To understand why IDO is a new era in DeFi, it is necessary to understand the meaning of this model and how it affects the cryptocurrency world. Thanks to its development and innovative solutions, IDO continues to change, which does not affect the decline in popularity (for instance, IEO Binance is skyrocketing).
The abbreviation IDO stands for Initial Dex Offering. At its core, this is a new crowdfunding model that is designed for the cryptocurrency market. The growth of its popularity came in 2020. This was entirely due to the fact that interest in DeFi increased during this same period.
Thanks to IDO, it is possible to raise funds, in which the crowdsale process is organized directly with the help of decentralized exchanges. At the same time, users can actively buy new tokens on the DEX using liquidity pools for this. Pools are pairs of cryptocurrencies and stable monetary units that characterize the value of an electronic coin. Also, non fungible tokens for sale (NFTs) can be acquired via this process.
IDO involves the appointment of a minimum number of norms and requirements for the investor. In some cases, these indicators are completely absent. Thanks to this basis, this fundraising option has become widespread for working with DeFi projects. Thus, IDO can become a key trend in the cryptocurrency market if it is not affected by the regulator.
Initially, users in other projects did not like the broad requirements, high costs, non-transparent deals, and lack of opportunity to sell on other exchanges. Also, the Initial Dex Offering was inspired by the fact that many previous models depended on centralized exchanges. All this went against the very concept of cryptocurrency and digital moments. To achieve decentralization, the IDO model was developed.
Based on it, you can launch your own IDOs by absolutely any users. To do this, they must be registered on a decentralized exchange. The user activates a new special contract, registers a token, and necessarily creates a liquid pool.
At its core, the IDO model is similar to the ICO. The difference is that this blockchain startup does not need to build its own infrastructure in order for its tokens to be sold on the market. All these actions are carried out by a crypto exchange or DEX.
Among the positive qualities of IDO, the following parameters can be distinguished.
All this increases the popularity of the exchange and makes it possible to carry out full-fledged projects within a decentralized exchange using cryptocurrency.
DeFi gained popularity in the summer of 2020. This acronym stands for Decentralized Finance. At their core, these are special applications, services, exchanges that are designed to issue and receive loans, create and manage deposits, and many other services. The conceptual idea for such platforms is that developers cannot exercise control over the funds stored and used by contributors and users.
An example is one of the most popular Uniswap sites. To implement trading operations on its base and other similar exchanges, the user does not need to create a separate account and transfer funds to his account. All monetary units are stored on a personal electronic wallet. The platform is intended for communication between traders. At the same time, the transaction itself is carried out directly between them using only two wallets: the sender and the recipient.
Most real DeFi projects have their own cryptocurrency. The vast majority of these are registered tokens that were created on the basis of the Ethereum blockchain. Among them, the most popular is the digital coin used in the field of decentralized financial transactions YFI. At the very beginning of trading in mid-July, it had a value of 32 US dollars.
Now there are a large number of DeFi projects that fit together with the IDO model. This allows you to get a number of positive qualities, such as:
Despite this, a large number of projects that have an unsupported increase in the formal cost of the proposed instruments have lost popularity and have come to naught. At the same time, only those options remained on the market that operate according to an understandable, proven and economically viable scheme and allow their investors to fully trade and earn money.
Today and in the future, the IDO model will continue to be used to attract new investors and customers, which will help increase the company's funds. Similar actions are carried out by NFT and DeFi marketplaces. DeFi Land is such an example. This idea became another project that was created on the IDO platform.
DeFi Land works in the form of a farming simulator that is designed for gaming processes. At the same time, all finance there also has a decentralized form. The key goal of this project is to be able to create an educational platform for those who want to study DeFi or other proposed alternative financial solutions in the cryptocurrency market in detail.