From "Who gives money to whom" to "Only give to the right people": The next generation Launchpad needs to be reshuffled.

Written by: Nishil Jain

Compiled by: Block unicorn

Introduction

The ICO is back, and various Launchpads are rushing in to get a share of the pie.

In October, Coinbase acquired Echo and launched its token sales platform earlier this month; in September, Kraken partnered with Legion. Meanwhile, Binance has a close relationship with Buildlpad, while PumpFun is trying to issue utility tokens through Spotlight.

These developments come at a time when investors' interest and trust in ICOs are warming up.

Umbra Privacy raised $156 million against a fundraising target of $750,000 on MetaDAO, while Yieldbasis was oversubscribed by 98 times within less than a day of launching on Legion. Aria Protocol was oversubscribed by 20 times on Buildpad, attracting over 30,000 users to participate.

As ICOs begin to raise funds at multiples of their issuance price, filtering out the noise becomes particularly important.

In a previous article titled “Capital Formation in the Cryptocurrency Space,” Saurabh elaborated on how capital formation in the cryptocurrency field has evolved. He explored how new financing structures like the investment model of Flying Tulip and the ICO of MetaDAO attempt to address potential conflicts of interest among teams, investors, and users. Each new model claims to better balance the interests of all parties.

Although the success of these models remains to be seen, we observe that various Launchpads are trying to address the conflicts between investors, users, and teams in different ways. They are achieving a selective investor roster (Cap Table) by allowing project parties to autonomously choose investors during public token sales.

In today's article, I will take everyone through the reasons and methods of investor screening.

First come, first served for selected token holders

From 2017 to 2019, ICO investments mostly adopted a first-come, first-served model, with investors flocking in to try to enter at a lower valuation, usually aiming to quickly profit in the early stages of the project. Research data on over 300 ICO projects shows that 30% of investors exited within the first month after the project's launch.

While quick returns always tempt investors, project teams are not obligated to accept every wallet that reaches out for funds. A truly visionary team should be able to choose their ICO participants and filter out those investors who are committed to long-term development.

The following is the content of Eigencloud's Ditto discussing the shift from a first-come, first-served (FCFS) sales model to a community-centered sales system.

The problem with the current ICO cycle is that it has ultimately fallen into the dilemma of a “lemon market.” Too many ICO projects have emerged, among which there are scams or traps, making it difficult for people to distinguish between high-quality projects and low-quality projects.

The Launchpad platform cannot conduct strict reviews of all projects that go live, leading to a low level of trust from investors in ICOs. Ultimately, the number of ICOs has surged, but the funds willing to support them are insufficient.

It seems that the situation is starting to change again.

Since its launch, Cobie's fundraising platform Echo has raised 200 million dollars for over 300 projects. Meanwhile, we have also seen millions of dollars vanish in just a few minutes in some independent fundraising projects. Pump.fun successfully completed its ICO, raising 500 million dollars in less than 12 minutes; Plasma raised 373 million dollars with a target of 50 million dollars in its public sale of the XPL project.

This transformation is reflected not only in token issuance but also in the Launchpad itself. Emerging platforms like Legion, Umbra, and Echo promise to provide founders and investors with greater transparency, clearer mechanisms, and more comprehensive structures. They are eliminating information asymmetry, allowing investors to discern the quality of projects. Nowadays, investors can clearly understand the valuation, funding amount, and relevant details of a project, thus better preventing the risk of being trapped in a project.

This has led to a resurgence of capital flowing back into ICO investments, with subscription amounts for projects far exceeding expectations.

The new generation of Launchpad is also focused on building an investment community that aligns with the long-term vision of the projects.

After acquiring Echo, Coinbase announced the launch of its own token sale platform, emphasizing the screening based on the compatibility between users and the platform. Currently, they achieve this by tracking users' token selling patterns. Users who sell tokens within 30 days of the sale start will receive a lower allocation, and more compatibility metrics will be announced soon.

