The world of token launches has changed dramatically since Ethereum’s initial coin offering (ICO) in 2014, which was the first token offering on a large scale. In any case, that year, half of the launch supply was sold to 8,800 accounts, bringing in $16 million. Fast forward to 2016, the ICO market has grown exponentially, with 29 ICOs successfully raising $90 million US Dollars. Fast forward to 2017, and the tide turned on a dime. This was the start of a long retreat from decentralization that has only deepened the crypto ecosystem today.
In many ways, decentralized fundraising started from a place of optimism. It very quickly morphed into a system dominated by private rounds and the venture capital world with little access for the public to participate. This change has huge implications on community engagement, market behavior, and the investor confidence of token projects as a whole. The clouds of regulatory pressures are combining with the storm of speculative trading taking over the market. A more sustainable and equitable path forward might lie in a return to more decentralized launch models.
The Rise of Centralized Token Launches
Moving into 2017, crypto entrepreneurs started to follow the traditional startup model, focusing heavily on fundraising from venture capital firms. This focus on offering “expert” de-risking ended up driving token launches toward centralization. Projects are instead having much larger rounds privately funded. Because of this, they usually reserve the bare minimum of tokens for public sale, if they even bother to include any.
This change led to the resulting token distribution favoring airdrop participants and showcasing the greater community’s participation. Though early ICOs such as Ethereum’s allowed for broad distribution, the new model accelerated ownership to a select few actors. According to one count, 900 ICO participants raised more than $6 billion, underscoring the size of private investment that is outpacing public investment.
The outcome was a shift from grassroots activism to what some critics now call “corporate greenwashing.” Token launches were turned into this highly coordinated spectacle, where marketing and promotion came first and actual community development—real community development—got pushed to the bottom. Unfortunately, this trend precluded access for everyday investors. This created not only a bureaucratic hurdle, but a direct disconnect between the projects and their intended non-motorized user base.
The Case for Decentralized Alternatives
Decentralized token launches provide an attractive solution to the current centralized model, preventing a multitude of its pitfalls. By prioritizing public participation and community involvement, these launches promote broader awareness, fairer distribution, and stronger alignment between projects and their users. We would argue that a thousand deep-aligned community members are worth a lot more than five VC logos.
Here’s the biggest advantage of decentralized launches – they remove misaligned incentives. This matter often derails the present formula. In other traditional VC-backed projects, liquidity doesn’t come for years. This timeline matches VC incentives with the long-term interests of the portfolio company. Unfortunately in the crypto space, the appeal of short-term gains tends to push investors towards short-term speculation. This singular focus on price appreciation is often a detriment to any real utility.
By decentralized launches, we can help build a more sustainable, community-driven approach from the start. By ensuring tokens are distributed to as many of these users as possible, projects can help build a greater sense of ownership and participation among their users. This is crucial to igniting more interest and public response. In turn, this will build greater support and contribute to the project’s success long after implementation in the years to come.
Navigating the Future of Token Launches
As the crypto landscape is always progressing, innovative new models are leading the way in enabling compliant and decentralized token launches. Community funding models and grants from established crypto networks are fueling a deeper level of public engagement. Innovative legal structures are the other half of what’s fueling this exciting movement. These strategies all largely work toward regulatory compliance. In doing so, they remain true to the core principles of decentralization that undergird the crypto space.
The existing regulatory landscape presents very real hurdles. Combined with mounting regulatory pressure, it has become a near-impossible task for any project to successfully launch a token without legal implications. As a result, many tokens that launch without VC backing are now considered primarily speculative assets. This negative perception contributes to the pump-and-dump schemes that continue to plague the industry.
Despite this reality, the need for decentralized token launches only continues to grow. As evidenced by the popularity of platforms like Pump.fun, users continue to seek out opportunities to participate in new projects, even if they are purely speculative memecoins. This points to a profound frustration with lack of access and agency in the existing token launch process.
