Key Takeaways:
- Explore the various points that made ICOs fall out of favor from entrepreneurs in the cryptocurrency market.
- Discover various alternatives that one can try out in the current economic climate for fundraising purposes.
- Find out how you can implement one of these fundraising mechanisms for your next blockchain-based business.
The global economy is increasingly getting digital-first as many of its facets have functional virtual versions powered by digital interfaces backed by advanced software solutions. The wave has not left the fundraising space, too, as it is experiencing a massive change in terms of technology used. ICOs (Initial Coin Offerings) became a valuable tool for crowdfunding that tapped into blockchain technology for representative digital tokens, which eased how fundraising campaigns were executed. However, since then, the model has become subject to several undesirable events, leading people to look for alternatives. In this blog, we will discuss in detail the top alternatives for ICOs, including IDO development and INO development.
Initial Coin Offering: Why Did It Fall Out of Favor?
Initial Coin Offerings (ICOs) became a hot fundraising model in the mid-2010s when entrepreneurs started looking for novel yet efficient ways to garner funds from investors. In particular, 2017 was the host of the global ICO boom, which saw thousands of projects (mostly based on blockchain technology) conducting fundraising campaigns using this approach.
- However, problems started arising when the owners of numerous so-called “revolutionary projects” abandoned their investors and took away all the raised funds. The volume of such instances in a short period of time led to the perception that ICOs are scams, which has become an irreparable status until today.
- Still, many ICO campaigns went on to become successful ventures, with Ethereum, EOS, TON (from Telegram), Tezos, Filecoin, and Polkadot being the most important. Such success stories could place some trust in ICOs, subject to investor speculation and how well a project conducts itself before and after the campaign.
- Another reason that made ICOs fall out of favor is the amount of hardwork it takes to conduct a campaign. Since every part of the ICO is free of intermediaries, projects need to look after all aspects of fundraising by themselves. Starting from website designing and community building to token development and distribution, projects have to handle everything, which makes it challenging for those new to the space.
Top Alternatives One Can Opt for Instead of ICOs
With ICOs gaining mixed reviews among investors and entrepreneurs, several alternatives have popped up over the years—each promising to be more efficient than the earlier ones (and even cater to exclusive use cases). Here, we have listed the top choices people have chosen for blockchain-based crowdfunding purposes, each of which we will discuss in the upcoming sections.
- IEO (Initial Exchange Offering)
- IDO (Initial DEX Offering)
- STO (Security Token Offering)
- IGO (Initial Game Offering)
- INO (Initial NFT Offering)
- Token Airdrops
Initial Exchange Offering (IEO): Taking a Helping Hand
As its name suggests, an Initial Exchange Offering (IEO) depends on cryptocurrency exchanges for crowdfunding purposes. The process taps into centralized exchange (CEX) platforms that will host fundraising events on behalf of projects and later list the tokens publicly, enhancing their reach.
While the approach looks like a great alternative to ICOs, it has its own perils. Here, projects need to trust a centralized entity to aid in fundraising and public listing, which also takes up considerable costs. Still, if an entrepreneur is prepared to pay heftily to raise a high volume of funds, opting for an IEO could be wise.
Initial DEX Offering (IDO): Working with a Decentralized Intermediary
Initial DEX Offering (IDO) came as a direct challenge to IEOs using decentralized exchange (DEX) solutions for crypto fundraising efforts. Since DEX platforms extensively use smart contracts for their operations, relying on human intermediaries reduces, leading to an increase in the efficiency of the campaign.
Based on how a particular decentralized exchange functions, IDO development projects need to pay a small cost to conduct the fundraising event and list their tokens on the exchange. The concept of launchpads became popular with the IDO model as these applications assist projects in building a solid foundation in terms of community apart from funds.
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Security Token Offering (STO): Taking Lessons from Conventional Fundraising
The Security Token Offering (STO) model is notably revered for its similarity to the Initial Public Offering (IPO) model common in the real world. This model aids projects in distributing crypto tokens that represent portions of the project’s assets as security. STOs are particularly useful for high-profile real-world projects that use blockchain technology for operational purposes.
While the whole premise behind STOs is attractive, one must note the legalities behind the model can be a hassle, as projects need to comply with necessary regulations relevant to financial securities. Nevertheless, with real-world asset (RWA) tokenization taking off to new heights, conducting an STO might be a bit easier.
Initial Game Offering (IGO): Easing Crowdfunding for Games
As Web3 gaming becomes more mainstream, so does the number of projects aiming to capture the evolving market. Initial Game Offering (IGO) serves as the ideal solution for small-scale gaming ventures aiming to scale towering success in the Web3 space. Projects can release in-game NFT assets and in-game cryptocurrencies for fundraising purposes through presale events.
Such an approach also benefits game projects in another way. They can become popular in today’s market even before release, as people love sharing great experiences and expectations. However, note that people’s mindsets could change if the game’s quality is compromised, making it important to deliver a top-notch platform that could benefit you in the long run.
Initial NFT Offering (INO): Leveraging NFTs’ Non-fungible Nature
Initial NFT Offerings (INO) are different only by the tokens they distribute during crowdfunding events, as they offer NFTs in place of fungible tokens. The model can be used for almost any Web3 project using NFTs, leading to diverse possibilities that expand from conventional PFP collections to decentralized server nodes (Initial Node Offerings) and shares of AI language models (Initial Model Offerings).
While being a generalized model, many projects using the INO development model utilize DEX solutions to conduct campaigns. This is obvious since most up-and-coming projects tap into NFT launchpad services that use DEXs for token distribution.
Token Airdrops
As an option that most entrepreneurs tend to misunderstand when approaching from a fundraising perspective, token airdrops have yielded immense success for projects over the years. In this method, projects randomly drop tokens (fungible/non-fungible) into the wallets of people in their community.
While dropping tokens into user wallets might not seem like an impressive way to raise money, the long-term effects of perfect promotions and an intriguing project story can lead to an increase in tokens’ value over the years. However, projects need to consider that there is a lot of continued hardwork to do to gain those funds, as results here come slowly and steadily.
Conclusion
Henceforth, we have seen the top alternatives entrepreneurs can choose in place of ICOs to raise funds in today’s crypto economic climate. Despite the availability of a plethora of options, IDO development and INO development seem popular among Web3 projects, as they provide truly decentralized experiences and ample flexibility in the fundraising mode. If you are an enthusiastic Web3 entrepreneur looking to garner community and financial strength, opting for our expertise to develop and execute your crypto fundraising campaign can be better. Our excellence in all facets of blockchain-based fundraising solutions sets the foundation for your project to thrive in the competitive space. Connect with our experts now to get a customized quote suited to your requirements!
