Top 10 Challenges for a Token Launch

Transcript

foreign [Music] challenges for a token launch and we have on stage Marina from the European crypto initiative DME from outlier Ventures and Robert from 1kx I guess we should start with a brief introduction say some words about yourself thank you Angela and thank you for the invitation my name is Marina and I'm a co-founder of the European Crypt initiative which is a non-profit it's an advocacy group we talk to Regulators in Brussels we do send documents feedback on all the Crypt assets regulation and it's pretty interesting to discuss also

the token launch because it's as you know regulated in Mika but even previous to that I did work with projects on similar things in previous to crypto I did work in crowd investing I co-founded the crowd investing platform so I'm even bringing the knowledge from them hey everyone I'm Jimmy from Outlaw Adventures uh our live entrance is the leading Global web3 accelerator and investor we're around since 2014. um myself I'm heading the token economies and nft team at outlier we are nine experts we are basically the experts working day in and out with Founders we're covering the four major functions token design token engineering

thousand governance design and nft strategy my background is in aerospace engineering I spend some while after studies acting as a bridge between trade finance and the industry tokenizing turning industrial goods into digital assets and then I moved over into the accelerator live inches okay yeah I'm Robert um yeah my background maybe start this way data science Mass Finance went through threadfry Consulting you know the typical Parts at one time even had a startup and then yeah ended up as a contributor to various defy dials and also mainly as a researcher for 1kx where yeah I oversee basically all

things token obviously like 1kx who doesn't know where early stage VC fund so the token launch is like a core topic of our work and yeah that's why I'm here I guess cool red and let's directly dive into why token launched Jimmy what are the typical reasons you see for a token launch yeah good question um the why is a good question so usually there are a couple of so one major one is obviously fundraising now there's we can debate this is a good strategy to launch your token in order to fundraise now with the recent SEC actions maybe this is a new New Path

again but there are further reasons to do so maybe you need to activate your community you need your to launch your product maybe you're running an infrastructure and where the token is a crucial crucial part and the fuel of your network that you need basically in order to be using the network or you might be basically needing to reward and attract your first movers to the product and you try basically to design a token launch in order to get your first customer stakeholders on board do you see typical mistakes to avoid in this very first step considering a token launch well I'm not sure about mistakes but but I think what's important here it

ties to the general token design phase where it's really important that you you know use first principle thinking so clear objectives right the one-on-one on token engineering like what is it what you're trying to achieve and obviously this sounds very simple but uh you know first you really want to be specific right have a specific objective you know full decentralization Fast growth this is rather unspecific and second your protocol evolves in phases so right think about bootstrap growth maturity so probably also your objectives change through these phases so you want to think about that as well

so this exercise you know you want to plan plan ahead and then third um there's also the part around right um when you when you think about you can't have like plenty of them you should limit your objectives obviously right so let's say it's Max 3. so a nice exercise for your teams maybe go to your BD person to your product person to your developer anybody in the team and ask them about their top objectives for the protocol you know what you're trying to achieve and maybe just supported by the token and yeah I guess then uh the specific ones per phase right and when you be able to aggregate that right and and you still think it's simple I guess

then we can probably move on with the next challenge but I think this this is the part where I feel like it's super important but also quite quite hard yeah and have you seen cases have you had ever a case where a team was postponing a token lunch and decided to not launch now and why oh yes I mean that there's always a case where I mean it's often tied to you know product related issues um but then you know every now and then I mean Market I guess we get to the timing question as well but for sure you know it's it's better to launch right than you know just rush into it and then realize I mean Trent just showed really

good examples what can't go wrong if you if you may rush things not not that trying to rush things but it's just like these things will happen it's a better safe than sorry I guess okay and let's go over the different variants of a token launches what options would a startup or could a startup consider when launching a tokens good you give us an overview Jimmy yeah yeah I mean there are a lot of options basically especially now with the on-chain products existing you have multiple ways to do so so you can decide basically to launch on a centralized exchange either do a sale on a centralized exchange on

