Most networks have been rewarding whales through liquidity mining. While this can help bootstrap a network, this usually leaves out early contributors who want to make the network better. When you have a fair launch and reward contributors, you can get more early contributors to the protocol to make it more successful without taking them on as employees. Just look at $YFI. yEarn had a fair launch and now has several high-profile developers maintaining it.
DeFi Whale Hunting and Fair Launch
One of the biggest problems with PoS chains is that exchanges reap most of the rewards from running nodes. This prices out smaller validators and doesn’t leave any opportunity for validators to grow the network by building tooling to make it more valuable. We’re starting to see the same thing play out in DeFi—it’s becoming a whales game and open source contributors are not interested in contributing to open source projects that are VC-backed. This will lead to more networks opting for fair launches because it attracts early contributors and some of the best developer talent.
I’m excited to be an advisor to Fair Launch Capital for this reason. The Fair Launch enables founders to leverage existing networks to bootstrap distribution and build long-term, highly engaged, collaborative communities. Fair Launch prides itself on new forms of community building. If you want to read more about it, you can check it out here.
If more projects opted for a fair launch, we could be creating projects with more sustainable value, while building on the shoulders before us. That’s why I’ve been thinking about a Lean Token Design framework. An opportunistic token design with a large design surface can create multiple ways to drive demand for the token, outside of its initially imagined use case. By having minimum utility, communities can be flexible and adapt through small governance changes while trying to find token-market fit.
In the next phase of DeFi, networks will reward users based on their transaction history, requiring a minimum score or certification based upon similar competitive networks. If networks opt for a fair launch, they’re going to be more careful about what types of users will have access to tokens. Imagine if there was a “DeFi Farmer Credential” that could be widely used by projects. To earn the DeFi Farmer Credential, you would need to complete a task across eight different DeFi networks and vote in x number of proposals over y number of networks. This will help ensure that your early holders and contributors know what they’re doing.
Eventually, we’ll transition to “skilled labor” entirely. Instead of rewarding users based on transaction history, networks will require skills to perform work. One early example of this that is launching soon is TheGraph. “TheGraph” is the first type of “skilled work” on Ethereum that isn’t about having the most money. Indexers require strategy. The more queries the indexers receive from third-party developers, the more tokens they get. And so they have to answer interesting questions like:
- What on-chain data can I index on a subgraph for others to query?
- What is the most popular data set that I can create?
- How can I make sure this subgraph has the latest up-to-date data, so no competitive subgraphs form?
This isn’t merely dumping tokens into a contract and getting new ones out. It’s an entire decentralized work economy that we’ve been hoping would come for years. And once we figure out skilled on-chain work, identity will play a much larger role in how we show our contributions to these networks.
YFI was so early most farmers were real community members. the concentration of positive value participation was key to the successful bootstrap. new fair launches are having to deal with more zero value and negative value participants self-selecting in. incentives must change
Get ready for the launch of the tokenized newsletter
The tokenized newsletter is getting closer! Soon, I’ll no longer be making my newsletter available on Substack for free subscribers. I’ve been working with Abridged to create a tokenized version of my newsletter using Ghost. Here’s what you need to know about this newsletter:
- You’ll need $JAMM to access the newsletter each week. You’ll be able to access the newsletter by connecting your wallet to the site and having your $JAMM in your wallet.
- Token holders will decide on how much the newsletter should cost.
- At any time, $JAMM holders will be able to propose a vote that changes the number of tokens to access the newsletter.
- This will only work with MetaMask to start, but will eventually incorporate other wallets.
If you’re a paid subscriber, I’ll be in touch with how to redeem your $JAMM this week. Have any questions? Feel free to e-mail me or DM me on Telegram (@flynnjamm)