Evolution of Public Token Sales: The next generation of ICOs

The unregulated and highly speculative nature of Initial Coin Offerings contributed to the crypto market crash of 2018 and generated distrust and bitterness for ICOs due to significant losses for investors and rampant cases of frauds. Cryptocurrency market capitalization has quadrupled since that period and the number of conducted campaigns has skyrocketed. Despite the fact that the majority of campaigns are conducted with alternative to ICO models, they are not being distinguished or examined separately in literature. The purpose of this study was to investigate the development of alternative models of financing through public sales of cryptocurrencies, which were developed in an attempt to diminish the shortcomings of ICOs. Using nascent literature, web sources and publicly available data, we perform a cross sectional multiple case study analysis of blockchain financing models and launchpads, to develop a framework for the
distinction for 2 additional models to ICOs, Initial Exchange Offerings and Initial DEX offerings.
Both introduce a third counterparty into the financing transaction, which are launch platforms, named launchpads. Starting with the “DeFi summer” of 2020, developments on DeFi technologies enabled for IDOs and shifted interest from IEOs, which were the predominant model in 2019. IDO and IEO campaigns generated less initial capital in average than ICOs, where
issuers assume the full responsibility of effectively signaling, marketing and conducting the public sale. Launchpads are facilitated by centralized cryptocurrency exchanges in the case of IEOs and decentralized protocols in case of IDOs. Launchpads attempt to reduce information asymmetries, reduce moral hazard for issuers, protect investors and create economic synergies. Trust is induced between counterparties whose incentives are potentially aligned leading to
reduced frauds, accessibility to early-stage financing and increased innovation. IEO Launchpads achieve this, by assuming and centralizing control over the whole process. On the contrary, IDOs enable for these processes to be decentralized permissionless, transparent and immutable through complex smart contracts and DeFi mechanics. We examine the proceeds of models, campaigns and individual launchpads through the construction of datasets by publicly available
data and confirm the assumption that the choice of launchpad influences the success and performance of campaigns, as the procedures of hosting campaigns are not standardized.
Further research, trusted sources and long-term studies are essential to conclusively determine the sustainability and underlying implications of each model as blockchain technology is in the adoptive stages and the cryptocurrency ecosystem is constantly evolving.