their long Launchpad venues or you do an order book a sale basically together with a market maker then we have the on-chain options there are different kind of ways other existing launch pads products that that provide like auctions or even a launch on a decentralized exchange you bootstrap a pool and you allow people to buy in or actually you don't sail but you basically airdrop tokens to your community that use before product and and and and you design basically different options on how you do the airdrop in order to achieve also stickiness

um I remember conversations with teams planning for a token sale and say ah we we are planning to do this in six weeks how much time would you recommend a team to prepare and get ready for a token sale a token launch it's a pretty broad question I mean it depends on the Readiness of the product I would say in the previous cycle we saw even token launches without having even a proper product and attraction and product Market fit build I believe now with the next cycle we are seeing more um sophisticated understanding of of the markets of the crypto Market um also the community is expecting basically products we have launched

before any token is being launched and um well Readiness on the legal side on the marketing side there are a lot of factors here but I would say you should plan three to six months like that's really broad but you requiring here that the product is already developed in the last stages maybe even launched and already built out first traction people already using it and then to focus only basically on your marketing efforts finalizing uh the legal actions and requirements and then speaking to market makers exchanges and the launch pads all right so um in a nutshell don't do product

development and token launch all at the same time this is something you would recommend well yes you need to we're in such a fast uh moving space that you probably cannot just say I'm gonna stop it now I'm gonna focus on something else so which means basically you either or it's recommended to have one person minimum within a team that just focuses on everything token launch and then we have also seen uh teams obviously then working with external agency advisories they get also support from market makers and market makers have a lot of like new features and

products offerings that they provide them marketing agencies or an accelerator like all the Avengers and once the token sale is defined or a big part of the token sale is then token Supply and token distribution because many times even though it's hard to foresee how your product evolves and and how much traction you gain you sign up for a particular token distribution so meaning unlock schemes vesting schemes what are the typical observations or challenges here Robert lots of challenges

um I think one you know maybe I repeat myself is again upfront in the design phase that's why you know three to six months is also what I would totally agree with is to you know know in which hands do you want to give your token right because this should be the relevant stakeholders supporters of your protocol these are the guys that will move forward with you you know on on scaling up your your protocol um and obviously you can't plan anything ahead you know again referring the trend this cameras will come people will try to sneak away um but there are mechan that's why you need to be very careful of like which of these like the variety of tools you you want to use right and and I guess this

meanwhile lots of discussion of like you know plain air drops is it suitable or not we had this discussion with all airdrops are farmed things like that so you find a suitable way to address those um yeah and when it comes to vesting and setting those schedules um yeah I think there's a good it's also a little bit about you know how quickly you want to get it out one consideration that I hear mostly is obviously about token price token price volatility and yeah there's there's also great work I guess six month Venture for example they put something out where they kind of like showed couple of thousand token launches and they said like yeah in hindsight it makes sense keep it small right rather

small uninvests you know weekly but but we load one percent and and that's help helps stabilizing your your price but then also the team attribution uh which kind of makes sense as well right like when the the token launches where team has more investors have more like you know people that inherently have a longer Horizon on their investment also help dump in the volatility but again then you know this doesn't generalize well it's really about you for your protocol make up your mind first in this token design phase what are your objectives what are the groups of users you want to attract and how do you think that works best maybe it is like a long-vesting schedule or

something like that all right and dimio already mentioned legal considerations let's dig into that Marina grab the mic what are the most important topics projects to keep in mind when it comes to regulation and token launches how much time do we have [Laughter] um so I think things changed over the years for sure um I want to say that we do have crowdfunding regulation from very early from 2014-15 so if you think about um in a way token lodges as a way of crowdfunding I think maybe we can

look into that there's a regulation in the US in the EU Etc but recently what I think happened was the Mika and that at least in Europe it's pretty interesting that gives specific Guidance just to the launch of token so sales of of tokens and they're pretty good guidances there they're pretty good rules and I would say that they are very lean compared to what we could have one is when you issue a token and then you want to sell it to the audience like an open uh open sale you need to write a white paper and that white paper is kind of a much more specific than the ones that we

