Over time, token offerings have mostly become fairer and more secure for investors. IDOs have some distinct advantages that support this:
- You don't need to deal directly with a project and trust their smart contracts. A reliable IDO platform will have several successful sales completed. If the smart contracts are the same, you can have some trust in the offering.
- Immediate liquidity provided post-sale. IDOs will lock up some of the funds raised in liquidity pools to create a liquid market post-sale. This helps reduce slippage and volatility.
- No sign-ups are required. You only need a wallet and funds to participate in the sale, and personal details aren't required. This makes it open to all kinds of users. However, the lack of KYC or AML processes can also be seen as a disadvantage (more on this below).
- IDOs are affordable and accessible for projects. It's often easier and cheaper for a small, less-known project to launch their token through a DEX than a large, centralized exchange.
- IDOs often have anti-whale measures, meaning no single investor can buy many tokens.
- No KYC or AML. Investors and projects are protected when proper checks are completed. These measures help avoid the laundering of illegal funds and the evasion of economic sanctions. For example, it may not be legal to participate in IDOs in certain countries if the token is considered a security.
- Less due diligence on projects. It's much easier for an un-reputable project to distribute their token through an IDO than it is through an IEO with a large, regulated exchange.