Launchpads continue to play a pivotal role in the crypto ecosystem, helping emerging projects and token-based economies with the initial push, and introducing them to potential investors. From aiding fundraising through ICOs, IEOs, and IDOs, to assisting with community building, and securing liquidity, these launchpads have a major role to play in the inception as well as the success of promising crypto projects.
Since a launchpad is key to a successful launch, it is paramount for emerging crypto projects to choose the right launchpad. But, there’s a challenge – lack of ample liquidity. Since most traditional launchpads rely on locked liquidity with minimum incentives for a sustainable contribution, early investors are always in a hurry to cash out, paving the way for a rug pull. The only solution is transforming locked liquidity into supplied liquidity by incentivizing community contribution to the liquidity pool.
Let’s explore the existing launchpad models new projects can choose from:
Regular Launchpads: Regular launchpads merely serve as an intermediary between project developers and potential investors. Such launchpads help emerging crypto projects raise funds through IDOs or ICOs from early adopters or investors. They follow a locked liquidity model, where early investors are required to lock their token holdings till the TGE. However, this prompts early investors to mass sell after TGE due to a lack of long-term value distribution, leading to issues like insufficient liquidity or rug pull.
LBP (Liquidity Bootstrapping Pools): LBPs are used in DeFi for the initial distribution and price discovery of new tokens. A variant of AMMs, LBPs allow projects to launch their tokens with minimal initial liquidity while mitigating some common issues seen in traditional token launches, such as front-running and price manipulation. They are often preferred by projects with capital constraints.
However, LBPs are more complex than traditional liquidity pools or launch methods, thanks to the dynamic weight mechanism that often leads to confusion among average participants. This often contributes to hesitation in user participation. Also, they are subject to price floor risk, i.e. the token price could drop significantly if the demand plummets. Liquidity fragmentation is another area where they fail to make progress.
FTO (Fair Token Offering): Introduced by Honeypot Finance, the FTO model replaces locked liquidity with supplied liquidity. FTO deals with critical issues that the other two models fail two: liquidity fragmentation, lack of long-term value distribution, and fair pricing. Participants offering liquidity through Honeypot Finance’s FTO model offer supplied liquidity to HenloDEX from day 1, making new tokens tradable instantly.
In return, they receive LP tokens. FTO is designed to create a level playing field for liquidity providers and project developers. The LP tokens are distributed 50% each between the two parties to enable sustainable value distribution while aiding seamless scaling. This eliminates the chances of an unfair advantage for either party, enforcing fair pricing.
There’s a clear difference between FTO and the other two models. Here’s how launching through FTO turns out to be beneficial:
100% Deep Liquidity: The FTO model ensures that all the tokens are in the pool at the time of the launch, which prevents market manipulation.
LP Token Creation: Instead of buying the actual token, investors buy LP (liquidity provider) tokens at the time of launch, creating liquid markets from day 1.
Fair Pricing: Both protocol and participants are treated the same and the allocation of LP tokens is split 50-50 between them, eliminating the chances of an unfair advantage for either party.
LP Sale Without Price Slump: Protocols are allowed to sell the LP tokens to raise funding for operational purposes. However, this sale does not impact the token price in any way.
The ability of FTO to facilitate a fair and transparent launch is enhanced by Custom Hook, another outstanding feature of Honeypot Finance. Dreampad Custom Hook:
- Expands the range of assets that can be launched through FTO
- Enforces increased flexibility to accommodate various project requirements and investor demands.
Dreampad is powered by three different hooks:
Vesting Hook: Vesting Hook allows projects to release a percentage of LP over time through a predefined vesting schedule.
Remove&Burn Liquidity Hook: It can be used by projects in multiple instances, including for burning the tokens to remove liquidity from the pool, creating a strong buying power for the token.
Future Option Hook: The Future Option Hook has three key use cases: enabling founders to secure pre-TGE liquidity by selling futures contracts on their tokens, allowing large holders to offload their tokens to reduce their exposure to specific projects, allowing traders to speculate on the future value of tokens.
Similar to how Uniswap V4’s custom hook has set a new standard for decentralized exchanges, Dreampad’s custom hook aims to redefine standards for future launching models.
But how can new projects decide on which model is right for them?
Factors To Consider While Choosing A Launchpad
Project Stage: Select a launchpad aligned with your project’s maturity. Early-stage projects may benefit from launchpads offering strong community support and strategic partnerships.
Sustainable Liquidity Gathering: Evaluate the launchpad’s ability to provide or secure initial liquidity and sustain it in the long term to maintain the project’s reputation. It is vital to ensure ample liquidity to minimize price volatility and gain user trust.
Long-Term Value: Choose a launchpad that supports long-term growth through post-launch services like marketing, advisory, and continued liquidity provision.
Fair Pricing: Pricing is the endgame. Thus, it is important to ensure that none of the stakeholders have an unfair advantage post-TGE, which could lead to manipulation.
Dreampad public testnet is already live, with 2000+ successful launches in just two weeks. The network has already facilitated 20k+ swaps with the thpot holder count exceeding 300k. The testnet is open to anyone and everyone seeking to launch a token with 100% liquidity from day 1.
Final Word
Regular launchpads fail to offer sustained liquidity to new projects, leading to unfair pricing and a bad reputation. While LBPs succeed in sourcing ample liquidity, the absence of incentives and effective mechanisms to attract sustained user participation could lead to unfair pricing. That’s where FTO emerges as the clear winner. It has an effective LP distribution mechanism that creates a level playfield for early adopters as well as project developers.
Most importantly, developers have access to 50% of the LP tokens that they can use to fund expansion without affecting the token price. Also, the flywheel model helps projects launching through FTO create a 100% liquid market from day 1, tackling liquidity fragmentation successfully. Need more to evaluate your options? Here’s what FTO is all about: https://docs.honeypotfinance.xyz/overview/dreampad/fto
Source: https://coingape.com/blog/the-right-way-to-launch-your-crypto-project-lbp-vs-fto-vs-regular-launchpad-model/