usually wrote uh there's legal questions there there's also way how for example you need to calculate your energy consumption of your project so you need to include that in you need to include your management your governance of your organizations Etc so this is I would say doable especially because this white paper needs to be sent to the National competent Authority but just as a notification so you don't need to wait for them to confirm your white paper you just send it to the National Commodore Authority they not I mean they're notified that you're going to do the sale and then you can do the sale so this is something that is it's going to be applicable in 2025 at the

beginning of 2025 so Heaven whoever would like to do token sale at that time will need to follow these rules for the European Union Market and so that's I think maybe I think that is important right now it's going to be more and more important in the future is that new regulations are coming or they are here already in Europe and they're going to in a way um Force fragmentation fragmentation within different jurisdictions so if we would like to do something that is a little bit more Global which is something that of course um blockchain and crypto is it was Global from the beginning I think now it's

going to be a little bit harder to to do it or at least you will need to be mindful of the most important jurisdictions I think all the latest token sales for sure has have observed those rules I think the terms and conditions all the you know contracts that you need to sign and look into that they've been upgraded year by year but right now the European Union has really the first framework that is very concrete just on token launch we don't know what will happen in the other jurisdictions from our understanding we will not at least in the next few years have new rules let's say when it comes to the us but as you know also there was a current Ripple case and the crypto

Twitter went quite crazy especially when it comes to token launches and the idea is that that could basically open the door to new token launches um maybe I don't know I'm not sure I I cannot comment that much on the U.S perspective but I would say that Europe is definitely going to have a very clear framework on how to do your token launch and offer it to the members um citizens of the European Union you didn't mention decentralization here um since I mean I just wonder because for the SEC this was kind of not being considered as a security due to decentralization was um I would say a

main driver for so many doubts to see how how they can prove decentralization what does the EU say about it does it does it matter so the EU doesn't say anything about decentralization there's one article in Mika that basically says that the projects that are decentralized are out of scope so they are not regulated but they need to be fully decentralized not partially decentralized so there shouldn't be any intermediaries within that project this is still an open term we don't know what decentralization means there is not been any kind of I would say open debate or even a paper or

anyone describing what would that mean in and I would say that this is also the work that we need to do as a community but also as our organization to talk to mostly European Securities Market agency that is the one that is right now uh doing the technical work after Mika so the more specific things that need to be still cleared before because it's going to be applicable and I can say that I would think that the Regulators at least in Europe they are very conservative when it comes to decentralization so whatever we think decentralization is they think it should you know be even more decentralized um so like the the

criteria is really really high and I think that yeah we need to keep that in mind but at the same time um I don't want to you know be very negative for the future uh there's there's many things that we need to keep in mind if we are a project that are is not in a way focused in Europe um for example there's still this thing that is called reverse solicitation which is quite complex but it basically says that if you are not addressing a specific Market um in a way you don't need to be regulated there you shouldn't for example address the European Union citizens you shouldn't Market to them

you shouldn't write or use any of the European Union languages like German or French you shouldn't probably sponsor events Etc so then whoever comes from the European Union to your project it can be seen as a reverse solicitation which means I somehow found you and I can still use mostly in most cases your your services maybe buy your token but you didn't come to me and and address me so the regulations are really in a way I would say regulating the markets not the global which um yeah sounds similar to the SEC decision on it's not the token itself it

is the Securities rather how you market and sell it that might be cons or yeah lead to this security maybe one very important thing here um Mika does talk about crypto assets and Mika does regulate crypto asset which is a completely new asset that never existed before legally so it's a completely new term uh from I mean Bitcoin actually made it to uh to US changing laws and bringing new terminology to uh to the European Union which means that those crypto assets are not Securities if they are securities or financial instruments they're regulated somewhere else we know method and mifir and other regulations so Mika is really just regulating non-securities and they

are they can be utility tokens they can also be stable coins stable coins are seen as not being Securities in Europe and I think that that's that's pretty important but of course we need to go Case by case and and look into every specific function of each token okay a lot of food for thoughts and I guess still no clear yeah black and white rather a lot of Grayson um let's think for a moment about this decentralization aspect it it looks like the the it still matters in the future but maybe not for a token launch immediately at least in Europe okay there are many jurisdictions uh take

