Significantly Increasing the Ratio of Retail Investors vs. Project Parties & VC Chips, Paying Tribute to FairLaunch. This article is sourced from CapitalismLab, compiled, translated, and written by PANews.
Tweet, compiled, translated, and written by PANews.
(Brief Summary:
What is the new project on Binance Launchpool, NFPrompt? Can AI-generated art + NFT unlock a new wealth code?)
(Supplementary Background:
Binance Launchpool Wealth Code: Estimated price for this period $ACE (Fusionist))
Table of Contents:
Issues with Token Distribution
Increasing Opening Circulation and Lowering FDV
Non-circulating Long-term Development Fund
Significantly Increasing the Ratio of Retail Investors vs. Project Parties
Summary
Binance recently launched an NFP on Launchpool, which the community questioned, “What is this?” The core of this launch is the accompanying “Fair Mode” and the corresponding Token Economy Guidance Report. From this, it can be seen that Binance is attempting to significantly increase the ratio of retail investors vs. project parties and VC chips, giving more chips to retail investors and enhancing the “Fair” level of projects.
This may become one of the core frameworks for listing on Binance Launchpad in the future, bringing new opportunities for BNB investors and users. This article will provide you with an in-depth analysis of all this.
Based on the introduction of Fair Mode, NFP, and the Token Economy Report, the main points can be summarized as follows:
Increasing opening circulation and reducing FDV, giving more shares to Launchpool and airdrops, and giving more chips to retail investors.
Permanently locking some chips from project parties, making them non-saleable, indirectly reducing the total supply.
Increasing and decreasing, the ratio of retail investors vs. project parties’ chips may have increased by 10 times compared to previous projects.
What are the issues with previous Launchpad/Launchpool projects? Chips are all in the hands of project parties and VC.
Take the frequently criticized Hook as an example. Launchpad only gave 5%, while project parties and VC openly took 40%. The so-called ecosystem and community received 55%, and recently, the project parties even pushed it to Binance, claiming to “add liquidity.” As a result, the ratio of retail investors vs. project parties and VC became 1:8 in theory, but in reality, it may be 1:19, meaning most of the chips are controlled by project parties.
Why should there be distribution to the ecosystem and community? Ideally, project parties should use these funds reasonably to achieve growth, so that even if they are gradually unlocked later, they can be supported by fundamental growth. However, in reality, they have become a tool for project parties to sell.
In addition, due to the small initial circulation of projects, they would easily reach a fully diluted valuation (FDV) of around $1 billion on Binance. This is close to the volume of one of the leading DeFi projects, MakerDAO. Even if the project parties reasonably use the ecosystem fund, it may not be able to sustain the $1 billion volume in the long term, resulting in little alpha returns.
How to solve this problem? User education is definitely not the solution, as retail investors will directly rush in. The only solution is to increase the opening circulation, as the buying volume is limited, and increasing the circulation will likely reduce FDV.
Looking at the previous new coin projects on Binance Launchpad and Launchpool, regardless of the quality, they all had around 5% shares. Therefore, most application-type projects were pulled to around $1 billion. This is quite absurd, and in the eyes of users, these projects are basically shells listed on Binance, regardless of their fundamentals. Therefore, Binance intends to adjust the initial circulation model to give different valuations to projects with different fundamentals.
For example, in the case of NFP, the opening circulation on Launchpool + airdrop is 21%, compared to Hook’s 5%. Assuming retail investors rush in with the same volume, the FDV on NFP’s first day may be only 1/4 of Hook’s, around $200-300 million. With this volume and the label of AI, there is hope for NFP to reach ATH even if the project parties lie down, relying on narrative hype.
Furthermore, from the NFP chart, it can be seen that 27% of the long-term development fund is “non-circulating” distribution. This note is worth reading carefully: “The tokens in the long-term development fund cannot be consumed or sold, and they will not enter circulation. After attribution, they can participate in the ecosystem through methods such as staking, sharing rewards and benefits from the project, but they have no governance rights. The rewards obtained from staking can be used for the project’s long-term operation and sustainable growth.”
What does this mean? How does the ETH Foundation currently pay for development and operating costs? By selling tokens! Most project parties do the same. This is clearly not a long-term solution because once the tokens are sold out, they are gone.
Binance’s intention is to have the ETH Foundation stop selling tokens and instead stake their own ETH to earn money for long-term growth and operating costs. Of course, this should only apply to projects that can generate income. The NFP report also states that it will support token “staking sharing platform fees.” In other words, if the project has no income in the future, it is almost like being destroyed.
Additionally, if the project can really make money in the future, the short-term development fund that can be spent will likely be used more cautiously by the project parties. After all, spending too much would dilute the staking shares of the long-term development fund, resulting in less income. This introduces a new game.
In summary, the long-term development fund is a way to indirectly reduce the total supply and another way to reduce FDV. It also motivates project parties to focus on creating projects and spend money wisely.
As calculated earlier, the ratio of retail investors vs. project parties and VC chips for Hook is 1:8 in theory and 1:19 in reality. With NFP, the ratio is (Launchpool 11% + airdrop 10%) 21% vs. 25% (team + VC), which is close to 1:1 in theory and 21%:52% (100% – 21% – non-circulating 27%) in reality, which is close to 1:2.5. Binance also stated in the report that it should have stricter supervision of fund usage, so there may be more improvements in this aspect.
After the increase and decrease, the ratio of retail investors vs. project parties and VC chips has increased tenfold. Although these projects still have some costs and cannot reach the level of blue-chip projects or meme coins, they are indeed much “Fair” compared to before. It can be seen as a tribute to FairLaunch, so calling it “Fair Mode” is also appropriate. This will also reduce inflationary pressure for these projects.
Binance intends to significantly increase the ratio of retail investors vs. project parties and VC chips, giving more chips to retail investors, enhancing the fairness of projects, differentiating initial valuations, reducing inflationary pressure, and motivating project parties for long-term build.
For retail investors, they can either buy BNB to receive more free Launchpool shares or actively participate in airdrops to receive more airdrop shares. It is estimated that more shares will be allocated to these two areas in the future.
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Tags:
Fair Mode
Launchpool
NFP
Binance