Recently, the narrative of token distribution to early users, testnet members, or even participants has been gaining popularity. Let's take a closer look at how this impacts the project and its activity after token issuance.
To begin with, it is important to understand why projects issue tokens.
Tokens can be used for participating in voting and making decisions about future changes and the direction of network development. Token holders may have the ability to vote on proposals, protocols, or changes, ensuring decentralization and community participation in decision-making.
Tokens are often issued to create an economic model for the network. They can serve as a means of payment for transaction fees within the ecosystem, incentivize users and network participants, and provide rewards for specific actions or participation in consensus.
Token issuance can be utilized to raise funds for the development and support of a project. Initial Coin Offerings (ICOs) or Token Sales allow project teams to attract financing from investors who receive tokens in return. This can be a way to achieve financial independence and implement ideas without relying on traditional funding methods.
It is also important to note potential obstacles to the token price growth, namely:
Not all projects are able to establish a perfect tokenomics, which may result in pressure from investors or the project team.
No matter how innovative a project's product may be, if the entire market is experiencing a bloodbath, breaking through selling pressure will be challenging.
Let's examine the consequences that projects encounter after token issuance through examples.
Optimism is a layer 2 scaling solution for the Ethereum blockchain. It aims to improve scalability and reduce transaction costs by utilizing a technique called Optimistic Rollup.
Optimism operates by enabling off-chain transaction processing while maintaining the security and decentralization of the Ethereum network. It achieves this by bundling multiple transactions together and submitting a single proof to the Ethereum mainnet. This approach significantly increases the throughput and efficiency of the Ethereum network.
By leveraging Optimism, developers can deploy decentralized applications (DApps) and smart contracts on layer 2, offering faster transaction finality and lower gas fees compared to operating directly on the Ethereum mainnet. It aims to enhance the user experience and enable a more scalable ecosystem for Ethereum-based projects.
The project has successfully raised $178,500,000 from Paradigm, IDEO Colab Ventures, a16z.
On June 1, 2022, the OP token was launched, distributed to early users. In the initial days, the price held at around $1.4, but within three weeks, it dropped to $0.45. In February 2023, an all-time high (ATH) was reached at $3.1. As of now, the price stands at $1.2.
First, the Aptos blockchain natively integrates and internally uses the Move language for fast and secure transaction execution. The Move prover, a formal verifier for smart contracts written in the Move language, provides additional safeguards for contract invariants and behavior. This focus on security allows developers to better protect their software from malicious entities.
The project has successfully raised $350,000,000 from Binance Labs, DragonFly Capital, Jump Crypto, Multicoin Capital, FTX Ventures, Apollo Capital, Circle, Griffin Gaming Partners, a16z, Franklin Templeton Investments, and others.
On October 19, 2022, the APT token was released and distributed to users who demonstrated activity on the network (minting NFTs) and set up a node.
The initial price of APT was $8.5, but within less than three weeks, it dropped to $3.85 due to the collapse of FTX, a global market downturn, and the fact that FTX and Alameda Research were major investors in the project.
In January 2023, an all-time high (ATH) was reached at $19. As of now, the price of APT stands at $7.1.
Arbitrum is a technology suite designed to scale Ethereum. Arbitrum chains enable users to perform various actions on Ethereum, such as using Web3 apps and deploying smart contracts, but with the advantage of lower costs and faster transactions. The flagship product of Arbitrum is Arbitrum Rollup, an Optimistic rollup protocol that maintains the same level of security as Ethereum.
The project has successfully raised $123,700,000 from Pantera, Compound, Lightspeed, Polychain, Alameda Research, Mark Cuban, and others.
On March 23, 2023, the ARB token was released and distributed to active users of the Arbitrum network.
The initial price was $1.25, and on April 18, an all-time high (ATH) was reached at $1.8. As of now, the token's price stands at $1.12.
Sui utilizes a PoS consensus algorithm based on the unique protocols Narwhal and Bullshark, enabling parallel computations similar to zk-Rollup.
The network aims to provide instant settlements and high throughput, reduce costs for launching web3 projects and DeFi services, and become a broad ecosystem compatible with existing industry leaders such as Ethereum, Arbitrum, and others.
The programming language used for SUI is Move, which is also utilized for writing smart contracts on Aptos.
The project has successfully raised $336,000,000 from a16z, Binance Labs, Jump, Lightspeed, Coinbase Ventures, Samsung NEXT and others.
The token was released on May 3, 2023, and early users received an allocation to participate in the ICO and purchase the SUI token.
The initial price was $1.35, and on May 4, an all-time high (ATH) was reached at $1.45. As of now, the price of SUI stands at $0.65.
Blur.io is an aggregator for trading NFT tokens. It allows users to discover and track NFTs across different marketplaces, manage portfolios, and trade tokens within a unified interface. By consolidating data from major trading platforms, Blur.io presents a comprehensive view of token information.
In addition to its scanning and aggregation features, Blur.io offers a range of tools tailored for professional traders. These tools bear similarities to those found on centralized cryptocurrency exchanges. In essence, these features make Blur.io a full-fledged exchange for NFT trading.
The project has successfully raised $11,000,000 from Paradigm, Egirl Capital, Ledger, 0xMaki, Zeneca, Deeze, and others.
The token was released on February 14, and early users of the marketplace received tokens based on their level of activity.
The initial price was $0.65, and on February 19, an all-time high (ATH) was reached at $1.2. As of now, the price stands at $0.32.
The examples provided were highly anticipated projects, supported by top investors and receiving attention from the community. However, as we can see, each of the tokens is trading below or at a similar level to their initial trading price.
Significant impact is caused by the fact that token inflation is quite high and does not correspond to the level of demand, or even exceeds it by several times. For example, Arbitrum has an annual inflation rate of 100%, which was initially built into the protocol. Additionally, projects can release tokens from lock-up through DAO decisions (such as Foundation), as Arbitrum did, increasing the circulating supply by 25%.
After the issuance of tokens in a crypto project, their relevance continues to be determined by several factors. Here are some key aspects to consider:
The project's success depends on its ability to attract users, developers, and partners to build and utilize its ecosystem. The project should attract top developers by offering new possibilities and tools to implement ideas for which there was previously no infrastructure. Otherwise, developers will have no incentive to leave the most popular Ethereum network in pursuit of a bird in the sky.
The project should address a real-world problem or provide a valuable solution within the blockchain or crypto space. The demand for its services or products and the ability to create tangible use cases are crucial for sustained relevance.
Ongoing development and innovation are essential to maintain relevance in the fast-evolving crypto industry. Projects that continuously upgrade their technology, introduce new features, and adapt to market trends are more likely to remain relevant and competitive. Otherwise, the project will lose relevance as the competition among web3 projects is immense.
The project's community plays a vital role in its relevance. A strong and engaged community can contribute to its growth, provide feedback, and support its adoption. Regular communication, community events, and involvement of community members in decision-making processes can enhance the project's relevance. After all, the success of every project is built on the foundation of its community.
Collaborations with other projects, organizations, or industry players can enhance a project's relevance by expanding its reach, increasing its user base, and enabling interoperability between different platforms. A great example is the development of Polygon NFT, where a studio paid $3,000,000 to the top Solana NFT collection, y00ts, to migrate to Polygon (Matic).
The overall market conditions and investor sentiment towards crypto projects can impact their relevance. Projects that can navigate market fluctuations, adapt to changing conditions, and maintain investor confidence are more likely to thrive.
