A major blocker for mainstream blockchain adoption remains the prevailing sense that the space is still too focused on speculation. To build a sustainable ecosystem and onboard more users, protocols must radically rethink how tokens are distributed. The focus must shift from inflated valuations and speculative price action to long-term utility and transparency.
This year, the cryptocurrency market has witnessed a resurgence in token launches, many of which have adopted a “low float, high fully-diluted value (FDV)” strategy. The plan is simple: launch at a high price, lead with a multi-billion dollar valuation and create hype around the project’s potential. This playbook has been broadly criticized but has proven irresistible for many projects chasing attention.The problem? It is entirely artificial.
The “low float, high FDV” model involves releasing a small percentage of the total token supply (the float) to the market while assigning a high price to each token. This creates a deceptively inflated FDV for the project, and many token holders fail to account for the remaining token supply that is still to reach circulation.
While this approach can generate significant initial interest, numerous projects that have adopted this model see short-lived benefits that disintegrate in the long-term. This is not a sustainable approach and takes attention away from what should be the real focus of all crypto projects — long-term utility and protocol adoption. Bitcoin took years to build up a user base — today, projects can do so with one big launch.
Crypto must make bolder bets to refocus the industry on distribution and utility, while eschewing price speculation.
There is a better way to manage token launches — one that prioritizes long-term utility and organic growth over speculative gains. Protocols are beginning to experiment with alternative models. FRIEND, a blockchain-based social platform, for example, launched with 100% float, distributing all tokens to the community from day one. After taking a radically different approach at Lava Network, I am convinced the industry must adopt a new standard for how blockchain projects should handle token distribution and valuation.
A Market-Derived Approach
By sharing experiences and insights from the lessons learned at Lava, an access layer for blockchains, I hope we can inspire a shift towards more responsible and sustainable token launch practices. Together, a stronger, more resilient blockchain ecosystem that benefits all participants can be built.
Source:- yahoo.finance
