As many likely remember, the surge of crypto prices back in 2017 led to countless new crypto projects’ development. These altcoins, offered through Initial Coin Offerings (ICOs) were considered extremely profitable, but also risky, as investors often fell for scams in their rush to buy coins whose prices’ were increasing the minute they hit the market.
Eventually, the SEC announced a crypto crackdown, which it still has to deal with today, simply due to a high number of projects that were selling securities, or just purely scamming investors. However, in early 2019, Binance started a new trend, IEO, by holding a BitTorrent (BTT) sale on its Binance Launchpad.
The trend took off rather quickly, and before long, every major exchange was selling new tokens, promising their legitimacy, while investors were buying them due to their trust in the platform. In other words, IEOs were thought to be a safer, more reliable version of ICOs, which allowed people to invest in interesting projects in a safe environment.
Exchange-based token sales are as risky as ICOs
For a time, everything seemed to finally be going well for the crypto industry. However, these days, the SEC warns that IEOs were compromised, as startups often pay exchanges in order to get their tokens listed, which makes IEOs just as risky as ICOs ever were.
While this should not be used against blockchain technology, which has already uncovered countless valuable use cases in a wide range of industries — investing in new crypto projects developed on the blockchain remains a risk.