this with a grain of salt but um this aspect of it matters for how you are considered legally decentralization matters and this brought a lot of projects to think about okay how can we decentralize now from your perspective Robert um what would be your recommendation what's important to think about when it comes to decentralization and tokens and so yeah it's for sure something you wanna think very like everything hard about because yes there is this advantage and

you know I guess everybody in this room is like yeah decentralization this is the way to go right there's also our uh our thesis that that you want to get there it's a timing question right it's a little bit the the thing about because it's really good you get legal benefits probably um but as any good thing there's also the other side and this is something to consider you know use a protocol you start as a business and um there is cost attached to decentralization right when you think about infrastructure protocols you know when you have like a centralized infrastructure like storage compute you have one devops person when you decentralize it the 20 000 nodes might

be twenty thousand but your protocol still needs to fund those somehow right so you lose the economies of scale basically there's just like one example of those considerations I I think again sorry Trend that I always refer to your presentation but it also raised the point right governance is something when you're like yes you can bring it out in the wild and have a community who drives it and and brings a lot of good value but it's also like an overhead right like it's something that you know you know you can't at one point not control who's coming in you open the whole governance attack surface and that's why you really want to think careful of like okay you know all the good things I get versus the potential drawdowns when do I make the

switch and typically when we discuss with protocols is like this more you know gradual Progressive decentralization way to to say okay let's go step by step uh open up you know each new attack surface so to speak step by step um because that seems more rational than you know open the gates and see what happens anything to add to me yeah maybe um to add also infrastructure with running validators it's one aspect if we think from a token launch perspective the decentralization aspect it's a matter here um the token launches the initial distribution of the token so you might

activate their decentralization effort by you know air dropping to your users but are they real users that will stick or are they just the farmers that think of a basically um yeah gaining profits out of it and and I think when we launch tokens we shouldn't just think of the initial token launch but from the like the continuous distribution of the token and and and also built in not only like okay I'm gonna air drop it now and and they can sell and we saw with uni swap arbitrol that like a really big amount of users token holders sold their assets I think it was like 30 40 50

but to build and then like uh um to build in uh factors to build in to build in requirements to basically hold your tokens or being even locked and then get further rewarded and further use the product in order to really say there is a stickiness these are the real users this is really decentralized not just based on the initial distribution but it makes a lot of sense and also on my comment I do see I mean decentralization is such a huge potential I guess all I want to say is maybe it should not only be driven by legal considerations and rush into it because they are also challenges that come with decentralization

now um I'd like to discuss okay talk launch is not your final step in in token design um how to get ready or how to be prepared as a team for the time after token launch after the token is being okay I mean obviously the T will need to further continue focus on the product and and depending on where we are on the market cycle especially when we're in the craziness of a bull market there might be a quick distraction because people will speak about prices and so on so you need to focus on your product but start basically building in and leveraging

your token like give it utilities allow people basically to stay to be active Progressive decentralization in order in the form of governance maybe have a delegation layer because people might not be um Can Be Like A Day In and Out on on forums on governance forums but to allow to delegate so you need to basically further care about your community as well as start analyzing your on-chain data um and start basically reading the activities um with with the product and with a token and based on these take measures especially when you continue to

distribute your token adapt the rewards um it's not just do it once and then I can't adapt it anymore so keep the flexibility open and I remember Robert you once said tokens are catalysts or anything in your ecosystem to to the big potential the positive size as well as the negative size sounds like me um so yeah right it comes back to to what we had in the beginning right like what you want to try achieve and how can your token help achieving this um which is a big question in in the token design and and this is exactly what dimmi said like you you want to have a

plan like you know once the token is out how can you know new unlocks and token features you know staking delegation but also new product features right how can they spin off this flywheel off uh of your pro goal to grow and also like in a sustainable way right because with the bear Market we now see that it's not always going up um and and this is the crucial piece you should plan before you launch a token for these phases they will come you know bad times will always come what will happen what can happen there and that's why it's so crucial to also understand like okay who are the ones that we want to stick with us and this

is like why you want them to give the tokens in their hand with the distribution it with the right distribution tools as well um speaking of bear Market would you recommend to not launch now how to get the right timing for a token launch oh is there always the right time that's a question but I would say um don't get distracted that's actually the best time to prepare now to focus on your product to launch already the product find product Market fit the real users the real Believers and what you do um try to prepare already for this for the next cycle which will be upcoming um you could launch already now the

