What is a fair launch protocol?

When a new cryptocurrency is launched, there is often a lot of debate about what constitutes a fair launch. Some people believe that all tokens should be distributed evenly to token holders, while others think the team behind the project should have first priority. So, what's the right answer? Let us discuss further in this article.

What is Tokenomics?

Before we dig deeper into a fair launch protocol, let us start with the fundamentals. Blockchain projects use tokenomics to incentivize or discourage particular user behaviors. This is similar to how banks print real currency and manage monetary policies that stimulate or restrict spending, borrowing, saving, and the flow of money.

The word “token” in this context applies equally to coins and tokens; if you're uncertain about the distinction between them, Any cryptocurrency that has its own native blockchain, such as Bitcoin, Ethereum, or XRP referred to as a coin, while tokens are cryptocurrencies that do not own a native blockchain and live on another blockchain, for example, SLP tokens from Axie Infinity were recently under the ERC-20 Ethereum blockchain, before migrating to their own Ronin Blockchain.

Unlike regular currency regulations which can be opaque and unpredictable due to political changes, tokenomics rules are programmed into code making them transparently predictable – even though they may be hard to modify later on.

Tokenomics is a term used to describe the entire economic system of any given cryptocurrency, designed and crafted by its creators. It covers all elements that affect the token's value - creating a fundamental basis for assessing an opportunity.

Examples of Tokenomics

Ethereum, one of the most well-known cryptocurrencies’s tokenomics include 83.33% going to an Ethereum crowd-sale, with the other 16.68% going to the Ethereum Foundation and early contributors. Due to this, Ethereum can not be considered a fair launch protocol as an ICO took place.

On the other hand, Cryptex Finance was a completely fair launched protocol. The CTX governance token launched with an initial supply of 10,000,000 tokens. 59.5% of tokens were placed into the treasury, 25% was towards initial protocol incentives, 15% to founders, and .5% to advisors.

Since inception, CTX tokens have always been rewarded to contributors and are never purchased from Cryptex Finance, keeping Cryptex Finance completely fair launched. 

What Is A Fair Launch Protocol and How Does It Work?

Token presales are the most common crowdfunding method within the cryptocurrency world. Generally, it is done in rounds and involves a chosen group of investors for each stage. After that, there's an opening sale available for everyone else in its last round.

A fair launch is a revolutionary form of crowdfunding in the cryptocurrency sphere, which grants each participant an equal opportunity to acquire tokens. These tokens are introduced into the pool with no preferential access or prices given to any particular group - everyone has precisely the same chance as every other person to purchase them at their true value. This model fosters equitable and balanced circulation of assets among all participants.

Fair launches exist to eliminate any incentives for investors and teams. This means projects cannot release tokens before public access. Typically, DeFi projects offer token rewards for the developers and teams involved - those who contribute to fair launches are rewarded, through a founders fund, compensation, or grants. As a result, fair launches create a level playing field for all investors, preventing insiders from gaining an early advantage over others in the project's success or failure.

The notion behind community funding is to offer fairness and visibility. Furthermore, fair launches strive to wipe out development tokens; they do not release a major amount of the total token supply prior to launch.

In summary, the steps and processes involved in fair launches differ from presales/ICOs. Developers must present their project details and be approved by the review team. This review includes assessing both the use cases and founders before approving the launch process. Additionally, developers must produce an independent audit report before beginning a fair launch.

Examples of Fair Launch Protocols

Cryptex Finance prides itself in being a completely fair launch protocol. Launching in 2021, Cryptex never has never taken part in an ICO, IEO, pre-sale, pre mines, or any VC capital to fund the protocol and protocol governance, allowing it to be completely governed in its entirely by the community. 

Other examples of fair launch protocols in the DeFi space include Yearn Finance, Sushi Swap, and Saffron Finance. Each of these protocols publicly announced their governance token launch without any prior pre-mine or pre-sale. 

What Are Initial Coin Offerings?

On the other hand, we have something we call "Initial Coin Offerings". An initial coin offering (ICO) creates a passageway to invest in the future of a company by trading their contribution capital for newly issued cryptocurrency.

By participating in an ICO, investors join forces with the organization to help them grow and develop while also gaining access to potential monetary rewards. Much like an IPO on the stock market, an ICO is a cryptocurrency version of investing and raising funds.

How Do ICOs Work?

Companies that choose to launch an Initial Coin Offering (ICO) will typically provide investors with the necessary information prior, such as rules and instructions on how to acquire the project's cryptocurrency.

On the designated day of the ICO, investors can acquire new digital coins by either using staple cryptocurrencies like Bitcoin or Ethereum, or even Fiat currency in the process.

The purchase process typically involves sending money to a specified crypto wallet address. Investors provide their own recipient address to receive the crypto they buy.

When it comes to an ICO, the total number of tokens sold and their price can be fixed or variable. Let's explore how this works in practice:

Pre-defined quantity of tokens and cost: Before the release, a set amount of tokens and price will be determined by the company. For instance, they may select one million tokens at $1 per token.

Fixed number of tokens and a variable price: The company offers a limited amount of tokens and prices them depending on how much money it collects. The more funds generated, the higher the token price will be. For example, if they raise $2 million while offering one million tokens then each token would have a value of $2.

A variable number of tokens and a fixed price: The company has established a fixed price but won't restrict the number of tokens that it will offer. To illustrate, if an organization is offering its tokens for $0.50 each until the ICO ends then this would be an example of its pricing structure.

With the simple barrier to entry, it's now easier than ever for anyone to launch their own ICO. Therefore, many new types of cryptocurrency are quickly becoming available on the market through this revolutionary process.

Final Thoughts

Whether you are interested in tokenomics, initial coin offerings, or fair launches, the crypto space is filled with a wide variety of procedures. Anyone can launch their own protocol and contribute to this rapidly growing and evolving industry. 

While there are risks associated with these launches, they offer enormous potential to grow and develop new technologies within the space. Be sure to do your research and understand the fundamentals of tokenomics as these serve as the legs of cryptocurrency projects.

DISCLAIMER: Any views expressed in this post represent the sole analysis of Cryptex, (“Cryptex”) whose opinions are based solely on publicly available information. No representation or warranty, express or implied, is made as to the accuracy or completeness of any information contained herein. Cryptex expressly disclaims any and all liability based, in whole or in part, on such information, any errors therein or omissions therefrom. Cryptex also reserves the right to modify or change its views or conclusions at any time in the future without notice. Cryptex is an open-source, fully decentralized protocol. Cryptex is NOT an ICO. No sale has been solicited. The information contained in this post DOES NOT recommend the use of any Cryptex token, nor is it an offer to sell, a solicitation, or an offer to buy any Cryptex tokenized asset. Furthermore, CTX token rewards governing the protocol are granted by Cryptex to system providers with a value of ZERO. Always do your own research. The information contained in this post is not intended to be, nor should it be construed or used as, investment advice. No representation, recommendation, or warranty, express or implied, is made as to the future performance or functionality of any Cryptex token. Any unaffiliated use of this document, or the contents herein, is strictly prohibited without the prior written consent of Cryptex.