As the world of NFTs has expanded to include more NFT projects and exclusive NFT drops, different projects have adopted various fundraising methods. One such fundraising method is the initial NFT offering or INO. Let’s dive into the origins of initial NFT offerings, what INOs are, and how they can benefit NFT projects and platforms.
What Is An Initial NFT Offering (INO)?
After stumbling into the NFT space, you likely have come across the term initial NFT offering, but what is an INO? To answer this question, we must first understand the precursors to INOs.
Initial Public Offerings (IPOs)
You likely already know what an Initial Public Offering (IPO) is. An initial public offering represents when a private company goes public, offering shares to the public for the first time to raise additional capital. It marks the debut of the company’s shares on the stock exchange. IPOs have been around for a long time, and many companies view IPOs as a monumental moment in their company history. One of the purposes of an IPO is to let early investors in the company cash out their investment.
An IPO represents the end of one stage for the company and the beginning of another. Not all companies decide to go public. After the IPO, there is usually much more scrutiny on the company and its founders since the company now has to answer to more shareholders who may be concerned about how its actions will impact the share price. However, many companies still see IPOs as a valuable and vital step to legitimacy, so they remain popular. ICOs and initial NFT offerings got their name from IPOs.
Initial Coin Offerings (ICOs)
Initial Coin Offerings (ICOs) are the cryptocurrency industry’s equivalent to IPOs. Instead of offering shares in their company, the crypto project allows investors to receive a new cryptocurrency token. Investors buy these tokens hoping that the token price will increase over time. ICOs are different than IPOs in that the coins sold in an ICO often have utility toward a product or platform developed by the cryptocurrency project. In contrast, shares in an IPO only represent ownership in the company.
Usually, a whitepaper is written before the ICO explaining details about the project to increase its support in preparation for the ICO.
The number of ICOs decreased in 2019 due to increased negative perception because of a few scam projects raising money through ICOs and disappearing with the funds.
Other similar ways of raising money, such as IDOs, became popular, which offered tighter regulations to reduce the number of scams and protect investors from fraud. Initial NFT offerings are like ICOs and IDOs, but for NFTs.
The Rise Of Initial NFT Offerings
As NFTs gained popularity, NFT projects adopted the ICO and IDO concept and started offering Initial NFT Offerings (INOs). In INOs, projects sell non-fungible tokens in the earliest stages of a project for a set period. One advantage of Initial NFT Offerings is that they make launching an NFT project easy. INOs are primarily responsible for the fast expansion of the NFT space and the number of NFT projects currently offering NFT collections. INOs also offer reduced transaction fees and higher investment returns. The higher investment returns come from the scarcity of the NFTs initially provided in an INO.
INOs allow projects to raise funds by listing a set of NFTs or an NFT collection on a Launchpad. Usually, these are limited edition NFTs focused on scarcity to make them more attractive to investors.
INOs promote community building as well. By buying an NFT in an INO, the buyer purchases a scarce NFT of a limited collection, providing them with acceptance in a small community. It’s easier with NFTs to recognize each holder than with a fungible token.
Each of these characteristics makes INOs one of the most attractive ways of fundraising for NFT projects.
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