question is um do you have is there a demand side because you want the demand side and and you do it once like you only launched once a token and if you don't do it right it can even like impact the success of your product um and I think it's the right time to basically prepare have everything ready um and and not do it in like the pickleball where you're gonna have just the crazy farmers and just the short-term thinkers okay so let's sum it up what are what's in a nutshell your main recommendation Marina for a project to consider token launch and a token sale thank you

um I would say that is my co-panelist said you need to prepare and take a lot of time also for the legal part not only for the product part which is essential of course and I think that it's really important to look into the future like okay this is the first step as you said what are the next steps like what are the next steps of the progressive decentralization uh what does it mean like from the legal side like how are we decentralizing uh even operations like all the I don't know collaborators that that are there might be there from the beginning and maybe um something to add a little bit more complexity to what we discussed before at least from the Mika site we do have two things mainly that it regulates one

is the token sales but the other part is also service providers so D5 is excluded and even if you know you're providing some service or the community the Dow is providing a service if it's decentralized is excluded from Mika and this is where decentralization is important and we need to understand like you know what is the level that is still in a way acceptable for Regulators but looking in the future um because now let's say it's bear market and maybe you can launch in a year or two years or something like that in in two to three years we are going to discuss the D5 regulation too and we are in France right now you probably have heard about the acpr paper on D5 the EMF

paper on D5 there's a lot of D5 discussion that is happening already and that one is talking about decentralization and maybe if you have time maybe during the you know summer take a look at it the interesting part is that they go into the technical part and we all know about the layering we know that you know layer ones and then all the applications and how they kind of interact and The Regulators are learning about that and they're also looking into this and I think that at least from in a way our organization point of view and I think also the community kind of agrees is that we definitely need to um stay with at least the the lowest layers as decentralized as possible and

in a way also as as Untouched by regulation as possible so there was a lot of innovation could still come there and then I think we can realistically expect that the you know I would say front ends and also the layers that are directly uh addressing maybe users those are going to be the first ones that are going to be looked at even if you know we talk about the D5 okay TV yeah to sum it up especially to the Builders out there don't feel overwhelmed there are a lot of experts in this field that can support you we have seen a lot right we there are now a

lot of cycles that we have seen already about tokens um and you we might have listened to our top 10 challenges today but 30 plus um just try to frame it into four questions uh why do I want to talk to launch a token um what do I want to achieve like and what's the token about um when am I going to do it and how basically what we discuss the distribution Robert you have the final word oh wow I mean there's already quite quite a good one um maybe to add one piece uh that we just briefly touched was also quite important in in our opinion is to like

around your token lunge you know build up the excitement in in the stakeholder groups that you want to attract and then also like keep up the momentum over time right not just like drop the token and maybe you know we covered quite complicated topics so I I thought I'd bring something that's that's easy to to understand um so everybody knows what that is okay so so let me explain how I see like this will help engage momentum so you know this is like the Kindle surprise and uh it's it's a perfect example for how you can excite kids because they don't know what's in there it's you know making noise and with any box they already are excited when they

hold it and then they unwrap it and it's chocolate so boom first excitement Rush it's similar to like 80 apy on your call too and then obviously you know this we know what's happened after the Sugar Rush so that's why there's a second egg in there and there you have like a little figure or something to build so something that keeps the kids busy you know and then still you know excited right and this is something where I mean this is just like couple of steps and I know you don't build protocols for kids and not for the real world uh or the two things you you should should really also take away is like one think about the all the steps how you can build up the momentum how you can keep

up those token enhance features the but also that go hand in hand with product enhancement for your protocol right and this is super important and the second aspect obviously also always have in mind is this the right incentive for the user group I want to you know attract this is for kids you know they are super happy with this if you get this as a teenager you know they're probably not so much excitement uh and yeah there might be even a third one uh always have an eye on the legal side because actually these guys you know these eggs are banned in the US as well so yeah thank you so much everyone this was the best closing ever thank you cool thanks