How DeFi Networks Enable Blockchain Startups to Raise Capital-Daniel Daboczy
To make the whole fundraising process more viable, several companies are now offering companies wishing to start their own ICO / IEO / IDO a full range of consulting services ranging from legal documentation, marketing services and aspects. technologies such as tokenomics.
Many startups today are trying to solve real world problems using blockchain technology and the increasing adoption of cryptocurrencies around the world has led to the stratospheric rise of decentralized finance (DeFi) applications that use contracts. smart on blockchains like Ethereum to offer traditional financial instruments. Additionally, the smart contracts feature has made it possible to raise token funds for start-up projects through Initial Coin Offerings (ICOs) which are the cryptocurrency industry’s equivalent to offers. Public Initials (IPOs) which are popular in more traditional stock markets around the world. . Rising all the way until 2018, ICOs allowed any blockchain-based startup to raise funds to create a new coin, app, or service, and were primarily deployed using Ethereum ERC protocol standards. -20.
However, with the emergence of bad players taking advantage of the crypto ecosystem and scams on the rise, the crypto world has finally turned to Initial Exchange Offers (IEOs) which were launched by Binance in 2019. and offered a more profitable platform for blockchain projects. to list their crypto tokens and access funds. Despite the additional validation performed by these centralized exchanges for each IEO, the higher barrier to entry caused by liquidity and funding requirements has made IEOs less popular and ultimately led to an increase in decentralized exchanges like Uniswap that allow anyone to list new tokens without any restrictions via Initial DEX Offerings (IDO). The evolution of IDOs has continued and has now led to the emergence of IDO Launchpads where blockchain projects meeting defined requirements are required to open a cash pool to launch their IDO with their tokens immediately listed on Popular decentralized exchanges (DEX) like Uniswap, Pancakeswap and Sushiswap.
Additionally, IEOs involve the payment of direct fees to centralized exchanges, which is not applicable to ICOs or IDOs as they are based on the principles of peer-to-peer lending. Instead, the liquidity offered by IDOs is far less than that offered by centralized exchanges through IEOs, as it relies on the community to review the startup’s offerings rather than exchanges. This is reflected in the lower liquidity pool available through IDOs (typically in the range of $ 5-10 million) and may not be suitable for companies wishing to raise much larger capital at $ 150 million; as is possible thanks to ICO and IEO. Naturally, the whole range of options available to a budding startup to raise funds can be quite confusing and present a daunting task for new age entrepreneurs who are constantly innovating with the capabilities of blockchain technology.
With most investors perceiving blockchain startup investments as a risky proposition, Singapore-based decentralized exchanges appear to be the most preferred avenue for such investments due to the robust regulations used by the city-state. These exchanges are considered “organized markets” under Singapore’s Security and Futures Act (SFA) and are legally recognized by the Monetary Authority of Singapore (MAS); the central bank which also regulates P2P loans which form the basis of ICOs and IDOs. Additionally, with the MAS’s implementation of stringent Anti-Money Laundering (AML) and Counter-Financial Terrorism (CFT) regulations, Singapore has made significant strides in allaying investor concerns. regarding crypto-related investments.
To make the whole fundraising process more sustainable, several companies are now offering companies wishing to start their own ICO / IEO / IDO a full range of consulting services ranging from legal documentation, marketing services and aspects. technologies such as tokenomics. With the strong regulatory framework implemented in Singapore, the best of these companies are headquartered in Singapore and support blockchain startups with experienced advisors who not only help with the necessary business skills, strategic advice and investor relations; but also pave the way for entrepreneurs to carefully select the most suitable fundraising avenue for their blockchain project. It would be fair to sum up that all of these factors are leading to the emergence of DeFi as a preferred avenue for raising capital and encouraging entrepreneurs to take advantage of its transformative potential to fuel their growth strategies today.