The primary medium of fund raising for blockchain projects has been the Initial Coin Offering (ICO). Since the first Initial Coin Offering in 2013 by Mastercoin, there have been hundreds of ICOs. At its core, an ICO revolves around a developer collecting contributions denominated in Ether (or some other cryptocurrency), and issuing a newly minted token. Whether or not there is a Smart Contract governing the ICO, the effective counter-party faced by each contributor is the developer himself.
An Initial Exchange Offering (IEO) relies on having an exchange (or set of exchanges) function
as the counter-party. Developers mint the project’s tokens and send them to the exchange, which
will then sell the tokens to individual contributors for Ether. Subject to the agreement between
the developers and the exchange, conditions traditionally found in an ICO can be emplaced in an
IEO. These conditions include capping the contribution per individual and having a fixed price
From the perspective of a contributor, instead of sending Ether to a Smart Contract governing the ICO, each IEO participant has to create an account with the exchange and send ETH to this account. When the IEO commences, the participant can purchase the token directly from the exchange.