There are numerous ways for developers to raise funds needed to build decentralized apps in the blockchain space. Some may choose to raise funds through an Initial DEX Offering (IDO) on a decentralized exchange. In some cases, the project team may opt for an Initial Exchange Offering (IEO) on a centralized exchange.
Blockchain gaming projects may decide to launch the in-game assets of their blockchain games through an Initial Game Offering (IGO).
Fundraising can also be done via the Initial NFT Offering (INO), which involves selling NFTs through a launchpad. This article focuses on the concept of INOs and how they can accelerate the growth of NFT projects.
This article comprehensively examines Initial NFT Offerings (INOs), popular platforms that conduct INOs, risks associated with this fundraising method, and other forms of fundraising in the blockchain space.
What is Initial NFT Offering?
An Initial NFT Offering is a new form of fundraising utilized by blockchain platforms. In this case, Non-Fungible Tokens (NFTs) are sold for money. An NFT startup seeking funds to develop its architecture or for other reasons can sell its NFTs for fiat or cryptocurrencies to investors. These NFTs tend to have specific utilities within the ecosystem. It could include an in-game asset, a song, a book, artwork, or even a movie.
Typical examples of INO launchpads are Binance, Polkabridge, and StartFi. Every INO platform has its own rules that investors must follow in order to participate. Some may require potential investors to hold the native tokens of the launchpad and stake them for a while before they are allowed to participate in the fundraising event.
What Are The Benefits of Initial NFT Offering?
Initial NFT Offering has several advantages for both the project and potential investors.
New NFT Listings
NFT collectors and investors can find new and innovative NFT projects that are about to break into the market and are currently seeking funding on an INO platform,
Investors can choose to purchase the native tokens of these projects before they go mainstream and either sell them for a higher price once they hit the market or hold them for speculative purposes.
Community Growth
NFT projects can grow their social following and community size by participating in an INO. Usually, these launchpads have many users and investors looking for new projects to follow. They tend to join communities of projects they believe are aligned with their objectives.
New NFT projects looking for ways to expand their community size can benefit from using an INO platform to raise funds.
Affordable transaction fees
Launchpads tend to charge affordable transaction fees to investors that purchase NFTs during an INO on the platform. This is usually cheaper than purchasing an NFT from the open market.
Fundraising
NFT projects use INO platforms primarily to raise funds for the development of their platform and its architecture. Usually, INO launchpads are filled with investors ready to spend money on getting the native tokens of platforms they believe will be profitable in the future.
INO platforms act as a link between NFT projects and investors.
NFT Lending
In addition to providing fundraising facilities, some INO launchpads also offer NFT lending features. Users can decide whether they want to lend their NFTs to others for money or use their NFTs as collateral when borrowing from others.
High Returns
In some cases, the value of NFTs purchased during the INO stage increases significantly after the event.
Regardless, it is crucial to conduct due diligence before participating in an Initial NFT Offering.
Easy Launch
Some NFT projects may not have the necessary expertise to launch their projects into the market. For instance, new NFT projects must consider funding, marketing, advisory needs, community, and other factors that are not readily available to the average NFT startup. Some launchpads provide the services mentioned above, accelerating the growth of new NFT projects.
What Fundraising Options Are Available to Crypto Projects?
Aside from the Initial NFT Offering, there are other ways for crypto projects to raise funds, some of which are highlighted below. The fundraising method is determined by the product being developed and how the platform will be launched. The major fundraising methods available to crypto and NFT platforms are Initial Coin Offering, Initial Exchange Offering, Initial DEX Offering, Initial Game Offering, and Security Token Offering.
Initial Exchange Offering
An Initial Exchange Offering (IEO) is a fundraising method utilized by crypto projects or companies to raise funds for infrastructure development while offering native tokens to their investors via exchanges. Native tokens typically possess utilities that grant holders access to various functionalities available on the platform.
It differs from other token offerings in that the fundraising is done on a centralized exchange.
Initial Coin Offering
An Initial Coin Offering (ICO) is a method of raising funds that is similar to the IPOs that traditional companies do during their fundraising stage. Typically, a crypto project offers its native tokens in exchange for the capital raised. Investors participate in the hope that the native tokens will provide them with access to the project’s functionalities as well as the option to sell them at a higher value in the future.
This is spearheaded by the company offering its tokens. It is not done on an exchange, whether centralized or decentralized.
Initial DEX Offering
Initial DEX Offering (IDO) is a token offering organized by a decentralized exchange. Because of the permissionless nature of this type of exchange, liquidity pools are required for IDO operation. After the IDO, the token is usually listed immediately on the decentralized exchange.
Initial Game Offering
Blockchain gaming platforms use this type of fundraising to raise funds for the development of their games. They can offer their native tokens, either as cryptocurrencies or in-game assets, to investors or enthusiasts. The tokens sold are intended to be utilized in the game once it is launched. IGOs can be conducted on a launchpad or in a notable gaming ecosystem.
Security Token Offering
Security Token Offerings (STOs) are a type of fundraising in which a blockchain company offers public security tokens in exchange for funds. Security tokens are typically regarded as securities, implying that they confer ownership on their holders. Those holding the security tokens of a platform are seen as the organization’s owners.
As a result of holding the token, they can receive dividends, vote on proposals, and become active participants in the organization. Typically, different Securities Exchange Commissions have rules that guide this since they are similar to traditional securities.
Where Do Initial NFT Offerings Take Place?
Initial NFT Offerings (INOs) occur on launchpads or fundraising platforms. These platforms can be centralized or decentralized. Some crypto exchanges may offer this type of fundraising. It is important to note that every INO platform has a set of rules that must be followed either to raise funds as a project or to purchase the NFTs of various projects as an investor.
Are Initial NFT Offering Platforms Safe?
Before using any INO platform as a project or investor, it is essential to conduct due diligence. As an investor, you should conduct due diligence on the NFT project you are considering investing in to mitigate its risks.
Though some launchpads claim to vet NFT projects before allowing them to use their facilities, it is crucial to conduct independent research.
Participating in an INO comes with some risks, some of which include:
- It is important to note that participating in INOs does not guarantee profits, as the value of the NFTs may plummet after purchase.
- Some NFT projects are illiquid, meaning it is difficult to sell their NFTs on the open market.
- There is the possibility of rug pulls, where the NFT project team abandons the project after raising funds.
- Sometimes, launchpads may be cloned by scammers and used to defraud unsuspecting people.
- There is a risk of signing the wrong transactions and losing NFTs.
- Some INO platforms may request personal information from potential users. This could jeopardize the concept of anonymity for those who wish to participate.
- Always conduct due diligence before using an INO platform to confirm its authenticity.
In Conclusion,
- Initial NFT Offerings (INOs) are a new way for blockchain platforms to raise funds by selling Non-Fungible Tokens (NFTs) in exchange for money.
- Typical examples of INO launchpads are Binance, Polkabridge, and StartFi.
- INOs offer several advantages, including funding, community growth, easy launch process, low transaction costs, high returns, NFT lending, etc.
- Other means of raising funds include Initial Coin Offering ICO, Initial DEX Offering IDO, Initial Exchange Offering IEO, Initial Game Offering IGO, and Security Token Offering STO.
- It is crucial to conduct due diligence before using an INO launchpad or participating in an Initial NFT Offering.
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