment tool, this will significantly reduce the risks. Some projects provide insurance against the loss of invested assets, and in case of failure, the investor simply will not receive the expected profit, but will not lose the main capital.
The cryptocurrency market is very young and subject to significant fluctuations. However, such conditions, with a certain amount of luck and correct analytics, allow you to get high profits.
Despite the fact that DeFi projects eliminate the participation of intermediaries, the danger of losing your capital lies in the smart contract code itself, in which attackers find bugs (developer errors) or expose the entire network to a hacker attack.
Another risk factor for investors is the high probability that after the listing, the price of the coin will not only not rise, but will also drop significantly.
Tokens based on DeFi protocols are very dependent on a sharp drop in the value of Bitcoin and other liquid cryptocurrencies from the top ten. Such volatility of coins makes them very risky.
Advantages and disadvantages of investing in IDO
As in any commercial project, participation in a token sale has its positive and negative sides.
Pros of Initial DEX Offering:
- Quick listing. Token holders usually do not have to wait long for the coins to start trading on the exchange. Listing occurs as soon as the IDO of the crypt ends.
- Availability. The simplified reliability check procedure allowed many more startups to raise the necessary money.
- Transparency. This item is not unique in the cryptocurrency environment. But it's still handy to be able to check the token contracts and adjust your plans
The disadvantages of project exit through IDO include:
- The other side of accessibility. Not very clear criteria for verification lead to fictitious projects.
- Forced purchase by users of a significant number of launch pad tokens, which makes participation more expensive.
Lack of coin price control mechanisms. This situation leads to the fact that using special software - a trading bot - you can buy more coins at the base cost. This is exactly what happened a year ago during IDO BZRX.
The result of the development of mechanisms for attracting seed capital to promote cryptocurrency startups was the emergence of IDO. This led to the formation of a new type of launch pad - Launchpad. Such platforms have a clear interface, decentralized functions and provide more opportunities for developers and investors. The former can quickly and reliably raise money for their project, while the latter can get a high-interest profit without the risk of encountering scammers or fakes.