Random Observation/Comment #737: Tokenization does not equal liquidity!
Why this List?
Whenever you have new markets, you have whales and market players that take advantage of market inefficiencies. The healthy growth of a network needs an evolution/stabilization of the valuation and analysis of the market.
To bootstrap your network (and maybe your native token governing the dapps on this market) there may be a need to build partnerships and incentivize players to reach adoption. It’s not as simple as buying bots for followers in the social media world for influencers, but it doesn’t hurt to have some social influence/liquidity.
Note that these properties are also required for successful permissioned and CBDC networks. VCs and the markets all together look at the support and momentum for tokens and bootstrapping institutional collaboration. Everyone has a role to play in the market.
- Establish Credibility – Your token or protocol must be attractive and not just a copy of an existing project. Collaborations and investors will look at brand, code, contribution, and connectivity.
- Design a balanced token distribution between pre-sale and rewards for validators – Most token launches will include a medium blogpost or whitepaper with a pie chart showing what’s provided in genesis to the protocol team versus what is sold further down the line before reaching the public exchange markets. Note that CBDCs also need to think about tokens. A gasless ecosystem for a domestic CBDC really restricts the economic incentives that multiples engagement.
- Diversify your validators – Some platforms/networks like Hedera Hashgraph and Sovrin’s Identity Network created Anchors and Stewards across multiple industries in order to not corner their network to a particular set of digital assets.
- Incentivize hosting full nodes/end points in multiple zones/regions – For a permissioned layer of validators, these base participants are likely incentivized with a distribution of the native tokens that run their network. For example, if we were to create a domestic CBDC, there needs to be some incentivization of commercial and international banks for mutualizing these infrastructure resources. A centrally controlled blockchain is not necessarily the best design for a blockchain.
- Build with existing blockchain software vendors – ConsenSys is a great partner here as we have existing networks of developers and users from our products in the consumer space with MetaMask, Infura, and Truffle. We have helped different companies through protocol enablement team to partner with EVM-compatible and active bridging technology.
- If you’re customizing your smart contracts, make sure to create a bug bounty and security audits – Most of these projects are open source and allow for enhancements of existing code as reference as long as whatever is created is also open sourced (yay GPL!). It’s important to not just copy and paste, but understand every new function could be exploited. Because it’s open source contributing back to open source, I really feel the IP around the code is less important than the ability to grow a community.
- Distribute tokens across multiple communities and ask them to be LPs – Consider DAO-based fundraising so they can also contribute to AMM Pools. A traditional method of fundraising through seed/series distributions of equity or tokens will lead to some institutional interest, but DeFi/DEX-based pools can be considerably less expensive than a $1M Coinbase listing of your token.
- Work with Raid Guild / Mystic Whales for Token pool launches – Work with experienced people on token launches and ask tons of questions. I personally learned so much just by attending MCON and looking at examples of DAO-based coordination.
- Coordinate launches on-time and with the right timing – It’s important to keep to your dates and communicate with your existing stakeholders. It may not be the best strategy to launch in a deep bear or raging bull market. It’s also important to schedule a burst of good news at once for consistent coverage.
- Start a Foundation – Tokens or protocols with new found wealth would normally create a separate business development or research foundation. The funds here are distributed in grants with a reasonable amount to pay their employees. A foundation is dedicated to the operations and growth of the network, which allows for an easy distribution of existing tokens as payments for other companies and DAOs.
- Issue grants to advance research – I’d say bridging of liquidity and protocol performance seems to be the major upgrades for most projects. There’s also a lot of great grants for experimenting with different economics and deployments of already successful dapps in the Ethereum ecosystem.
- If you have a governance/voting token in place, run these meetings consistently and vote often – These governance tokens are owned by many, but voted by few (unless there’s some type of telegram rally). I’d like to see more people care about the future of the protocol without doing an immense amount of lobbying.
- Launch a bridge to Ethereum mainnet – I guarantee that all new protocol and token creators likely have some ETH and invest in other projects. There’s no denying that the value of the ecosystem will leverage mainnet for settlement of asset ownership (like a decentralized Central Securities Depository) or a fortified identity layer.
- Work with custodians to make sure your assets are compatible – This might be specific for any asset backed stablecoin or traditional financial asset looking to be issued for collateral to receive DAI or other assets. I think informing the custodian and your main Oracle data feed for auditing of value is extremely important.
- Get on a DeFi index – Work with VCs and analysts to review your token and minimum viable ecosystem. If it has promise and momentum, it can be added to watch lists and therefore be extended.
