Initial DeFi Offering

by | Nov 17, 2020 | Industry | 0 comments

Initial Coin Offerings (ICOs) took center stage in crypto fundraising in 2017 and part of 2018. In 2019, Initial Exchange Offerings (IEOs), where centralized exchanges (CEXs) like Binance acted as intermediaries for new token offerings, were common. Now in 2020, ICOs and IEOs seem to have slowly disappeared from the scene, as a new crypto-native offering type-Initial Exchange Offering- shines all the way. 

The DeFi ecosystem, which leverages smart contracts instead of third parties to power traditional and unparalleled financial solutions, has topped Ethereum’s top stars in the recent past. We have experienced the launch of revolutionary DeFi projects focusing on financial solutions, such as lending, borrowing, yield farming, and more. 

Besides, another major hit in the DeFi ecosystem is decentralized exchanges (DEXs). These are marketplaces where users trade tokens 24/7/365 in a non-custodial and permissionless manner. Among these marketplaces, the Tokenizer DEX, which was unveiled on July 29, has particularly attracted a lot of attention in its efforts to democratize finance and become a new standard in DeFi.    

With that in mind, it is now time to dive into examples of Initial DeFi Offering projects. Theoretically, the most appealing Initial DeFi Offerings will be from projects with battle-tested solutions on the Ethereum mainnet, or have publicly released MVPs. 

Recent DeFi Token Offerings

UMA

Introduced in December 2018, the UMA protocol is a DeFi contracts platform with a mission to offer a “Universal Market Access” to cryptocurrency users. Notably, the UMA Protocol focusses on powering priceless synthetic tokens. These tokens are collateral-backed ERC20 tokens that track all sorts of things without the need of a ceaseless on-chain price feed from an oracle.   

In April this year, the UMA Protocol developers unveiled plans for an Initial Uniswap Listing (i.e., read as Initial DeFi Offering) on April 29 for the $UMA governance token. The UMA team created this token to enable holders to govern crucial parameters of the UMA Protocol and help address contract issues by accomplishing price requests via the project’s Data Verification Mechanism (DVM).  

To officially launch the token, the project backers received 2 million $UMA tokens, translating to 2% of the starting 100 million UMA supply. They created a Uniswap liquidity pool using $525,000 worth of ETH. This gave $UMA an initial price of $0.26. The offering marked the first time the public gained access to the token, as the UMA team explained:

“[This] implies a fully diluted market capitalization of ~26.67mm for the UMA token network. This is the same valuation used in our initial seed investment.”

Various Venture Capital firms, such as Coinbase Ventures, Gragonfly Capital, and Two Sigma Ventures, took part in the seed round. Regarding price discovery, the $UMA token’s value skyrocketed upon its Uniswap listing, increasing from $0.26 to $2 in the first five minutes of the offering’s start. As the market settled in the next hours, the token experienced a sharp selloff and found support around $1.40. Since then, $UMA has crossed the $1.40 mark and traded above $2 severally. 

The other major recent Initial DeFi Offerings are COMP, DXD, and BAL.    

While Initial DeFi Offerings come in different shapes and sizes, one thing that remains constant is that there are many more to launch. This is because these types of fundraising have just started. Besides, they are already proving crucial for bootstrapping community efforts around young tech projects. Therefore, more projects will follow suite. 

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