What is an IDO? Legal advice to finance yourself with an IDO
The IDO or Initial DEX Offering are an alternative source of financing . An evolution of Public Offerings for Sale, similar to ICOs and IEOs, but based on decentralized technology.
It is a relatively new option, but used by more and more projects, which allows liquidity to be obtained quickly. But, despite its advantages, before resorting to an IDO, it is worth knowing its drawbacks as well. Studying the company and planning a good project, with the appropriate economic and legal precautions, will be key to maximizing financing through an Initial DEX Offering .
What is an IDO?
The IDO ( Initial DEX Offering ) is a financing method that would be classified as alternative. When launching an Initial DEX Offering , the promoters of a project create a cryptocurrency or token .
Those digital currencies will be financed by individual investors, who will be able to exchange their tokens using a decentralized system. This creates a liquidity pool or liquidity reserve . A ido token launchpad development deposit that will allow the investor to provide liquidity and subsequently collect commissions on exchange operations and even, if stipulated, participate in the governance of the project.
In this sense, IDOs are similar to ICOs and IEOs . They have been used successfully to obtain the initial financing of numerous projects, since they allow liquidity to be raised quickly to bring the project to market.
How do IDOs work? There are platforms specialized in IDO services, such as Binance DEX or Uniswap . The promoters of the project can document it and send it to the platform, which after studying it will be able to accept the launch of the IDO.
At this point, the possibility of purchasing the tokens will open. During the initial stage, what is actually being sold is a promissory note. A representation of the acquired tokens, which will be delivered to the investor as soon as the assets are minted, but which allows anticipating the obtaining of liquidity .
Advantages and disadvantages of resorting to an Initial DEX Offering
Like any other funding source, IDOs have positives and negatives . Therefore, before resorting to them, it is advisable to study the status and prospects of the project.
Generally, this analysis should be put in the hands of specialists, who will actively participate in the development and documentation of the project. At attolón we can help you study the ways of financing your project, as we are specialists in the field.
Advantages of IDOs By using alternative sources of financing, startups access funds that would be closed to them if they resorted to traditional channels. In addition, many times these sources are more profitable, although it is true that it is necessary to carefully regulate the impact that the possession of the tokens will have on the project , both economically and politically, where appropriate.
Compared to other alternative financing channels, Initial DEX Offerings launchpad development company also have some advantages:
Unlike IEOs and ICOs, which are linked to an initial waiting stage, IDOs offer immediate liquidity . This allows for a quick jump to market at a project stage where agility is key.
On the other hand, the decentralized nature of DEXs facilitates access to this financing channel . It is not necessary to have the approval and collaboration of the CEX.
Also, IDOs are usually cheaper and more reliable than IEOs and ICOs .
What legal aspects should I take into account when financing myself in this way?
As with any other token, when creating the ones that make up the IDOs, we must establish their impact on the project. And we cannot forget that regulation in the sector is growing , both at national and community level .
Disadvantages of IDOs Although the absence of a centralized operator gives IDOs all their advantages, it also brings some disadvantages:
- On the one hand, the privacy provided by the decentralized system prevents us from knowing our investors .
And, on the other hand, the absence of control mechanisms exposes us to greater price volatility and malicious practices .
In this sense, the tokens that are considered utility tokens may be affected by different areas of the Legal System. From theido crypto launchpad service general regime of obligations and contracts to electronic commerce, through advertising systems and tax effects.
In IDOs, however, the most common is to seek only liquidity, which would lead us to assimilate the token to a cryptocurrency. This being the case, it will be necessary to attend to the regulations on the prevention of money laundering , as well as the fiscal aspects of the project.
The publicity regime before the Bank of Spain and the CNMV will constitute one of the most relevant formal obligations for the financing project. In addition, it will be advisable to adopt certain precautions in terms of legal certainty.
Let’s not forget that by resorting to an Initial DEX Offering we are exposed to malicious maneuvers, and that we do not know our investors. This introduces volatility risk that may affect our liquidity availability, our investors’ returns and our own public image.
Where can I find IDO attorneys?
Since the first IDO was launched in 2019, we are talking about a still young concept. This means that there are not many specialized firms in the field , although there are more and more lawyers who focus on blockchain and crypto assets.
At attolón we have a team of specialists in New Technologies. Therefore, we can offer your project the legal protection it needs . We have experience in the field of crypto assets and we have collaborators who have accompanied dozens of startups from their inception to their takeoff.