Are fair launches really that equal? And, if not, how can we improve them?
(Fair) Launch Codes
To add context, here’s a quick primer on the concept.
These are token distribution models which are designed to favor no individual or group. There are no founders’ allocations, seed round, or ICO that provides preferential coin or token access.
Yearn.Finance is a prime example. Zero $YFI was allocated to presales or ICOs, or even the founder. Early distribution was primarily shared out between the first LPs.
Bitcoin also fits the model. Only early miners were rewarded for lending computational power to the network. Although the initial group of participants was limited to a small circle of in-the-know cypherpunks.
Economic Design
Fair launch models tend to be simpler than most ‘standard’ distribution designs.
From a regulatory perspective, an open distribution model that favors equal access mingles founders’ efforts with the broader community.
This approach has become muddied in response to the growing number of DAOs and community-led protocols. The Ooki DAO community and its recent lawsuit struggle with the CTFC serves as a clear reminder that the legal dynamics around decentralized protocols are still shifting.
Regardless, an open and fair distribution is a solid strategy to crystalize community collaboration and create a protocol where governance feels accessible. Nothing shatters broad confidence like watching a VC dump its privileged holdings, especially in a bear market.
The Fairest of Them All?
There’s an argument that no launch is ever fair while any suggestion of information asymmetry exists.
Andre Cronje, and those building alongside him, understood the $YFI distribution before anyone else.
Satoshi designed the OG blockchain’s mechanics and began mining from the very beginning of its existence.
It’s possible then that human decision at a protocol design level is the foundational fault line running through equality. Let’s look at some novel approaches for launching protocols that could blunt this issue.
Concept: random distribution
Applying randomness to an initial distribution could work to remove any claims of gaming by the protocol designers.
A lottery-type mechanism would act as a gateway to identify users who are keen to participate in the protocol. The distribution then allocates batches of tokens to entrants’ wallets at random.
In an ideal scenario, the outcome is that would-be whales might have to build holdings through participation or spot buys. While those who are typically smaller participants get a shot at actually gaining influence if fortune favors them.
Concept: 1:1 distribution
An easy one. One token per wallet as a starting point.
Governance could then decide on how best to begin developing the protocol and even creating opportunities to capture more tokens, such as providing liquidity.
The caveat here is that this mechanic has the potential to be gamed. Projects like Gearbox Protocol have made solid progress on removing bot accounts aimed at greedily spamming their way to whale-size holdings.
Concept: third-party generation (aka ‘divine intervention’)
If the founders are the spark for realizing a protocol, why not remove their influence and pin the protocol launch to an external event?
This could be anything from a particular social media account posting a tweet with a specific word, or having users send tokens to a smart contract that automatically launches the protocol when a set limit is hit.
We’ve seen recently with the $PSYOP launch that stranger things have happened.
Concept: AI generation
We’re all using tools like ChatGPT to up-skill, whether that’s write blogs, research, or even create spicy-themed python apps to track fiery governance.
But what if the machine could become a protocol creator? There is something captivating about the notion of having AI design and launch a token with minimal human input.
Assuming that such a protocol has the potential to lock up considerable value, or facilitate operations in a regulatory gray area, like decentralized perps, there would be difficult questions around just who or what is responsible for it.
The Bottom Line
It’s hard not to question the concept of any new fair launch, there are just too many influences that chip away at equality.
We’ve previously discussed Canto and its proposition as a public good; except it’s one where founders portioned out sizable token allocations with zero vesting. This perfectly illustrates how nuance can provide a foil for persuasive marketing spin.
Perhaps there isn’t a way to structure tokenomics that are truly fair. Inevitably, any conscious design decision would likely be made to influence price, accessibility, or network mechanics in some way.
There’s also a question around incentivization. Early blockchain protocols often build on a shoestring, with founders’ allocations pitched as the reward for long-term success.
Experimenting with removing, or at least limiting, human decision-making in the early stages of this process opens up the possibility of creating more protocols that aren’t purely geared to making the Top 100 on Coinmarketcap as quickly as possible.
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