In this article series, where we will examine the concept of Launchpad in-depth, we will provide you with beneficial information in every aspect. We can clearly say that we want to touch on very different subjects in this series, which is full of factors you do not know as well as our self-criticism.
What is Launchpad? How does it work?
Launchpad is a platform that allows investors to buy cryptocurrencies of new projects before they become publicly available on any DEX or CEX. Such sites help new projects to efficiently conduct crowd sales and allow investors to buy tokens at a reasonable price, while market speculations have not yet influenced the price.
Launchpads act as a bridge between investors and startups — startups get access to the needed fund for the project’s development, while early investors get access to early-stage deals. Let’s go through this scenario in more detail:
- Projects — By launching their projects through a launchpad, founders get what they need — which is capital to move the projects forward. Additionally, a launchpad offers exposure to a project by bringing it in front of a massive community of crypto enthusiasts.
- Investors — Early investors (especially in VC deals) tend to get tokens at a way better price than when the token launches on the public market. Like the CryoWar deal on BullStarter, the price skyrocketed by more than 120X from the initial rate.
What are the launch types? What are the differences?
What are ICO, IEO, and IDO? How do we distinguish these three forms of capital call? We will outline the primary differences between ICO, IEO, and IDO below, to help you better understand the three investment forms that are very interesting in the cryptocurrency market.
What is an ICO?
ICO stands for Initial Coin Offering, a method of raising capital using cryptocurrencies. This method is popular for projects that have not fully developed Blockchain platforms, products, and services.
ICOs are often compared to IPOs (Initial Public Offering). But this comparison is misleading. IPOs usually apply to established companies with the sale of a part of the company’s shares as a way to raise capital.
What is an IEO?
IEO's full name is Initial Exchange Offering, a fundraising event managed by an exchange. Contrary to ICO, IEO fundraising will be conducted on a well-known exchange fundraising platform, such as Binance Launchpad… Here, users can buy Tokens with coins directly from their exchange wallet.
For users, IEOs are easy to join because they don’t need to manage on-chain transactions with different wallets on blockchains. Users only need to have an account on the exchange and an amount in their account to participate in the IEO through the website interface.
What is an IDO?
IDO is the abbreviation of Initial DEX Offering, which means the initial issuance of Tokens on a decentralized exchange initiative. The Raven Protocol project team first proposed IDO.
IDO can be organized by the Token issuer independently, independent of any other unit, organization or individual. IDO can also be performed directly from the project’s development team on the Blockchain platform through transactions from the project’s product, the issuer.
Differences of three types;
The most significant difference between these three methods of raising capital is the location of the sale. ICO is open for sale right on the website of the project owner, IEO is available for purchase on centralized exchanges and IDO is open for sale on decentralized exchanges and Launchpads…
How should an investor choose Launchpad?
If we list the essential elements in the selection of Launchpad;
4. Unit Cost
Well, if a Launchpad is entirely decentralized, as described above, wouldn’t it already meet these conditions?
As an audited and approved launchpad, it will satisfy the investor in security and privacy issues. Blockchain is also sufficient in terms of transparency and traceability due to its structure. The Launchpad platform is also responsible for providing a transparent and traceable design to its investors.
The unit cost is the cost of the purchase amount you deserve from the IDO of the projects. Although you can invest and stake $1000 on some launchpads, your purchase from IDO is only $20–30. On the contrary, in some launchpads, you can get 200–300$ with an investment of 100$.
Relationship Between Launchpads and Projects
Let’s examine launchpads' working logic and strategies with the classic working system in the crypto world.
Launchpads was established to offer tokens of crypto projects publicly. So IDO is about to do…
They adopted a revenue method to receive commissions from the total public sales amount of the projects they have contracted with. For example, if they agree to sell $100,000 of a project’s public sale round and complete the sale, assuming their commission deal is 5%, they earn $5,000 from that sale. A launch contract protects these deals. Contracts contain clauses that will protect both parties legally. In addition, various marketing services are offered to the projects with this contract. The launchpad community is also attracted to the project, with its Airdrop, AMA and Whitelist campaigns.
In our next articles, we will also touch on the problems that can be experienced in these relationships.
Relationship Between Launchpads and Investors
Understanding and classifying the investor concept is necessary because not every sales round should be sold to every investor.
- Seed Investors are usually family and friends who buy from the seed sales round of the projects. It can be seen that some big projects also received investments from big investors in the seed round.
- Big Investors (Ventures Capital) buy big amounts, especially from private sale rounds of projects. They are both long-term investors and want to take advantage of the price advantage of the private sale round.
- Public Investors are small investors who have fulfilled certain conditions to benefit from the public sale round of the projects. This is where Projects and Launchpads come into play. This round, which is put up for sale with an IDO, should definitely not be sold to big investors with big amounts that will create rapid selling pressure.
The public sales round should be the right of the public investor.
So, what conditions do launchpads offer for you to be a public investor of the projects they have signed a contract with?
First of all, you have to buy the platform tokens. You must lock these tokens into the stake pool for the duration you choose. A tier system is determined according to the number of coins you stake. Which tier system you are in, your right to purchase is defined accordingly.
For example, you buy YYY tokens that belong to XXX launchpad. This launchpad requires you to buy at least 1000 YYY tokens. The investor who buys 1000 YYY tokens is included in the Tier system that he has determined.
1000 Staked YYY Token > Tier 3
2500 Staked YYY Token > Tier 2
5000 Staked YYY Token > Tier 1
form such levels. The main idea of these systems is to buy more tokens and give more buying rights to investors who buy more tokens.
Continuing from this example, investors must stake the YYY tokens they buy. There are different systems here too, but investors generally have to add the YYY token to the platform’s stake pools for at least 7 to 30 days.
The main problem here is that while a contract protects the relationship between the launchpad and the project, there is no contract to protect the relations between the launchpad and public investors.
While this creates a more comfortable and safer launch environment for the projects, it becomes a much more dangerous sale round for the public investor.
Next week; Tired of Losing in Pre-Sales?
IQ Zone Team