Cryptonomics: What Are Initial Farm Offerings

Initial Farm Offerings (IFO) are a new type of token sale event popularized by Decentralized Exchange (DEX) platforms, IFO's are utilized as a fundraising event for upcoming De-Fi protocols. 

By
Wilfred Victor
on
January 21, 2021
Category:
Cryptonomics

Initial Farm Offerings

Initial Farm Offerings (IFO) are a new type of token sale event popularized by Decentralized Exchange (DEX) platforms. PancakeSwap is the most popular of them all, utilizing this unique fundraising event for upcoming projects.

IFO’s are both different and similar to Initial Exchange Offerings (IEO) and Initial Coin Offerings (ICO). All three methods serve as a way to raise funds for cryptocurrency projects. These are typically carried out on an exchange, but sometimes project websites or other “pre-sale” methods are used.


Introduction 

Since the inception of cryptocurrencies over 12 years ago, significant developments have changed the types of fundraising events that have been used, for example, before ICO’s projects heavily relied on venture capitalist (VC) backing, which is a slow and cumbersome process. The ICO period revolutionized the way fundraising was done, cutting short the process of obtaining venture capitalists (VC). The initial system of getting VCs was proven to be a prolonged process for blockchain-based projects. 

To solve this, exchanges stepped in to help projects raise funds safely and transparently. - See Binance IEOs

Recently, the tide has shifted towards the decentralized finance (DeFi) sector of the Crypto markets. The most prominent Dapp’s used are DEX platforms like PancakeSwap and StreetSwap, which have introduced another innovative sales offering, Initial Farm Offerings (IFO).


What Is An IFO? 

As the name suggests, Initial Farming Offerings are a brand new type of fundraising activity that uses farming events to generate funds for participating projects. 

With the help of IFO’s, users can participate in “pre-sales” hosted through DEX’s to get tokens before listing on respective exchanges. Typically the DEX teams will thoroughly vet projects before hosting official IFO’s. While this vetting process is included, it does not ensure the token’s success or integrity, as users should always due diligence beyond BSCNews when making financial decisions. The IFO process benefits both new projects, Pancakeswap, and its users; the IFO allocates farming rewards for PCS users while also providing new projects an incentivized liquidity pool on PCS. This system allows sustainable yields to be generated for PCS users, and it creates initial liquidity for the respective token. On top of this, half of the funds raised are burned in CAKE if the sale is completed.

For those who are unaware of the smart contract and project risk, check out the following articles:

How To Spot a Potential RUG — Clear Signs Something is Sketchy

How to Keep Your Funds SAFE — MetaMask Guide


Participating In An IFO

Before taking part in an IFO event, users must provide liquidity, which is used to purchase the respective token participating in the IFO. In PancakeSwap IFO’s, users must provide Cake-BNB liquidity on PancakeSwap using a BEP-20 wallet such as TrustWallet. See How to provide liquidity on PancakeSwap.


Once liquidity is provided, the new tokens are bought using the Cake-BNB LP tokens generated after adding liquidity. Pancakeswap utilizes a system that rewards the project with the BNB collected, and PancakeSwap burns the Cake. Finally, the users are granted the tokens after the IFO event is completed. 


What Happens to Unspent Funds? 

They simply come back to the user after the event. In a sellout event, users will receive the proportional value in tokens based on their contribution as a percent of the total contribution done. For example, suppose the full value of an IFO is set at a $1,000,000 contribution. In this case, users get the equivalent amount of their contribution in the tokens over the total value after the event and get what's leftover. 

If the targeted amount of funds are not raised, sales will proceed as normal, and funds will be utilized. Project development doesn't stop if the total expected funds are not reached; it just means fewer tokens are distributed.


Summary

A bold new kind of idea could once again change the way funds are generated in a whole new way. PancakeSwap has continued to innovate upon their platform, integrating ICO’s. This system rewards both new projects and PCS users as the process creates liquidity for new projects and burns CAKE tokens. Overall, IFO’s are used to raise funds for new decentralized protocols on the BSC. This system provides a seamless way for new projects to launch into the De-Fi space.



All users must note local and national regulations in their respective regions when participating in IFO’s.

Overall it is vital to proceed with caution when purchasing tokens that have just been listed. For those who have not already read our articles on safety in the BSC, it is crucial to reference the following items, HERE and HERE.

None of our articles are advice at the end of the day, and all financial decisions should be made on your behalf or from a professional financial advisor.

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Wilfred Victor

Ace finds himself as a blockchain enthusiast who is focused on growing with the entire crypto sector. He is an energetic and passionate writer who believes that all things are achievable.

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