From ICOs to IEOs to IDOs
On June 17th, 2019, Binance DEX hosted Raven Protocol's first ever Initial Decentralized Exchange Offering (IDO). Decentralized exchanges, or DEXs, have yet to acquire popularity in the market at the time. With the rise of DeFi in 2020, DEXs gained traction, and IDOs became a low-cost alternative to the centralised initial exchange offering (IEO) paradigm.
While using IDOs on Uniswap reduced the initial cost of a project's token listing, the convenience came at a price. This new coin launch technique was soon changed by the crypto community. After a considerable quantity of liquidity was offered to a Uniswap pool, savvy investors began to front-run listings. Some would buy the entire pool in one go, driving up the price of the crypto asset while others tried to do the same. To describe users who turned up the gas on their MetaMask wallet to buy out entire pools of newly-created tokens at lower prices before others did, the term "ape in" to a liquidity pool was coined.
This resulted in wild volatility, leaving many investors stunned and driving valuations above reasonable. Furthermore, this approach has several significant drawbacks, the most notable of which is that projects must provide liquidity on both the asset for sale (base currency) and a quote currency (usually ETH) for it to initially trade against. Automated market makers, like the one that powers Uniswap, would modify the asset's price dynamically based on supply and demand. The growing popularity and use of platforms like Uniswap has exacerbated scalability difficulties, with Ethereum network fees soaring and platform performance slowing, frustrating end-users.
Because investment entry points were difficult to come by unless you had the knowledge or financial means to maintain a position in a crypto project, launchpads were created. Popular ones are CodeFi Activate, CoinList and Republic. These platforms enable active participation in staking and protocol governance which are critical to incentivize optimal user behaviour, build network resilience, and improve performance.
Projects like Launchpool provide investors with pre-IDO private sale options with the same vesting schedules and bonuses as funds and partners. Today, users are requesting more affordable transactions, safe swaps, and a user-friendly design. The ability to buy and sell assets on different blockchains. The ability to make both set swap pools and cross-chain swaps is one of the most appealing characteristics of launchpads. Interoperability is already becoming a must-have aspect of the DeFi future, as the future of decentralised finance will not be tethered to a single chain.
Launchpads also act like a decentralized VC investment platform, where the only qualification necessary to gain access to vetted, highly sought-after projects is holding a specific token. For example, $DDIM (DuckDAO), $DAO (DAO Maker) and $NEBO (CSP DAO). By holding fixed amounts of the launchpad native tokens, users gain access to the inner communities, where they can access propitious, often exclusive deals before anyone else. As a community-powered crypto incubator, practically anybody can invest in promising early-stage crypto startups and also share a hand in its success by assisting with user-acquisition and marketing. Increasingly, we’re also seeing some AMM DEXes having specialized platforms for crowdfunding and token launches, e.g. Sushiswap’s MISO. All of these platforms show the need for a capital efficient and permissionless mechanism for token launches.
How can Humanode benefit Launchpads?
Even if project teams were receptive to it, more experienced actors (crypto funds, whales, exchanges) held the upper hand, making an equitable offering difficult. The rewards were nearly impossible to attain unless investors got in early into the project.
The current KYC for Identity buyers and fraudsters is easy to cheat. For decentralized launchpads - when they have no KYC - the fraud comes from the project itself. When Founders of the project see that the sale is not going well - they create hundreds of wallets and buy the sale out themselves, with each wallet purchasing a few hundred dollars as if the sale is successful with many token holders.
How can launchpads and projects avoid huge value captures by Whales or insider trading during the early stages of token launch?
Humanode enables investor identification which does not demand the sharing of any personal information to formalize a unique human (no KYC). It uses a search-and-matching algorithm to demonstrate the humanness and individuality of its participants. Validated participants are probably unique and human, with the use of cutting-edge liveness detection. Humanode will enable fair distribution of tokens to all token holders, based on the one human, one allocation principle.