This shift towards a community-centered distribution philosophy is vividly reflected in the carefully designed airdrop plan of Monad and the ICO distribution plan of MegaETH, both of which focus on community members.

The subscription multiple of MegaETH is approximately 28 times. The project requires users to link their social media profiles and wallets with on-chain history to filter out the list of token holders they believe aligns best with the project's concept.

This is the transformation we are witnessing: when the funds from participating in ICOs are abundant again, project teams need to choose who to allocate the funds to. The new generation of Launchpad was established to address this issue.

Next Generation Launchpad

Currently, platforms such as Legion, Buildlpad, MetaDAO, and Kaito are emerging as representatives of a new type of Launchpad. The first step is to review ICO projects to ensure investor trust in the Launchpad platform; the next step is to review participating investors to ensure that fund allocation meets project standards.

Legion adheres to a performance-oriented allocation philosophy, providing the most comprehensive ranking system for community members. The platform has successfully completed 17 token issuances, with the most recent token issuance having an oversubscription rate of approximately 100 times.

In order to ensure that tokens reach the right hands during an oversubscribed sale, each participant will be assigned a Legion score, which takes into account their cross-protocol on-chain historical record and activities, developer qualifications (such as GitHub contributions), social influence, network reach, and qualitative statements regarding their intended contributions to the project.

Founders launching products on Legion can choose to allocate weight metrics, such as developer engagement, social influence, KOL (Key Opinion Leader) participation, or community education contributions, and assign weights accordingly.

Kaito has taken a more targeted approach by allocating a portion of the shares to “speakers” who actively participate in Twitter discussions. The engagement will be weighted based on the user's voting reputation and speaking influence, the amount of $KAITO staked, and the rarity of the genesis NFT. The project team can choose from these types of priority supporters.

Kaito's model can help projects attract influential social media participants as early investors. This strategy is particularly useful for projects that heavily rely on early exposure.

The core concept of Buidlpad is based on the allocation of funds. The more funds users stake, the more tokens they receive from participating in the token sale. However, this also means that only wallets with funds can participate.

To balance this capital-based system, Buidlpad has introduced a “team system” that grants leaderboard points and additional rewards through community activities such as content creation, educational promotion, and social promotion.

Among these four Launchpads, MetaDAO is the most unique. The funds raised through the MetaDAO ICO are placed in an on-chain treasury and utilize a market-based governance mechanism known as Futarchy. Futarchy is essentially a futures trading mechanism for the underlying tokens, but its trading is based on governance decisions rather than prices.

All raised funds are stored in an on-chain treasury, and each expenditure is validated by the conditional market. The team must propose a plan for the use of funds, while token holders bet on whether these actions can create value. Transactions can only be completed when the market reaches a consensus.

The investment participation in the MetaDAO ICO is permissionless and completely open, with each investor receiving a corresponding token allocation based on their invested funds. However, community building and alignment of interests for token holders occur after the ICO ends. Each proposal in Futarchy acts as a market, where traders can sell tokens when a proposal passes or purchase more. Thus, the token holder community will form based on the final decision.

Although this article focuses on the selected allocation plan, from the perspective of the project party, there are many other factors to consider before deciding to launch an ICO, such as project screening criteria, founder flexibility, platform fees, and support after going live. The comparison table below can help you clearly understand all these factors.

Web3 can bring together users, traders, and contributors through incentive mechanisms based on verifiable reputation systems. Without appropriate mechanisms to weed out bad actors or attract the right participants, most community token sales will remain in an immature stage, filled with a mixed group of both believers and non-believers. The current Launchpad provides teams with an opportunity to improve the token economy and take the right first step.

The project requires some tools to identify suitable users within the ecosystem and reward their actual contributions. This includes influential users who have active communities behind them, as well as founders or builders who create practical applications and experiences for others. These user groups play an important role in driving the development of the ecosystem and should be incentivized for long-term retention.

If the current momentum can be maintained, the next generation Launchpad may help solve the community launch issue in the cryptocurrency space, which airdrops have failed to address.