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IDO Explained: How Initial Dex Offerings (IDOs) Work

Updated: Jun 30, 2022

In 2019, Raven Protocol launched an Initial Dex Offering (IDO), a fundraising method that was unheard of at that time. Back then, everyone ran Initial Exchange Offerings (IEOs), and IDOs were uncharted territory. But the public’s trust in Raven’s IDO paid off, and just days later, early investors saw their money double.

Years after it was first introduced, IDO has become one of the most popular ways to raise funds in the crypto space. But to understand how it works, we must explore how IDOs came to be.

The Rise of IDOs

In 2016, companies that wanted to raise money for their crypto project launched an Initial Coin Offering (ICO), which worked just like its stock market counterpart, the Initial Public Offering (IPO). During an ICO, the company sells a part of its token supply to the public. ICOs were beyond effective; teams could raise millions during a single ICO. In fact, EOS managed to raise a whopping $4 billion through its ICOs.

The catch, however, was that ICOs were unregulated and became a hotbed for scams. And so the IEO was born, which provided more stringent vetting and stronger due diligence. But it also has a downside — IEOs have high barriers to entry.

Enter IDOs, which immediately became the crypto crowd favorite. It enables teams to raise money, with a reasonable amount of regulation and lower barrier to entry and allows any and all types of teams and investors to participate. In addition, the tokens involved in an IDO are listed immediately on a decentralized exchange (DEX), but more of this later.