From crowdfunding ICO to exchange-endorsed IEO, the form of token distribution for blockchain startup projects is constantly changing in such a flourishing “innovation” field. With the booming of the DeFi trend, a new and more decentralized form of token distribution appeared, which be called as IDO (InitialDEXOffering) by DeFi users. Compared to IEO, the most important change of it is that it doesn’t require a license and marketization.
Due to the improvement of the DEFI infrastructure, distributing tokens with the method of IDO has become a hot button and trend. The IDO platforms keep updating and iterating, and other popular public chains have also emerged new IDO platforms such as Solstarter on Solana, Westarter on Heco, bsc-station on BSC, KList on OKEXChain.
This article will explain the distribution methods of the established Uniswap, Polkastarter, balancer, bounce, and the newly emerging Solstarter, Westarter, KList and other IDO platforms.
The DEX led by Uniswap
Uniswap is essentially a decentralized exchange based on AMM exchange agreement, which doesn’t have an order option and can only trade at market price. It is necessary to create a smart contract-based fund pool in advance and inject tokens and Ethereum in proportion to determine an original exchange price. Once users open Uniswap in the Ethereum wallet and complete authorization, tokens can be directly exchanged after entering the contract address. However, Uniswap doesn’t set up a special module for the issuance of new projects. Due to its transaction attributes, it can carry the initial token distribution in form of IEO like in centralized exchanges. The well-known lending protocol Compound’s governance token COMP has essentially implemented IDO on Uniswap.
Generally, Uniswap has opened a new token distribution channel for the project, which could quickly circulate and trade. However, due to insufficient initial liquidity, a small amount of funds’ price can even be pumped several times or even dozens of times, so subsequent participants will only buy them at an expensive price. The situation also gave rise to DEFI scientists, they bought in large quantities as soon as the project was launched, which caused the token price to skyrocket. Then when ordinary users participated, the scientists had already cashed out. In addition, due to the openness of Uniswap, there are no restrictions on any token so many fraudulent projects spawned, some are even escape with money within 2 hours after going online. What’s more serious is that many token contracts have set up whitelists to restrict user transactions, resulting in users not being able to sell after buying.
Polkastarter: Cross-chain token exchange and auction protocol
Polkastarter is currently running on the Ethereum network and the BSC network, and it is expected to be launched on the Polka network in the future. Polkastarter is the platform with the most IDO projects at present. The Polka Eco-currency market protocol Konomi Network carried IDO on Polkastarter on March 16, issuing 500,000 KONO tokens, with a token price of 0.4 US dollars. Now, KONO is quoting 4.3 US dollars, with an increase of about 975%. Public Mint carried IDO on Polkastarter on February 23 and issued MINT tokens. The crowdfunding price is about 0.035 US dollars, It is now reported to 1.1 US dollars, with an increase of about 3040%.
Project parties that want to carry IDO on Polkastarter are required to apply on the Polkastarter official website. After the Polkastarter council approves the project, the project party will set a fixed price for the tokens in the fixed exchange pool for auction, as well as a whitelist with only specific addresses can participate in the auction. If users want to exchange new coins on Polkastarter, they need to complete the whitelist task published by the project party on Polkastarter. Generally, the tasks are to join the project’s official community, follow the project’s Twitter and interact, etc. Once the whitelist task is completed, the official will draw a whitelist that can participate in IDO, but the amount for each user participate in will be limited.
Polkastarter is just a simple token exchange platform. It has a review system for projects, which can effectively prevent and reduce the occurrence of fraudulent projects. The only drawback is its insufficient liquidity as the exchanged tokens need to be withdrawn to the DEX or secondary market for transaction
Balancer: LBP Dutch auction
Balancer was originally a DEX based on AMM, and later launched a liquidity boot pool (LBP) specifically for the IDO sector. It is also a decentralized auction platform, any project can spontaneously establish a liquidity auction pool, APY.Finance (APY), Perpetual Protocol (PREP), Furucombo (COMBO), MASK, KINE and other projects are all adopt the LBP model for token distribution.
