Cryptocurrency is a decentralized virtual currency that uses blockchain as its base. To create a new cryptocurrency token, a developer needs a large sum of financial sources to fund the development of the crypto project until a new cryptocurrency token can be listed in the exchanger. There are several ways to fundraise in the crypto space, but in this article, we will focus only on the Launchpad platform and IDO.
Fundraising In Cryptocurrency
To develop a project a project team needs Financial support for a certain amount, depending on how big the project is. To gain such financial support, the project team needs to gather financial resources.
One of the ways to get financial resources is by doing fundraising to gain financial support from investors. The raised funding is usually done during the token sale event to gather financial support from the investors.
Differences Between Launchpad And IDO
Launchpad and IDO are a way to gather funding for developing cryptocurrency projects. Both of them have their nature that makes them different from each other even though their goal is the same which is to gather financial support for the cryptocurrency project team.
The differences between the Launchpad and IDO are explained as follows:
Launchpad
Launchpad is a platform that was created to provide financial assistance for a new cryptocurrency project to grow. The Launchpad platform usually helps the new crypto project to raise funds from the community and introduce the project to the community to gain exposure.
An example of a good launchpad is Kommunitas Launchpad which is a launchpad that is built in a Polygon ecosystem that grants a secure, fast, and transparent decentralized transaction.
IDO
IDO (Initial DEX Offer) is a fundraising method that is used in the cryptocurrency space. The Initial DEX Offering is particularly done within decentralized finance (DeFi) where the new cryptocurrency project launches its token directly on decentralized exchange (DEX).
To put it simply, IDO is a crowdfunding method that allows the project developer to launch their token or crypto coin through decentralized exchange directly. Unlike other crowdfunding method that involves a centralized platform, the IDO involves a decentralized platform, aligning with the principle of DeFi.
In summary, Launchpad and IDO are different things Launchpad is a platform that offers assistance for cryptocurrency projects to launch and grow by helping them in funding and building community. On the other side, the IDO is a fundraising method that involves a decentralized exchange platform without intermediaries and directly trades inside of the exchange with the other by using a smart contract.
Read also : Crypto Launchpads: Your Path to Profitable Investments and Exciting New Projects
Which Is The Better One Between Launchpad and IDO?
It is difficult to answer a question such as which is a better crowdfunding way for funding cryptocurrency projects. Both the launchpad and Initial DEX Offering (IDO) have their advantages and disadvantages.
The judgment of which is a better way to gather financial support for the development of cryptocurrency projects depends on the nature of the project, the goal of the project, the target audience, and the current regulation in fundraising for crypto projects.
Here are the advantages and disadvantages of using a crypto launchpad platform and conducting IDO for fundraising:
Crypto Launchpad Platform
Advantages
1. Project Credibility
Any project that is signed into a Launchpad platform will be filtered through strict selection. Only a credible and potential project can pass the selection, Projects that pass the platform’s selection process are viewed as more promising and favorable for the investor.
2. Exposure From The Launchpad Community
A project that gains assistance from the Launchpad platform has a big chance to gain big exposure within the community in the platform. A big exposure means a bigger chance for the project to get more investment in the token sales event.
3. Community Building and Community Support
Most launchpad platforms are willing to help a project with big potential to build its community from the start. The project also gained some help from the solid community within the Launchpad. Assistance from the community and Launchpad can connect the project to many potential investors.
4. Technical Support
A good launchpad platform often helps a team project who are new to the token sales process. Some launchpads also give assistance in developing a promising project. This can help the project development so the result can be optimal.
5. Liquidity
Shortly after the token sales event ended, the Launchpad platform helped the project to listing their new token to the related crypto exchanger. The quick listing token in the exchager can provide liquidity to the investor.
Disadvantages
1. Assistance Fees
The Launchpad platform never assists for free. The project that needs assistance from a launchpad platform needs to pay for certain amount as a fee in assisting the token sales event.
2. Competition With Other Projects
It is not easy for a project selected in Launchpad. To be selected a project should undergo a strict selection process and compete with another project at the same time.
3. Regulatory Considered
Depending on the jurisdiction, conducting a token sale through a launchpad might require compliance with relevant regulations.
Initial DEX Offering (IDO)
IDOs are conducted on decentralized exchanges, which also aligns with the ethos of blockchain and cryptocurrency which is decentralization. It can attract users who prioritize the decentralized transaction.
Advantages
1. Direct Access to Users
IDOs are allowing the project developer to directly access the user base from the selected decentralized exchange. A direct approach like this has the potential to gain a more engaged community.
2. Faster Listing
Unlike the other crowdfunding methods that have issues with the delayed token listing, by using IDO new tokens can be listed shortly after the token sale ends. It can provide the investor an immediate trading opportunities.
3. Transparency
IDOs are transparent because the transaction happens directly in the blockchain.
Disadvantages
1. Technical Complexity
Setting an IDO can be technically complex due to its need to involve interaction with smart contracts and understanding the decentralized exchange process.
2. User Education
IDOs might require educating potential investors about how to participate in the sale and trade the token in the decentralized exchange.
3. Market Risk
The liquidity of trading activity in decentralized has the potential to affect the initial trading experience for the projected token since the trading in DEX varies.
4. Uncertain Regulation
While it is decentralized, the IDO still be able to be subject to regulatory scrutiny which depends on the jurisdiction.