About Token Launches

When launching a new token, one of the biggest decisions a project team faces is how to distribute the tokens. There are two primary approaches: fair launches and premined or pre-sale launches. Each method has its advantages and disadvantages, and the right choice depends on the specific needs and goals of the project.

What is a Fair Launch?

A fair launch means that everyone has an equal chance to acquire the token when it goes live. There is no pre-sale, no special access for large investors, and no early allocations for the development team. One of the best-known examples of a fair launch is Bitcoin. When Bitcoin was first introduced, anyone could start mining it without any insider advantage, ensuring that no one had an unfair head start.

Satoshi Nakamoto, Bitcoin’s creator, took specific measures to ensure that its launch would be considered fair. There was no premine, meaning that Satoshi did not allocate any coins to himself before making the network public. He also announced the launch two months in advance, giving everyone a fair opportunity to prepare. Additionally, during the early days, Bitcoin had no value, allowing it to circulate freely without speculation. Over time, this helped Bitcoin gain organic adoption. Furthermore, Satoshi never sold his coins, reinforcing the idea that Bitcoin was launched for the community rather than personal gain.

Fair launches offer several benefits. First, they ensure equal opportunity for all participants since no early investors or insiders get a head start. This promotes greater decentralization, as tokens are not concentrated in the hands of a small group, reducing the risk of centralized control. Fair launches also enhance trust and transparency, as the absence of a pre-sale eliminates concerns about unfair distribution or hidden deals.

However, fair launches also present some challenges. One major drawback is the lack of funding. Without early token sales, the project team may struggle to finance development, marketing, and operations, which can slow down progress. Additionally, fair launches can be vulnerable to market manipulation since there is no control over who buys the tokens. Whales can accumulate significant amounts, manipulate prices, and create volatility. Another challenge is team compensation. Developers and early contributors may not receive enough tokens to stay motivated, potentially leading to a lack of long-term commitment from the core team.

What is a Premined or Pre-Sale Launch?

In a premined or pre-sale launch, a portion of the tokens is created and distributed to specific groups before the public launch. These groups often include early investors, venture capitalists, and the project’s development team. This structured approach helps secure funding early on and provides stability to the project from the beginning.

One of the main advantages of a premined or pre-sale launch is secured funding. By selling tokens in advance, the project raises capital that can be used for development, marketing, and operational expenses. This financial backing can help the team focus on building and improving the project rather than worrying about funding. Another benefit is better liquidity, as early investors contribute to the market by providing liquidity, leading to smoother trading experiences for future participants. Additionally, this approach ensures team motivation, as developers and early contributors receive a fair share of tokens, incentivizing them to remain committed to the project’s success.

Despite these advantages, premined or pre-sale launches come with risks. One of the biggest concerns is unfair distribution. Since some people gain access to tokens before the public, they have an advantage, which can create resentment among later investors. Another issue is the risk of centralization. If a small group of investors holds most of the supply, they can exert significant control over the project’s direction, which goes against the decentralized ethos of blockchain technology. There is also the possibility of pump-and-dump schemes, where early investors quickly sell off their holdings for profit, leading to price crashes and losses for retail investors.

Having good tokenomics is key to a successful launch. The tokenomics should be designed to incentivize long-term commitment from the core team and early contributors, while also providing a fair distribution to the community.

How should we launch a token?

I like the idea of a hybrid model. For instance, project might sell a small percentage of tokens in a pre-sale to secure funding while keeping the majority available for a fair launch. This method allows the team to raise the necessary capital while still providing the community with a fair opportunity to participate in the project.

Ultimately, the best launch strategy should focus on fairness, sustainability, and long-term success. A model that balances the interests of both the development team and the community can help build a strong, lasting project that benefits everyone involved.