IDO: Initial DEX Offering Explained

IDO or Initial DEX (Decentralized Exchange) Offering is a token offering mechanism on DEX. Investors lock their funds to create a liquidity pool (LP) post-sale to get new tokens during TGE (Token Generation Event). This is a fund-raising approach used by projects to get early access to LP and coins at the initial price, which is a lot lower than at the public sale. 

The method is the same as ICO (Initial Coin Offering) but since it involves the DEX in the process, it is relatively safe and there is less risk of someone pulling the rug on you. IDO is actually a crowdfunding technique that is alternatively used for ICO or STO (Security Token Offering). Let’s dig into how IDOs work.

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IDO (Initial DEX Offering)

For an IDO, the first thing required is a Decentralized Exchange to aid the token sale. The token is provided to the DEX so that when an investor commits his funds through a specific DEX, the platform could complete the final distribution and transfer. The whole process takes place differently as per the rules written in the smart contract, but the most common proceeds are as follows:

  1. After screening the platform, the project is selected for an IDO on a DEX. The tokens are accepted at a fixed price and investors have to lock their funds in return for these tokens. 
  2. The tokens are not awarded directly to the investors. Investors get their tokens during the Token Generation Event (TGE).
  3. Investors are usually vetted through a whitelist. They either have to complete a marketing task or just provide their public wallet key.
  4. Another way investors are funding a project is through a Liquidity Pool. This way, the project team holds investors’ funds, and they can use it their way. Investors are allowed to trade their tokens only after the TGE because normally, the liquidity is locked at the beginning to organically appreciate the token’s price and liquidity.

Conclusion

If you want to be a part of the next IDO, you’ll need a crypto wallet like Trust wallet or MetaMask. Make sure your wallet is on the same mainnet as the token and the wallet holds enough funds to pay for the subscription and fee.

Since token offerings involve huge risks, always invest what you can afford to lose – quite a hostile place. Moreover, DYOR (Do Your Own Research), that’s the best thing to avoid rugpulls and scams.

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author: mnmansha

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.