Most IDO platforms carry IDO at a fixed exchange price while Balancer’s IDO method is a reduced-price auction, or reverse Dutch auction. A higher price will be set at the beginning, and the exchange price can be affected by constantly changing the weight of each asset in the pool as LBP is a smart pool template. The LBP weight is constantly changing according to the direction of programming during the entire auction cycle, for example, the weight can be changed from 80% / 20% token / USDC to 20% / 80% Token/USDC. The auction time is generally 2 to 3 days. As time goes by, the price of buying funds will become less and the price will gradually decrease, which could avoid the price surge caused by the influx of buying funds in the DEX so that to guide a reasonable market price.
The Balancer token distribution method is the most interesting of all IDO platforms as this mechanism can effectively prevent scientists from arbitrage, making the entire exchange process fairer and market-oriented. Also, due to it is a smart pool template, the project party is able to initially guide the circulation of its tokens with 2 :98 fund reserves, which greatly reduces the capital investment. However, the only disadvantage of it is the long time IDO cycle.
Bounce: Flexible Auction Platform
Bounce is a batch auction exchange protocol, which was first deployed on the Ethereum network, and has been listed on BSC network. It only needs to set the total amount and time. The excess funds will be returned to the user. It also supports fixed exchange, Dutch auction and sealing auction, etc.
The Bounce platform is divided into two categories, one is decentralized flexible exchange, and the other is community-authorized auction. The former has no requirements for users and projects while in community sales, users who hold Bounce platform coins have rights to vote for popular projects but it requires users to complete KYC verification and whitelist tasks proposed by other project parties.
KList: Super IDO protocol
KList is an IDO platform that supports cross-chain and multi-chain. It was first deployed on the OKEXChain network and supported the deployment of multiple chains such as Ethereum, BSC, Salana, Cardano, and Polkadot. It also pioneered the margin system. Judging from the current market, KList should be the first IDO platform on OKEXChain. It is currently on the OKEXChain testnet and will be officially launched when the OKEXChain mainnet is officially opened.
KList has diversified IDO methods including fixed pool issuance, liquid pool and combinable MISO issuance, KMM liquid pool management and issuance. Combinable MISO was first proposed by SUSHI, which is to create various combinable tools in the form of smart contract packages to simplify the process of creating tokens and launching new projects on the exchange, it includes creating tokens, establishing a machine gun pool, creating a token sale strategy, starting liquidity mining, etc., and can promote an optimal market price according to the market and community heat. For users, they can trade, add liquidity, and operate machine-gun pool mining after participating in IDO. The core of KMM liquidity pool management and issuance is to set the price range according to the needs of the project party, so that the project issuance will be carried out within a certain price range, and the market-making liquidity can also focus on a certain price range.
Meanwhile, KList pioneered the margin system. The project party’s token distribution adopts a margin lock-up mechanism, supports a lock-up period of one month to one year, as well as the lock-up for 10%, 20%, 50%, and 100% of the total amount of a single token distribution, which effectively protects participating investors interests and prevents fraudulent projects from doing evil.
Compared with other platforms, the KList platform has more combinable MISO issuance methods, it added the margin system, and also supports KMM liquid pool issuance management. KMM takes into account the flexibility of Uniswap and the operability of Balancer. KList is even more intelligent IDO platform.
Westarter: IDO platform on Heco
Westarter is the first IDO platform on Heco. It has been launched for about 2 months, and 12 projects have been carried IDO on the platform, including popular projects such as COOK, O3, and dFuture. Among them, dFuture’s participation amount has reached 51.946 million U.S. dollars in 1 hour, which is over 1038.92 times, the highest increase is about 16 times after it has been listed on exchange.
Westarter’s current IDO methods include public pools and private pools, as well as over-raised pools. The winning ratio is determined according to the weight of funds. The excess part will be returned in the same way. Westarter will launch blind box auctions, Dutch auctions, and Sealed bidding, STO, NFT and other subscription methods, etc.
The IDO method of Westarter is similar to other platforms. The main feature is that it will incubate and publicize IDO projects on its own platform, which will help the project to develop better.
Conclusion
Generally, IDO’s distribution method has been iterating based on pricing methods and participation thresholds, resulting in each platform having its own characteristics. From the market situation, the IDO platform is under-supply, and all public chains have IDO platforms. The early DEX led by Uniswap was gradually replaced by professional IDO platforms. In the future, the market potential of IDO platform will be determined by diversified distribution methods, IDO derivative ecology, project quality, etc.
