What is a Launchpad? Common Crypto Launchpad Models

What is a Launchpad? Common Crypto Launchpad Models

During the market uptrends in 2017 and 2021, 2024, projects on launchpads garnered significant community interest due to the potential for returns as high as 100x. So, what exactly is a launchpad? Can a launchpad help investors change their position in the upcoming bull run?

A launchpad in the cryptocurrency world is a platform that helps new blockchain projects raise funds and gain exposure by conducting token sales, often referred to as Initial DEX Offerings (IDOs) or Initial Exchange Offerings (IEOs). These platforms provide a structured and secure environment for both projects and investors.

Popular launchpads like Binance Launchpad, Polkastarter, and TrustSwap have been instrumental in the success of many projects. They offer investors early access to promising tokens at lower prices, which can lead to substantial profits during bullish market phases. Additionally, these platforms often have rigorous vetting processes, which can reduce the risk of investing in fraudulent or poorly managed projects.

Given the historical performance of launchpads during previous bull markets, they remain a significant consideration for investors looking to maximize their gains in future uptrends. However, as with any investment, it is essential to conduct thorough research and understand the risks involved.

What is a Launchpad?

A launchpad is a platform that supports Web3 startups in their initial token or NFT sales through mechanisms like Initial Exchange Offerings (IEOs) and Initial DEX Offerings (IDOs). The primary goal of a launchpad is to connect users with promising projects at their early stages, while also helping startups raise funds from the community.

Each launchpad typically has its own set of procedures and criteria for vetting startups, focusing on aspects such as security and tokenomics. This thorough vetting process aims to protect users' interests and mitigate the risks of investing in fraudulent projects.

According to data from Plisio, launchpads are highly attractive to investors, with returns on investment (ROI) reaching up to 3,000%, and in some cases, even 19,000%. Notable examples of popular launchpads in the market include Binance Launchpad and Coinlist.

In addition to their financial benefits, launchpads also provide valuable support to startups, including marketing assistance, advisory services, and a robust community of early adopters. This comprehensive support system significantly increases the chances of a project's success.

For investors, participating in a launchpad offers the opportunity to get in on the ground floor of innovative projects, potentially leading to substantial profits.

Top Launchpads Ranked by Average ROI

The following are some of the top launchpads based on average ROI:

Binance

  • Current ROI: 2,939.4%
  • All-Time High (ATH) ROI: 19,000%

Coinlist

  • Current ROI: 1,526.9%
  • ATH ROI: 6,000%

Fjord Foundry

  • Current ROI: 757.3%
  • ATH ROI: 1,000%

Bounce

  • Current ROI: 680.4%
  • ATH ROI: 3,000%

Bybit

  • Current ROI: 648.7%
  • ATH ROI: 2,000%

KuCoin Spotlight

  • Current ROI: 426.1%
  • ATH ROI: 4,000%

OKX Jumpstart

  • Current ROI: 364.8%
  • ATH ROI: 1,000%

AscendEX

  • Current ROI: 206.2%
  • ATH ROI: 4,000%

DAO Maker

  • Current ROI: 158%
  • ATH ROI: 3,000%

Seedify

  • Current ROI: 141.4%
  • ATH ROI: 3,000%

For investors, participating in a launchpad offers the opportunity to get in on the ground floor of innovative projects, potentially leading to substantial profits. However, it is crucial to conduct due diligence and understand the risks associated with early-stage investments. The impressive ROI figures from various launchpads highlight their potential but also underscore the need for careful selection and research.

Popular Fundraising Models on Launchpads

Stake-to-Access

The stake-to-access model is widely used by most launchpad projects. In this model, users must stake a required amount of tokens to receive an allocation to invest in a startup. The larger the stake, the bigger the allocation.

The purpose of stake-to-access is to increase the value of the launchpad's token and ensure stability. For example, Binance Launchpad requires users to stake BNB tokens to receive allocations for startup projects.

However, the downside of stake-to-access is that it can resemble a multi-level Ponzi scheme over time. As the ratio between the launchpad token and allocation increases, users need to invest more money to receive an allocation. There have been instances where investors spent $30,000 only to receive $20 worth of the project's tokens.

First-Come, First-Served (FCFS)

FCFS is a model for investors who arrive first and purchase first, with each person's allocation being limited. Currently, the FCFS model is popular in the NFT market.

The advantage of FCFS is that it promotes fairness among investors (first-come, first-served) without relying on staked assets like stake-to-access.