- Form an accelerator – Similar to a foundation or research fund, the accelerator incentivizes startups and developers to work together towards deploying crucial components your dapp ecosystem. The accelerators provide mentorship and possible funding in order to bring people together.
- For protocols, have clear guides and YouTube videos/tutorials for direct dapp creation – A good protocol has a good protocol team behind it that has thought about the full developer life cycle process towards application deployment. YouTubers out there are more than happy to be paid per video or paid per amplification of network. A known partner for developer relations can make a big difference in developer adoption and therefore VC valuation of token floor pricing.
- Leverage an existing hackathon or conference to announce your project / Coordinate your own hackathon – Discovery for these new projects are a huge part for the opportunity cost of early adopters. Early company investors receiving value from pre-sale contributions or direct “executive producer” type of engagements are traditionally easy to build, but developer choices on building or deploying dapps to new ecosystems/networks are harder to create.
- Multiply your launch by building a PR/marketing plan – The marketing plan for any company, network, token, and protocol launch is super important here. This requires excellent PR coordination with existing public relation engines in order to cross promotionally announce combined news and news coverage.
- Invest in providing proper market data to necessary sources – Data providers need to know your institutional pricing sources and metadata in order for your token or protocol to be registered across as many data provider sites and block explorers as possible. A failure of new networks comes from the failure to provide proper data access.
- Work with reputable research sources for coverage of your platform – Sources like Gartner, CBInsights, Deloitte, McKinsey, etc are good enterprise starting points. Today, we have higher velocity pieces behind research firewalls like with Messari, Defiant, and Bankless with countless newsletters that expand readership in the cryptocurrency/blockchain space. I also think getting your ideas on Mirror will also provide some scarcity and attention on your pieces by some thoughtful people.
- Build certifications and hiring pools for your protocol dapp development – Similar to conference and hackathon exposure, there needs to be a demand for the developer and company skillset. A developer certification program usually helps with the creation of better/safer dapps. Some developers like to expand their skillset to coding languages and platforms that give them the ability to be more unique/distinguished. Creating your own path with new protocols can become quite lucrative.
- If you’re a protocol, incentivize existing dapps to publish to your network – EVM-compatibility is a huge plus for new networks because all solidity code for AMMs and lend/borrow protocols will already exist. Dapps may also have high demand to have multi-chain compatibility. This is the equivalent of a social network being able to post across multiple social networks (which famously led to the success of Instagram based on its porting of their “TXs” to Facebook, Twitter, and Tumblr).
- Incentivize trading centers – Institutional block trades require Brokers and OTC desks to work with trading centers for fulfilling large orders of certain tokens with minimal slippage (price fluctuation). The trading centers that receive demand for certain tokens will likely also need to purchase some of these tokens themselves to support the other side of the trade.
- Run meetups in different major cities and create an evangelist/ambassador team – Ambassadors are underrated as they bring a lot of their existing social influence and coordination to a mass of motivated and interested parties. A local meetup can really help with getting a social media following or a larger attendance for conferences.
- Create one or two additional steps for joining the discord – Friends With Benefits (FWB) created a barrier to entry and exclusivity into the membership by requiring the purchasing of their FWB Token. There were also in-person events where they asked people to purchase tokens in order to join digitally and physically to parties.
- Airdrop parts of tokens to existing users / discord users – I just heard of an Initial Discord Offering (IDO), which seems insane and not any better for KYC or maybe Know Your Discord Users. The tools used for the clearly needed coordination (and fight against Moloch in this deep forest) has yet to be resolved. I would say that airdrops are super interesting because they automatically fail the Howey Test because it can’t be an investment contract or vehicle without your consent.
- Coordinate marketing with Influencers – Coordinated PR with news outlets nowadays also includes coordination with social media influencers. We saw a lot of this with some sketchy launches. Celebrities changing their twitter profile pictures to NFTs are a great sign for peak hype.
- List your token at an exchange (e.g. Coinbase, Gemini) – This used to be one of the first steps, but because it takes around $1M and distinguished due diligence of your protocol with further sales of your tokens to the centralized exchanges at a discount, you’re probably going to wait until your token becomes popular enough for you to be requested to be listed.
- Observe existing DeFi projects to learn from their mistakes and successes – I should probably start a graveyard for all these projects that accidentally became pump and dump schemes. Not all penny stocks 100x. Not all tokens 100x. Not all protocols grow into newly adopted ecosystems. Just because you have all the features of Facebook, doesn’t mean you are Facebook. Tokenization does not equal liquidity.
~See Lemons Bootstrap Liquidity