Initial Farm Offering (IFO) Definition
Initial Farm Offering (IFO) is a method of launching new tokens by getting funding from the community. It is typically carried out on decentralized exchanges (DEXs) that have a yield farming platform, where investors can stake liquidity pool tokens and receive the new token in return.
Initial Farm Offering (IFO) Key Points
- IFOs are launched on yield farming platforms on DEXs, where new projects acquire funding from the community.
- Participants stake liquidity pool tokens and receive the new token in return for their investment.
- IFOs being offered have to be audited by a third party to assure its authenticity and legitimacy.
What is an Initial Farm Offering (IFO)?
An Initial Farm Offering is a new and radical way for developers to raise funds for their new projects. It can be compared to the conventional Initial Coin Offerings (ICOs) or Initial Exchange Offerings (IEOs) though differs significantly in its decentralized approach. Instead of selling tokens to a limited number of private investors, IFOs utilize DeFi yield farming platforms on decentralized exchanges (DEXs) to sell their tokens to community members.
Where and When to Launch an Initial Farm Offering (IFO)?
IFOs are launched on DeFi platforms that also support yield farming. PancakeSwap, one of the top DEXs built on the Binance Smart Chain, is well known for launching IFOs regularly. A project chooses the date and time to launch its IFO and announces it to the community beforehand, often using social media and other community channels.
Why Launch an Initial Farm Offering (IFO)?
When a project launches an IFO, it is essentially crowd-sourcing funding for development from the community. It creates a much larger and decentralized user base, prevents whales from monopolizing the token distribution, and provides more fair and equal opportunities for participation. Also, since the tokens involved are audited by a third party, it provides assurance to investors about the project’s security and legitimacy.
Who Can Participate in an Initial Farm Offering (IFO)?
Any member of the community who holds liquidity pool tokens can participate in an IFO. Staking their liquidity pool tokens allows them to receive the offered tokens in proportion to their staked amount. Usually, there is no limit on how many tokens one can buy, however, there may be a burning mechanism that burns a part of the staked tokens.
How to Participate in an Initial Farm Offering (IFO)?
To participate in an IFO, you typically need to provide liquidity in a specific pool in return for liquidity pool tokens. Then, you stake these liquidity pool tokens in the IFO. Once the IFO ends, you receive the new tokens and can claim any unspent funds or retrieve your stake. The specifics can change depending on platform policies, so it is essential to understand the approach taken by individual platforms.
