Make Token Launches Fair Again
The most recent batch of projects that launched on Binance has been down bad. Key stakeholders in the space have come to CT voicing their concerns that new tokens have launched at lofty valuations, and with low circulating supplies. Also known as ‘‘Low Float, High Fully Diluted Valuation (FDV)’ token launches.
The Problem
It has become almost impossible for retail investors to be ‘early’ in new token launch opportunities. This is because of the privatization of price discovery associated with projects with ‘low-float’ or ‘high-FDV’, as a result of absurdly high and unrealistic inflated valuations from VC markets that ignore supply and demand. In fact, securing funding at a high valuation during private rounds incentivizes stakeholders to aim for an even higher FDV when the token is publicly launched.
The Rise of Memecoins
In response to this new phenomenon, retail investors turned to meme coins. Meme coins have all their tokens unlocked and circulating at launch, thereby nullifying the possibility of selling pressure from future dilutions. This property has played a key role in their growing popularity this year.
Meme coins have attracted large trading volumes as they represent an investment opportunity accessible by anyone, with little opportunity for institutional actors to acquire tokens at a cheaper price ahead of launch. In a way one could argue meme coins appear to be the perfect antidote to obscure, murky ‘low float, high FDV’ token launches.
More importantly, what the recent prominence and rise of meme coins have taught us is that culture is everything and that culture must come from the people. It cannot be fabricated and engineered with private, opaque deals.
Takeaways
While there are some takeaways from meme coins to bring about more equitable token launches, it is unrealistic to unlock all circulating supply for utility tokens at launch. Therefore, the solution must lie somewhere in the middle. While tokenomics is likely more art than science, there is no magic answer to the ‘low float, high FDV’ narrative. However, it is indisputable that price discovery in public creates much healthier markets. Retail investors should have access to information about who holds the unlocked supply for a given token, how it is being used, and whether they can distribute that supply or not.
Liquidity Bootstrapping Pools (LBPs)
There is more than one approach to try and make token launches fair again. One of these is called Liquidity Bootstrapping Pools (LBPs). LBPs start with a high price to deter sniper bots and whales from manipulating the price. Users can engage in community-driven price discovery, deciding to buy and sell tokens at the price they want. The unique design and mechanism of LBPs allows fair participation by everyone, creating the conditions for an equitable and transparent environment for token distribution and price discovery. Additionally, some of the unique characteristics of LBPs include:
- Transparent price discovery
- Weight Shifting
- Community involvement and trust building
- Enhanced liquidity and lower barrier to entry
- Democratizing access to early-stage investment opportunities in crypto
Next Steps
Having recognised that memecoins are here to stay and that LBPs represent a valid solution for democratic token distribution, TokenBuilder aims to play its part to make utility token launches fair again.
More specifically, TokenBuilders empowers Web3 projects to launch tokens transparently, securely, and fairly. Our AI tools enable seamless management of every aspect of the token lifecycle—from design and deployment to trading and ongoing marketing—setting new standards for the future of crypto markets.
Therefore, if you have an exciting idea and want to get started with your Web3 project to bring this vision to life, don’t waste any more time and begin your journey by getting your Ducks in a Row first.
