Are you about to launch a token? Then, you are likely aware that this event will be one of the key milestones in your project’s life cycle. While there is some helpful guidance on token launches available, there is no gold standard; each launch is heavily dependent on its specific merits. As an avid observer, you may have noticed the recent token launches and the challenges associated with them. Additionally, the current global macroeconomic environment adds further complexity to these challenges.
With the above in mind, I would like to share some general insights I’ve personally gathered from past token launch experiences. Of course, this is not an exhaustive guide, and I encourage you to conduct your own research and seek external counselling.
1. Have a clear token narrative in place explaining the need for such a token! Define clear utilities attached to such a token!
You should ask yourself the following questions: Why do you need a token in the first place? What is the primary function of the token? It’s essential not to build a token-centric product; instead, focus on achieving product-market fit. This is particularly true unless you’re building a Layer 1 (L1) blockchain, where the considerations might differ. In most cases, your token is not your product.
2. Think early about the community adoption of the token!
In an ideal world, you would launch your token only after your protocol or application has already achieved product-market fit. While this is a highly idealistic scenario, it is still crucial to ensure there is sufficient organic demand for your token, ideally driven by your product.
If you have an existing product on which you plan to launch a token, engage with your community early and educate them about the token’s role and purpose. Identify where to target within your community and which ambassadors to involve, such as partners, affiliates, and key opinion leaders (KoLs). The ultimate goal is to ensure that your community understands the value of your token and doesn’t view it merely as a monetary windfall (e.g., through an airdrop) that could lead to increased sell-pressure upon launch.
3. Decide early on the chain stack!
Consider carefully whether to build your own chain or leverage the ecosystem of an appchain. Before making a decision, evaluate factors such as the availability of internal resources, ecosystem liquidity, project timeline, and funding opportunities (e.g., grants). It’s also wise to engage with other projects and ecosystem organisations (e.g., L2s) to gather insights and ensure you make an informed decision.
4. Tokenomics matters but keep them flexible.
Keep things as flexible as possible, especially since your tokenomics are unlikely to be final until you’ve found product-market fit. For instance, avoid over-communicating the specific use of certain token baskets, such as those for ecosystem funding, market-making or exchanges, in too much detail.
In this context, it might be beneficial to consider the role of community governance in amending the tokenomics, such as introducing network inflation. Additionally, ensure that no unnecessary sell-pressure is introduced by applying appropriate vesting and release schedules.
Stay updated on and leverage industry guidance, such as from 6th Man Ventures. It’s also crucial to involve broad parts of your team in assessing whether the restrictions applied to certain token categories align with operational needs, such as market-making, listing, and community incentives. Open discussions around these topics are essential.
5. Consider restricting the token transferability upon launch
If you’re bootstrapping your network from scratch, it might be worth considering restricting token transferability upon launch. This strategy allows you to focus intently on the network launch while minimising regulatory complications, as the token’s existence does not equate to transferability.
However, it’s important not to overlook how this decision impacts network incentives. For example, if you require validators or node operators to participate in your network from the start, you’ll need to develop alternative compensation methods since they won’t be able to liquidate their earned token rewards to fund their operations. Additionally, having a clear roadmap for when and how the token will eventually become transferable is crucial.
In this context, a milestone-based approach with a defined timeline, such as the Eigen approach, can be beneficial. Community-driven methods, like the Safe approach, are also possible, though they require strong community moderation to avoid unforeseen events. A combination of both approaches could be a promising path forward: Communicate a timeline with clear milestones and include a final community approval step.
Remember to adjust your communication strategy accordingly. Refrain from promoting your token until it is actually available, and even then, ensure that all promotion adheres to established principles.
6. Initiate early on discussions exchanges, market makers and custodians
A successful listing campaign for your token begins with a strong and strategic approach to building relationships with market-makers and exchanges. Typically, it takes 2-3 months – or even longer – to onboard with exchanges and finalise your market-maker setup. When it comes to exchanges, it’s crucial to start thinking early about effective marketing strategies and creating educational content related to your network and token. This can include publishing through platforms like Messari, The Block, or Blockworks. Be mindful that the onboarding process with exchanges is often opaque and requires considerable patience.
It’s important to highlight that all these activities carry an elevated regulatory risk profile. You should carefully navigate these actions in consultation with your legal counsel. Under no circumstances should you organise a public sale of your tokens in the U.S. or any other jurisdiction which require regulatory compliance.
7. Prepare your organisation for the token launch!
In addition to token-related matters, it’s crucial to allocate sufficient resources to prepare your organisational setup ahead of the token launch. This preparation should include the incorporation and staffing of your token-issuing entity (e.g., a foundation). For regulatory compliance, it is essential that the pre-existing organisation is clearly segregated from the newly created token-issuing entity. Finding the right people at the right time – such as directors, legal, and finance leads – is key to establishing the proper foundations and processes (e.g., legal, treasury management, budget) in a timely manner.
Moreover, it’s important to ensure that there is proper substance in place where your entities are established. This often proves challenging when foreign foundations (e.g., in Switzerland or the Cayman Islands) are involved. Using additional legal structures or subsidiaries in jurisdictions where your key personnel are located may help avoid unnecessary tax and legal risks.
To effectively manage the transition from the development company to the token-issuing setup, as well as to coordinate joint efforts, a strong project management office is essential. Spinning up an internal project management team with full focus and dedication is crucial, especially for teams with already existing products.
8. Write down a decentralisation vision, it should be your North Star!
Although full decentralisation may be years away, it is crucial to establish a clear framework to guide the process. Decentralisation should serve as your North Star. The community should be informed early about the vision and steps toward this end state. It is also vital to have a milestone framework in place that is regularly monitored and updated.
These are my 5 cents on token launches. I hope the reflections provided are both conclusive and insightful. If you have any questions, please feel free to reach out. I am happy to brainstorm your current planning in light of my experiences.
“The person who is prepared has their battle half fought.”
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