The ICO market seems to be on the decline, with IEOs gradually taking its place, as projects enjoy the benefits of the latter. In this article, we talk about how the global crypto exchanges are choosing the assets for listing.
As Tokoin is preparing for yet another exchange listing that will be live in the coming weeks, we believe it is important to remember the key facts about the process of listing on exchanges.
Let us dive into the key methods of crypto project funding, their advantages and disadvantages, and the latest trends. In this article, we would also like to talk about the main points that are being considered by cryptocurrency exchanges when choosing a coin for listing.
We live in the era of digital finance, and even though many would still claim that cash is king, new ground-breaking innovations are slowly and steadily taking over the world. In this regard, the realm of decentralization is being the center of global attention.
IEO Vs ICO: Market Dictates Its Will
When blockchain appeared back in 2008 thanks to Satoshi Nakamoto, the world has become a completely different place, where thousands of hundreds of new digital projects are coming to life every day. Some of them stuck around for good, bringing something useful to our world, while others failed.
With the rise of blockchain, ICOs, STOs, and IEOs became popular, with the latter taking the center stage at the beginning of 2019. On the contrary, the ICO market has experienced a drastic decline in popularity – according to research from a cryptocurrency exchange BitMex, the initial coin offerings market is down 97% on a year-on-year basis.
In Q1 2019, the global ICO market made $40 million, while the newly-favored IEOs managed to nearly reach that figure, with $38.9M in their pocket.
Why are we seeing such a drastic change? The part of the answer to this question lies in the undeniable benefits of the IEOs.
What are the benefits of IEOs?
In fact, IEOs, or the Initial Exchange Offerings, as opposed to Initial Coin Offerings, have a number of advantages.
For projects, an IEO is a sure-fire way to attract the necessary capital for development and growth. As an IEO involves the launch of the coin on a particular platform, the exchange itself is doing a great job at spreading the word about an upcoming token project. Therefore, modern digital projects more and more often are looking to introduce their tokens through IEO, being attracted by the benefits this method offers.
IEOs are also beneficial for exchanges, as the launch of a new coin always attracts a ton of attention, which quickly converts to a ton of new customers. For that reason, exchanges also favor IEOs – who does not like an increase in sales, income and a boost in a reputation?
Lastly, traders are also one of the parties that get to benefit from IEOs. IEO gives users a unique opportunity to purchase tokens at the initial price. Later on, these tokens can either be sold on a secondary market for much more than the initial price, or they can be stored for the long-term for those who love to HODL.
How Crypto Exchanges Choose Coins for Listing?
Aside from the differences between IEOs and ICOs, these two have one major common point – they are the major sources of the inflow of new projects to the crypto market.
As a matter of fact, the listing of a coin is considered to be one of the biggest and important milestones for a project. Through the listing, a project is gaining a global “seal of approval” and is recognized by the crypto community as a reputable coin.
Yet, not every project is making it to the listing on the exchange. There are numerous requirements a project should meet to be able to apply for a listing.
Just some years ago, when the crypto world lacked proper regulations, the barriers for listing on a platform were much lower. During those days, the criteria for applying for an opportunity to be listed on an exchange were not well defined.
However, everything changed after the wave of crypto-scams has taken over the world back in 2017. After realizing that the crypto space needs stricter regulations, governmental bodies started working with cryptocurrency exchanges more closely.
As a result of more stringent regulations and better practices on exchanges, once flourishing scam projects are fading away, leaving the crypto industry with a clean record. Today, the most reputable and authoritative cryptocurrency exchanges play the role of the “customs” when it comes to digital assets.
What are the requirements that leading crypto exchanges have these days?
When a particular cryptocurrency exchange is considering whether to list an asset on its platform, its biggest concern is whether this asset is secure. There are a number of ways of how exchanges answer this question – we will present them in the form of questions:
- What is the idea behind the project? Is it relevant and useful?
The very first and the most important question, is, without a doubt, about the idea of the project. Why?
The idea or the value proposition behind the coin is the key to its long-term success. The usefulness and relevance of the project will determine how long the project will survive and how popular it will be. Thus, cryptocurrency exchanges take this point very seriously.
2. Who is behind the project?
Another very important point for cryptocurrency exchanges is the team behind the project. One might argue with this point, saying that nobody knows the person/team behind Bitcoin, the cryptocurrency pioneer, but we will say that one was an exception.
Every single exchange is evaluating the team behind the project – their skills, background, communication with the public, and their social media activity. All of these factors provide exchanges with an idea of how transparent and stable the project might be.
3. Tokenomics and financial strategy of the project
Tokenomics of the project is the mechanism of the token implementation within an ecosystem. This explains how the token will be used by the users and why should such a token be created. This part is usually explained in detail in a whitepaper, so paying close attention to the creation of a whitepaper is a must when it comes to preparing for a listing on an exchange.
4. Does the project have any community support?
If a project has a substantial base of followers, this will definitely play a role in the decision-making process of an exchange. Not only community support in the crypto world usually means that the project is believed to be valuable, but it also means a ton of new users for an exchange.
5. Are there any partners?
Partners are like the stamps of approval – if a project has partnered with reputable and well-known companies, that means those companies are not afraid to associate themselves with it. While this point might seem insignificant to some people, this means a lot to crypto exchanges – they carefully review the list of partners before making the final decision.
In addition to the points mentioned above, a large number of exchanges also look into the legal aspect of the project in question. The key purpose of the legal opinion on a project is to conclude that the token is a utility.
In the early days of crypto, listing a coin on an exchange was not that hard. These days, the majority of global crypto exchanges are evolving quite quickly, as they grow savvier in terms of regulations. In addition to all the requirements listed above, every individual exchange might have some extra criteria for listing.
This brings us to a new crypto world with strong and valuable assets that are benefitting all participants of the market. The times of shady projects that are taking advantage of the opportunity are over, with trust and reputation leading the way to success in crypto space.
The leading cryptocurrency exchanges acknowledged this truth a long time ago and now have tightened their regulations. Stay tuned for the next piece of article series about the top cryptocurrency exchanges and differences in their listing criteria and application processes.
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