The disadvantage of the FCFS model is that it can diminish the project's value because it allows easy access for everyone and has fewer participation requirements. Consequently, some startups using the FCFS model have struggled to raise sufficient funds, and not all tokens/NFTs were sold.

NFT Model

In addition to the above models, some launchpads have started using the NFT model to avoid Ponzi-like situations. Specifically, users use the launchpad's NFTs to secure allocations instead of relying on the allocation ratio based on the staked tokens.

In cases where a Web3 project has many investors, the allocation is evenly divided among the NFTs rather than by the number of tokens staked.

The advantage of this model is that it gives investors equal opportunities, as the allocation of project tokens to the NFTs is equal. For example, Starship prioritizes those holding Starship membership NFTs for investing in startups.

Launchpad on Magic Eden

Magic Eden is one example where the NFT model is utilized. Users acquire NFTs specific to the launchpad, which guarantees them an allocation in upcoming projects.

Each fundraising model on launchpads offers unique advantages and disadvantages. While stake-to-access promotes token value and stability, it risks becoming overly expensive for small investors. The FCFS model ensures fairness but may limit fundraising effectiveness. The NFT model, meanwhile, provides a more equitable allocation but requires innovative implementation to ensure project success.

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The Benefits of Launchpads in the Crypto Market

From an investor's perspective, launchpads offer the opportunity to access early-stage startup projects, allowing them to purchase tokens at lower prices with the potential for higher returns compared to traditional investments. For instance, in 2017, Coinlist's launchpad enabled users to buy FIL tokens at $1.91. The current ROI stands at around 360%, and at one point, it reached a staggering 12,257%.

Despite many investors significantly improving their positions with just 1-2 projects funded through launchpads, the return on investment (ROI) is not always guaranteed. For example, the Moonstarter project Dead Knight (DKM) had an ROI of -37.4% after its launchpad phase and has since plummeted to -100%. Even during periods when Bitcoin exceeded $65,000, some launchpads still delivered negative returns.

Perspective of Startups

For startups, launchpads simplify the fundraising process from the community, bypassing the need to rely on venture capital funds with numerous obligatory terms. According to Cryptorank, in 2018, the total funds raised by startup projects through launchpads reached $4 billion, equivalent to the GDP of a small country.

Furthermore, a successful fundraising campaign that helps many investors improve their positions also contributes to the growth of the launchpad and startup communities. This success fosters a supportive environment where more projects can thrive and attract further investment.

Case Studies

Filecoin on Coinlist: In 2017, Filecoin (FIL) was available for $1.91 per token on Coinlist. The token's ROI reached an all-time high of 12,257%, showcasing the immense potential of investing in early-stage projects through launchpads.

Dead Knight (DKM) on Moonstarter: Not all projects succeed, as seen with Dead Knight (DKM). After its launchpad phase, it experienced a -37.4% ROI, eventually hitting -100%. This example highlights the risks associated with launchpad investments.

Market Trends

Even during bullish periods, such as when Bitcoin surpassed $65,000, some launchpad projects delivered negative returns, indicating that market conditions alone do not guarantee success. Investors must carefully evaluate each project.

Launchpads play a crucial role in the crypto market by providing early access to promising projects for investors and facilitating community-driven fundraising for startups. However, both parties must navigate the inherent risks and conduct thorough research to maximize the benefits of these platforms. The fluctuating success rates underscore the importance of informed decision-making in this dynamic market.

Do Launchpads Need to Comply with Legal Regulations?

Currently, most launchpads in the crypto market adhere to legal regulations and the specific rules of each country.

For Investors

Launchpads typically require users to complete Know Your Customer (KYC) procedures to verify their identities. This step is crucial in preventing activities such as money laundering and terrorism financing. Additionally, the KYC process helps launchpads minimize the participation of bots, ensuring a fairer environment for genuine investors.

For Projects

Launchpads usually implement various levels of project evaluation. These evaluations aim not only to help users access quality projects but also to prevent scenarios such as "pump and dump" schemes orchestrated by the projects themselves or by investment funds.

Importance of Regulatory Compliance

Regulatory compliance is critical for maintaining the credibility and stability of the crypto ecosystem. Launchpads that comply with legal regulations can attract more legitimate projects and investors, fostering a safer investment environment. Non-compliance can lead to severe legal repercussions, including fines and bans, which can adversely affect the launchpad and its users.

Legal compliance is an essential aspect of the crypto launchpad industry. By adhering to KYC requirements and conducting thorough project evaluations, launchpads can offer a secure and transparent platform for both investors and startups. Ensuring regulatory compliance not only protects investors but also helps in building a trustworthy and sustainable crypto ecosystem.

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