Many projects allocate a significant portion of their liquidity to whales, venture investors, and funds. The result? Well, it's not quite the decentralization they claim because the project team and these deep-pocketed investors hold most of the cards.
Check token distributions of popular coins, and you may be shocked to learn that huge swathes of so-called decentralized networks are reserved for early investors or founders, leaving the general public on a second plan.
Because of this, crypto-enthusiasts do not enter the projects, as they understand that the big players will pour liquidity through them.
Therefore, the projects don’t have a community that will validate nodes, create networks, etc.
A Fair Launch is the solution to these exact problems.
So, What Exactly Is It?
In simple terms, a Fair Launch is the launch where your community takes the role of the initial investors in your startup. They provide the project with liquidity, effectively rendering it truly decentralized.
You possess a database filled with hundreds, if not thousands, of wallets, each holding a portion of the token supply. Crucially, you have real people involved, not just only investors.
It's imperative to grasp this concept:
An investor's primary objective isn't merely to trade or sell your tokens; it's to hold them and strategically deploy them when the time is right.
That's precisely what they'll do, with a 100% certainty that their share of tokens will eventually be sold, leaving the project bereft of liquidity.
Consequently, this is the most significant challenge for any project: the absence of resources to purchase its own tokens from the market, which, in turn, leads to the tokens becoming less valuable.
Thankfully, the emerging narrative of Fair Launches is gaining traction, and the web3 space is actively combating this issue.
Now, let's delve deeper into the mechanics of a Fair Launch.
First of all, you have to follow the basic concepts:
- Make a clear and high-quality MVP of your project.
- Gather the appropriate community for which you plan to make Fair Launch. After all, the launch process is driven by the community.
So, How Do You Build This Community?
It's all about making sure people get something awesome from you.
Here's the game plan:
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Nail your marketing strategy
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Partner up with other projects and media outlets
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Roll out attractive campaign incentives
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Toss in some NFTs that open the door to exclusive perks
What is important at this stage - is security audits, regular appearance on the network, and high-quality communication with the community. It is important to build a relationship of trust, and clearly show the idea of the product and your narrative.
People should understand why they join your project.
Crypto Hamsters
But here's another concern: not only big investors, but also crypto beginners, often called "hamsters," can flood the market by selling all their tokens at once, which can hurt the project's liquidity.
We believe the solution comes at two levels. First, when a project is starting and building its community, it should share a compelling story, an exciting plan, and the benefits it'll bring in the future to keep these "hamsters" interested.
On a larger scale, there's a need for better education in the digital world. Some projects are already working on easy-to-understand lessons for beginners in the crypto world. These efforts can help more people become crypto experts and understand the market better.
The Main Phases of Creating a Successful Fair Launch:
Before the Launch:
- Whitelisting: This is the early step where investors get pre-approved to participate. They share their email and wallet addresses to keep out bots and scammers, ensuring only legit investors join.
- KYC/AML Requirements: These rules prevent fraud and confirm everyone's legit. Investors may need to provide ID documents like passports or licenses to meet these requirements.
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Token Distribution: The project team lays out a clear plan for how tokens will be shared, how many will be made, and who gets what. This info is public before the launch to create a fair process where all investors have an equal shot at buying tokens at the same price.
During the Launch:
- Token Sale: This is where the initial token sale happens, raising funds for the project. The goal is to sell tokens at a fixed price to all investors, with no special deals. The project sets a minimum and maximum target for the sale's success.
- Listing on Exchanges: The next step is getting the tokens on exchanges so that investors can buy and sell them. This adds liquidity and can raise the token's value over time.
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Post-Launch Support: After tokens are on exchanges, the project team must provide ongoing support. This includes tech updates, security fixes, and active community engagement. Marketing and promotion are vital to keep the project visible and gaining momentum in the market. Without this support, a project can struggle to succeed.
In addition, once your token is up and running smoothly, it's a good move to get lots of different investors and VC funds on board. Keeping the money flowing from regular folks can be tricky, so having some big-shot investors around, after the launch, is a smart idea.
It keeps your product in the spotlight.
New Developments in Fair Launch Processes:
Popular decentralized launchpads like Uniswap and PancakeSwap have made fair launches easier. They let projects start their tokens in a transparent and fair way. Plus, some projects use cool stuff like token bonding curves to make sure the token's price is fair and true to its value.
And there's more! Community-driven models, like initial liquidity offerings (ILOs), let the community set the token's price and supply by adding money to a decentralized exchange. It keeps things fair and adds cash to the market.
Here's How Some Projects Do It:
- They reward early users with airdrops. Take OpenDAO, for instance. They dished out their SOS tokens to folks who had previously used the NFT marketplace OpenSea.
- Some projects keep the rewards flowing for folks who keep contributing. A cool example is Yearn.Finance (YFI). Its creator, Andre Cronje, didn't keep any YFI tokens for himself. Instead, he let people who added liquidity to the platform earn those tokens.
- And then, there's Bitcoin - the OG of fair launches. Miners get new Bitcoin to help out with the network. The founders didn't hoard coins before the launch. Though back then, the crowd was pretty small.
Conclusion
Therefore, the main goal of Fair Launch is to build a quality community.
Here's the deal:
- Check the Crypto Vibes: Is the crypto world in the mood for your project right now?
- Marketing Magic: You've gotta have a killer marketing plan to build that awesome community.
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Top-Notch Product: Fair Launch works best for projects with rock-solid fundamentals and game-changing ideas that can win over a bunch of folks.
Fair Launch isn't the go-to startup launch method, but it's how we get a real taste of decentralization. Of course, like anywhere else, it comes with its own set of shortcomings and issues, but as explained earlier, there are ways to address them.