What is an initial exchange offering (IEO)?
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 5 min
In short
In an IEO, an exchange vets a project and sells its new token on the project's behalf. Having an exchange as the gatekeeper adds a minimum layer of due diligence, but that review is not a forecast of price. Many past IEO tokens fell far below their offering price, and lottery or first-come allocation creates its own unfairness, so this is a mechanism to understand carefully before acting.
Key points
- A token sale vetted and run by an exchange
- Vetting says nothing about where the price goes
- Lottery, first-come or holding-based allocation creates unfairness
- Falling below the offering price soon after listing is common
Definition
A token launch in which an exchange reviews the project, sells the token to its own users, and then lists it for trading on the same platform.
IEOs spread as a response to the wave of fraud in direct token sales. The exchange checks the business plan, legal position and token design, and sells only to users who have completed identity verification. Because the exchange handles the funds and the distribution, the class of loss where you send money to the wrong address largely disappears.
The review, however, tests whether the project is real and internally consistent — not whether the business will succeed. In practice many tokens spike at listing and then trade below their offering price for a long time, so treating a completed review as an assurance of safety is a mistake.
The allocation method matters too. A lottery means applying does not mean receiving; a first-come sale can be unreachable in practice when everyone loads the page at once. Where the allocation scales with how much of the exchange's own token you hold, users who already hold a lot are structurally favoured.
Watch out for
- · Passing an exchange's review implies nothing about success or price
- · Read the terms for sale conditions, refunds and listing timing beforehand
- · Fake application sites impersonating the exchange are a known tactic