Blockchain startups raise funds either through an initial coin offering (ICO) on their own website or on a crypto launchpad. According to ICO Drops, 2021 was the first time in crypto history that more funds were raised through launchpad ICOs ($3.7b) than through native ICOs ($2.7b).
Among the seven biggest launchpads in 2021 are: Coinlist, Miso, Tokensoft, Polkastarter, Balancer, Binance, and DAO Maker. Given this trend, MimemaOG investigates if launchpads are able to fulfill the hopes of its investors: are launchpads a driver of blockchain innovation? Are launchpads protecting investors from scams? Do launchpads treat all investors fairly?
Binance Launchpad: Where is our Innovation?
The CEO of Binance – Changpeng Zhao – has stated several times that he identifies with Satoshi Nakamotos’s ideal of advancing mankind through blockchain innovation. Let’s have a look if this holds true for the Binance Launchpad. In 2021 alone, 4 out of 11 Binance Launchpad projects were soccer club fan tokens which are designed to raise funds for the clubs and to connect investors and fans to their teams.
For instance, Lazio Fan Token (LAZIO) sold 10% of the token supply for around 4 million USD. LAZIO – however – pocketed 35% of the token supply for themselves. LAZIO intends to use these funds to develop services like NFT sales and gaming. Another milestone of LAZIO is to enable its holders “to donate directly to their loved team and get a proof-of-loyalty badge”. While these services will help further enrich LAZIO, it is unclear how these services help to bring about meaningful blockchain innovation. Matters seem even worse when looking at LAZIO’s social media accounts.
The LAZIO Telegram group – for instance – has become a ghost town. The moderators do not even take the time to delete spam from other crypto projects posted weeks ago. It can be observed that the moderators have not responded to any questions for months with the exception of banning users for using forbidden words. Instead of addressing individual questions, every new group member is greeted by an automated notification on how to deal with wallet issues and how to retrieve lost tokens.
The example of soccer club tokens and of LAZIO in particular, illustrate how careless the Binance Launchpad chooses and supervises its flagship projects. Given the leading role of Binance as the biggest crypto currency exchange, this practice has a negative effect on the whole crypto funding market.
PinkSale: Letting Investors and Scammers fight it out
The decentralized launchpad lauds itself as being the “next frontier in community driven value”. PinkSale has adopted a Wild-West approach of dealing with scams that seem to be plaguing the launchpad. Instead of vetting upcoming projects properly, PinkSale punishes scammers by releasing their personal data in the PinkSale Telegram group.
Just as the Roman emperors threw the Christians to the lions in the Colosseum, PinkSale is throwing their projects to crowds of angry investors. For instance, when investors suspected the Big Red Dog (BDOG) of an exit scam, PinkSale launched an investigation. After less than 24 hours, PinkSale determined BDOG to be a scam and posted screenshots of the developer’s identity card in their Telegram group. It should be noted that before and after the doxxing of the BDOG developer, angry investors issued several death threats.
This practice by PinkSale is not only morally reprehensible but also illegal: releasing private data is a punishable violation of privacy protection policies which puts the life of the scammer at risk. While PinkSale pocketed the fees for funding a scam project, its investors have lost their funds because PinkSale was unable to perform due diligence in the selection of projects. PinkSale – therefore – operates its business under moral hazard because it will neither suffer from losses as its investors nor from threats of violence as its scam projects.
Tokensoft: An Inverse Robin Hood?
Tokensoft lauds itself to “enable different groups of investors to participate in a sale in an orderly fashion.” In other words, Tokensoft lets retail investors buy in only after VCs have already filled their bags. This can lead to a phenomenon called “slow rugging” where the VC funds dump their discounted token on the clueless retail investors over an extended period of time.
You ask yourself why Tokensoft is doing this? The answer is that Tokensoft is funded by VC money from Avon Ventures, Coinbase, Base10, and e.ventures. This moral hazard incentivizes Tokensoft to place VC above the interests of their retail investors. A good example of how a slow rug by VC works on Tokensoft is Moonbean (GLMR). After starting at $15.1, GLMR plummeted to $3 as of today, April 28, 2022.
Solution: The MimemaOG Launchpad
2021 was the first year in which launchpads overtook native ICOs in terms of funds raised. This trend is problematic insofar as above examples indicate that launchpads are not always willing or capable to ensure blockchain innovation and to protect their investors. In order to make crypto funding a force for true innovation and investor participation, MimemaOG developed the concepts of the “Holy Trinity” and of “Digital Democracy”. Digital Democracy lets $MIME investors shape the future of MimemaOG in the Board of Members. All projects funded through the MimemaOG Launchpad will adopt the same mechanism of investor participation. The Holy Trinity of the MimemaOG Launchpad consists of:
- Feasibility by handpicking sound projects
- Trustability by doxxing the team of a funded project
- Responsibility by releasing funds after the completion of milestones