What Is a Fair Launch in Crypto & How to Participate in It

Cryptocurrency is all about decentralization and financial inclusion. Anyone should be able to participate, regardless of their location, income, social status, net worth, and other aspects often considered in traditional finance. Still, it’s not uncommon for tokens to be distributed unevenly, especially at launch. This is where the concept of a fair launch in crypto comes into play.

Like in many markets, there can be individuals and entities that have advantages over others in decentralized finance as well. So, how can we level the playing field and make cryptocurrencies completely impartial for everyone? What constitutes a fair launch in the first place, and how can it be obtained?

In this article, we unravel the intricacies behind a fair launch in crypto, what it is, how it works, and how you can utilize it to its full extent. Without further ado, let’s jump in!

What Is a Fair Launch in Crypto?

A fair launch in crypto refers to the concept of giving all participants equal chances to purchase tokens for the initial price. That stands in contrast to how many projects, coins, and tokens have been launched in recent history. In most cases, there’s a private sale, an ICO, or even preallocation, often to insiders and team members.

This type of crypto launch creates an imbalance, as it allows a select number of individuals and entities to “get in on the ground floor.” Everyone else gets to buy cryptocurrency once it’s already been established, which means its price is usually higher, sometimes multiple times over. This uneven distribution is unfair and can lead to a centralization of wealth.

The best example of a fair launch in crypto is its first and biggest digital currency, Bitcoin. Satoshi Nakamoto initiated the network without pre-mining any coins. Anyone was free to join alongside him, mine BTC from the get-go, and get as much as the creator, if not more. Today, most crypto fair launches leverage decentralized exchanges to give everyone equal chances.

How Do Fair Launches Work?

Fair launches work in three main phases: preparation, the launch itself, and the post-launch period. Let’s examine them.

#1. Pre-Launch

The pre-launch period is all about preparation. It involves laying the groundwork for a fair launch of a cryptocurrency.

At this stage, many of the companies and project owners do whitelisting. That refers to the process of going through interested parties and selecting who can participate in the launch. While whitelisting might sound counterintuitive regarding a fair launch, it prevents malicious parties, such as bots and scammers, from trying to exploit the system.

In addition to whitelisting, most projects require interested parties to perform know-your-customer (KYC) and anti-money laundering (AML) processes. While this goes against central cryptocurrency themes like decentralization and anonymity, it’s vital to ensure the legitimacy of a fair launch and to prevent any criminal activity.

Finally, after all the interested participants have been verified and put on a fair launch crypto list, project owners can create a token distribution plan. That involves having a clear set of rules and a transparent roadmap that describes information such as how many tokens will be minted, who will get what percentage, what the price will be, and so on.

#2. During the Launch

The launch process involves selling the designated portion of tokens to investors. During this step, the goal is to give everyone involved an equal opportunity to buy tokens at the same price.

To ensure a successful launch that meets the requirements of both investors and developers, project owners can sometimes put caps on the sale, such as:

• Soft cap, which is the lowest number of tokens that need to be sold. If the sale doesn’t reach the soft cap, the company can’t raise enough funds, in which case they’ll refund the investors and cancel the sale.
• Hard cap, which is the maximum number of tokens designated for sale. In case the limit is exceeded, the issuer might stop the process early or decide to obtain more capital to fund their endeavors.

Since the sale needs a platform, project owners will need to find the appropriate decentralized exchange (DEX) that will facilitate the process. They’ll have to submit a request to the exchange and make sure that they meet all the requirements before getting approved.

#3. Post-Launch Period

The post-launch period is all about continuing with project development and delivering on the promises and expectations. The development team should continue working on their service or protocol to maintain or increase the value of their tokens.

They are incentivized to listen to the community feedback and address any concerns or found exploits to ensure the project’s longevity. Moreover, the team will likely continue to promote their cryptocurrency while planning on how they are going to distribute the remaining assets.

The Importance of Fair Launches

The importance of fair launches in crypto is in their ability to represent the intrinsic principles of cryptocurrency, which are decentralization, transparency, and financial equality. The DeFi space was conceptualized with the idea of giving everyone equal chances at managing their finances and “becoming their own bank.”

A fair launch combats one-sided practices of having individuals or entities in more favorable positions than the rest of the community. It allows anyone to enter the project and participate from the ground up. That immediately mitigates the risk of wealth and power centralization that could lead to unfavorable manipulation by whale and insider investors.

Furthermore, the benefits extend beyond the immediate accent on financial inclusivity. The fairness and democratization of the investment process signal long-term thinking on the creators’ end. It tells investors that the developers aren’t doing a project for short-term profit, as happened with plenty of unsuccessful ICOs between 2017 and 2019.

In turn, this builds trust among the participants and helps increase their interest in the project. The result is often a broad and diverse community that actively participates in development. That further facilitates organic growth and improves the chances of cryptocurrency being stable and self-sustainable.

3 Main Features of a Fair Launch in Crypto

A fair launch in crypto offers three main features that put it above other initial token distribution methods. These features are decentralization, transparency, and open invitation. Let’s examine each one.

#1. Decentralization

Decentralization is the fundamental element of blockchain technology and an essential part of a fair launch in crypto. In the context of token distribution, decentralization refers to the effort to distribute the assets, control, and power over the project among many participants.

That’s why there are no activities like pre-mining and preallocation in a fair launch, as nobody should be able to get a hold of coins or tokens before the others. This prevents potential centralization of wealth and power, which could undermine the stability of the network, as it leaves it susceptible to manipulation.

