How do IDOs work
What is an IDO?
An initial DEX offering, refers to a project launching a coin or token via a decentralized liquidity exchange . It is an excellent choice for new projects and startups keen to launch a token and access immediate funds.
General Parameters of IDO
There are several requirements to participate in an IDO as a token buyer, and some additional parameters that are essential for participants to consider. These include:
- Maximum contribution per wallet ‒ To ensure an even and fair distribution of IDO tokens, there will be a cap set on the maximum contribution one wallet address can make to an IDO. No one will be able to contribute more than this parameter, set by the pool originator (i.e. the project owners who create the OccamRazer pool);
- Private or public pools ‒ If an IDO pool is private, participants will be required to hold more than a predetermined number of tokens in order to participate in the pool. Both the required number of tokens and time held is set to a minimum system value by the respective project , but can be increased by pool originators;
- Whitelisting status ‒ Some pools may require their participants to be whitelisted, i.e. meeting KYC requirements or a minimum accredited capital status. If the pool is set up to be whitelisted by the pool originator, participants need to comply with whitelisting requirements.
How to participate in IDO ?
- The best way to learn about any new project or IDOs is to follow the project's own twitter, telegram or their own website accounts. All the necessary information regarding the IDO will be posted in these channels, so the buyer should keep checking them regularly.
- Participating in an (any) IDO requires pre-buying launchpad tokens and winning the whitelist lottery. Most of the projects require this process. As IDOs tend to raise small amounts, they have to limit the number of buyers and the launchpad tokens that they can buy.
- The buyer now has to setup a web 3.0 wallet like Metamask. That wallet address will be required to complete the whitelist application.
- Once you have found the right project that you would like to participate, the next step is to get whitelisted - meaning your wallet address will be eligible to participate in the IDO. Each project will select a specific number of addresses randomly to get whitelisted. Each address will be selected only once for a project whitelist.
- Winning a whitelist lottery, requires the buyers to hold minimum amount of launchpad's native token. More the number of tokens you hold, more are the chances of winning the lottery. Some launchpads also allow non-token holders to participate in the whitelist lottery.
- Once you have submitted the whitelist application, you have to wait until the window to close and the team need sometime to process all the applications and the results will be announced in their respective channels.
- Once you are whitelisted, you need to complete the KYC (Know Your Customer) process. This step is to make sure that no bots are whitelisted and to see that the project launches fairly. Once KYC is done, you have to for the project launching day.
- Make sure to have sufficient funds in your wallet before the IDO date.
- IDOs are always First Come First Serve basis. Its upto the projects as and how many people they whitelist. Depending on that number, your chances of winning the IDO varies.
The Cooldown Period
Most of the projects follow this rule. Once you have sucessfully participated in an IDO, the wallet you used to purchade the tokens will be placed on a cooldown period for specific number of days. During those days, you will not be whitelisted for any other IDO. This step is to ensure a fair trading across the ecosystem.
Tokens can also be purchased directly when it is being listed in the cryptocurrency exchanges (like uniswap, pancakeswap, etc..). For this you need not complete any whitelist application or participate in the IDO. Listing refers to a project offering trading pairs to an particular crypto currency exchange .
After an IDO is completed, the project will be listed on a coin exchange, but higher than the IDO price. This could be the price starting very high and coming down very quickly or starting at very low and increasing at a higher rate. This is very common and make sure to understand the market prices on all exchanges.
Once the project is listed, the prices may move insanley up or down for first few days, in which risk is very high to buy when a coin is being listed rather than to sell. So trade at your own risk.