On the currency fee, circulation fee, market-making fee, a failed IEO project also costs so much money.

We all know that IEO is very bad. Just last week, research firm Longhash found that this short-lived financing mechanism—hundreds of password start-ups to sell on tokens through exchanges—has brought a negative 80% return to thousands of investors involved. rate.


However, very few people know how much these losses have caused the company that issued the tokens. After communicating with several companies and researching multiple IEO notes, Decrypt (original media) found that the cost to the issuer could be high. Larger, more mature exchanges do not charge advance payments, while smaller exchanges may require payments in excess of tens of thousands of dollars . For companies that want their IEO to be seen by some investors, they must pay extra for external marketing, which will result in more losses.

Token sales Vanity Fair

IEO's selling point is brand awareness and management – ​​start-ups that issue tokens can use tokens with industry-influenced exchanges for token sales. A small startup company in the currency IEO, equivalent to the New York Times wrote a passionate article for it. As a result, projects such as Ampleforth and Algorand, which were previously unrecognized, stood out almost overnight after the currency security and Bitfinex's IEO.

But for companies that can't attract large exchanges, the situation is very different. According to The Block's Larry Cermak, 45% of IEOs at the end of July came from "four little-known exchanges" – Bitforex, Coineal, Exmarkets and ProBit. The returns of these IEOs are not only low, but they also cost thousands of dollars to the token issuing company.

Of course, prepaid expenses are not illegal – it is clear that for token issuers, the funds paid are rarely matched to the returns.

Take 24 projects randomly selected by exchanges such as ProBit, Coineal and Exmarkets as examples. The returns are as follows:


(The data comes from CoinCodex. This graph shows the percentage of ROI (current price – IEO price / IEO price). The only exception is that "Tokeoin" is not registered because it received 150,000% of the revenue.)

The performance of Bittrex IEO is equally bad:


(This chart shows the gains and losses of Bittrex IEO, also from CoinCodex. The RAID IEO was cancelled.)

Even the IEO of the currency platform has only succeeded in half:


(The figure shows that the currency IEO has gained more revenue than other platforms.)

On smaller exchanges, the cost of failure is very high: for example, Coineal charges customers a prepayment of 10 to 12 bitcoins. A screenshot of the Estonian exchange's Exmarkets conversation with customer Greg Pwol shows that Exmarkets charges 2 bitcoins. Probit charges an advance payment of $18,000 in advance, and if the token sales are successful, an additional $18,000 is required.

One of ProBit's products is called "Package D-General Hype and FOMO", which includes marketing and IEO "instant" coins, but requires a prepayment of $50,000. About $40,000 is refundable, but only if IEO is sold out and at least 1.5 times the price after one month of listing. If these two things can't be done, then unfortunately, 50,000 US dollars will be wasted.

At the same time, on its separate S$ platform, ProBit told customers that it would help them appear on the popular index CoinMarketCap. However, we found that of the 54 projects running or running IEO on ProBit, only 7 were listed on CoinMarketCap, two of which "have no data available."

Given the failure rate, these advance payments are likely to leave the token issuer empty. Shawn Key, which launched the CYBR token, invested $143,000 in Coineal for IEO, but he said he did not receive any return and lost the corresponding fees. Another entrepreneur, Pwol, who is on the Exmarkets, provided a screen shot of the conversation with the exchange, which promised to bring him thousands of dollars in returns. However, after spending $6,000 on IEO, he now has only $7.5.

What about the unsuccessful IEO? Pwol said his token was immediately removed and all relevant information was removed. According to Volodomyr Malyshkin, CEO of IEO Consulting, this is commonplace on lesser-known exchanges because they don't want failed tokens to "stain their reputation."

Decrypt contacted Probit, Coineal and Exmarkets: Coineal explained its listing process, but did not further explain the concerns raised by the customer; Exmarkets did not comment; Probit acknowledged the issue raised by Decrypt, but did not follow up at the time of publication. Decrypt will continue to update the information.

No news is bad news

After the payment, these exchanges often make the token issuer feel dissatisfied. Pwol said his $6,000 is only enough to pay Exmarkets to advertise their projects to about 2,500 Telegram users, and the results are not significant. (He said that after that, his tokens were cleared from the exchange and its related social channels.) At the same time, Shawn Key, another entrepreneur and password startup CYBR, said he found Coineal Marketing is not to force. He said:

"In addition to posting ads on the site, they haven't done anything. It's a joke."

This is not to say that organizing marketing activities is an obligation of the exchange. But according to Malyshkin, if there is no such publicity campaign, a project can't earn even $1,000.

“If there is no marketing campaign, IEO is useless.”

Companies that market through third parties may face greater pressure. The information obtained by Decrypt shows that the consulting fee is quite high, as in the case of Easy Listing: the fee to be paid includes “traffic fee” – 0.2% of the monthly transaction volume of a certain token; “brokerage fee” – total 7% of the volume; and $5,000 and $3,000 for the transaction and the "extra transaction pair" fee. This does not include the cost of the exchange.

(A spokesman for Easy Listing confirmed the accuracy of the above information. He also said that some companies have already recovered the cost, but he admits that it is difficult to get any small IEOs using marketing techniques from 2017 to 2018. The propaganda effect of meaning. He added that many of the data on the Internet are “fake”, but he also admits that at least half of the IEO fundraising will fail.)

At its core, some small IEOs are more like vanity publishing (originally referring to the behavior of self-financed books): paying higher bills and taking on greater risks. For a few companies that can recover their costs, this is a boon. But for others, it is a waste of money.