#2. Transparency

Transparency is vital for a successful fair launch of digital assets. It involves the team behind the project openly communicating every aspect of their launch that is important to the investors. Part of the information concerns tokenomics, the total supply of the tokens, the portion designated for the initial sale, etc.

Moreover, the team should be transparent with their whitepaper, roadmap, and project goals. They timely disclose the platform on which the initial sale will take place and whether there are any specific rules and protocols for applying.

#3. Open Invitation

An open invitation is the only way to ensure financial inclusion and create a truly fair launch. It means that any interested party gets the opportunity to apply and take part in the initial sale. This is in contrast to how most ICOs and presales function, where only a select group of privileged entities and insiders get to participate.

Of course, the participants will need to conform to the rules (such as performing KYC and AML verifications), but ultimately, anyone can apply and purchase cryptocurrency for its initial price.

How to Participate in a Fair Launch in Crypto

The process of participating in a fair launch in crypto can vary between projects. Many factors influence how the launch will go and what you’ll need to do.

For starters, one of the most straightforward ways to launch a cryptocurrency in a transparent and decentralized manner is through established and trustworthy decentralized exchanges. Platforms like UniSwap and PancakeSwap have been around for years and are protocols of choice for many developers.

In these cases, the initial requirement for users is to have compatible wallets integrated with these DEXs. Moreover, participants must have a sufficient amount of other cryptocurrency to purchase the tokens and pay for the gas fees.

Some teams will go as far as to develop proprietary launching platforms. In these cases, it’s essential for users to conduct in-depth research, as project owners will provide clear guidelines on how to join the fair launch.

In some instances, developers might require potential buyers to hold other tokens to gain the opportunity to participate. This means users will need to have relevant assets in the same wallets they’ll be using to purchase new tokens.

It’s also not uncommon for fair launch participants to be required to have hardware for mining or staking. Some projects offer initial tokens through staking or mining, much like Bitcoin was launched. In these cases, users who want to participate will likely need to have enough GPU or CPU power or even purchase specialized devices, such as ASIC miners.

Fair Launch vs. Presale

Presale differs from a fair launch, as it involves selling tokens to selected investors before the public launch. Its purpose is to fund initial marketing endeavors and cover necessary development.

There are two types of presales:

1. Capped presale occurs when the development team has a goal in mind. They can put a limit on how much one individual can invest, and the presale ends once the overall goal is reached. These types of presales can happen fast, and there’s usually whitelisting involved.
2. Uncapped presale is one where developers don’t put a limit on how much capital they want to raise. While these presales are more inclusive and generally easier to participate in, a lack of limits can leave the token susceptible to manipulation by wealthy investors.

Ultimately, while a fair launch gives investors a better chance at purchasing tokens for the initial price, a presale is better for developers who want to ensure their project gets proper funding.

4 Benefits of Fair Launches

Fair launches bring multiple important benefits to the cryptocurrency space. Some of the key ones include:

1. Improved decentralization. Decentralization is the cornerstone of cryptocurrencies and blockchain technology, and a fair launch encapsulates that idea perfectly. It prevents the centralization of coins or tokens, which often leads to having an influential minority that controls most of the wealth and has the most power.
2. Increased trust through transparency. Transparency is a vital part of a fair launch. It ensures that every participant has the required information about the launch. Moreover, it ensures there’s no shady business and secretive preallocation that could undermine the entire process, impacting everyone’s confidence in the project’s longevity.
3. Enhanced accessibility. One of the main goals of a fair launch in crypto is to stop the “rich get richer” aspect of TradFi. The system is designed to give everyone with an internet connection and a crypto wallet a chance to participate. It’s meant to include everyone, regardless of region or financial background.
4. Organic growth through community engagement. Fair launches encourage people to join, creating a broad community of enthusiasts. Those who enter a project on the ground floor are often more likely to become invested long-term. This can further lead to improved communication, more ideas, better governance, enhanced growth, etc.

Risks Associated With Fair Launches in Crypto

A fair launch isn’t a foolproof solution, and it comes with some common risks and disadvantages. Here are some of the most prominent ones:

• Limited initial project funding. Many project owners use the funds from the initial presale for marketing. By creating a sufficient marketing budget, they can reach more investors down the road and raise enough capital to ensure future operations. With a fair launch and no presale, they are at risk of not reaching enough interested parties.
• Difficulties in establishing a user base. In addition to providing funds for marketing, presale investors also often act as advocates for the project. They can attract others to invest through promotions and word-of-mouth marketing. A fair launch removes this option, which can lead to challenges in creating hype around the project.
• Lack of a developer’s stake in the project. Many project owners set aside a portion of tokens for the team members. This represents the initial payment but also acts as an incentive for the team to put effort into building a valuable product or service. With no personal stake in the project, the people working on it might lack motivation.
• Technical difficulties. It can be challenging and time-consuming to do a fair launch in crypto, meaning teams have to put additional time and effort into it. It’s often easier to do a presale or preallocation than to create whitelists, find appropriate platforms, and ensure the whole process remains fair to the end.

Key Takeaways

The introduction of fair launches represents a significant shift towards a more inclusive and equitable system. Today, anyone can look up upcoming fair launches in crypto and become a part of a potentially successful and lucrative project from its inception.

It’s important to keep in mind that there are still the usual risks associated with DeFi and crypto investing, especially with new altcoins that aren’t established. As a result, it’s vital to exercise caution and do your own research before putting your money anywhere. That’s the best way to ensure long-term success in the cryptosphere!