Topic: ViaBTC Capital Reaserach Report丨An Analysis of Solana Launchpad (Read 88 times)

The Beginning of Everything: Projects in Their Infancy
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Launchpad projects function as a critical financial link for crypto-asset projects, connecting project teams with investors. Having evolved from the IEO (Initial Exchange Offerings) model of centralized exchanges, such projects boosted the bear market during 2017–2018 and provided a brand new channel for projects funding and crypto investment. According to incomplete statistics, in 2020 alone, Launchpad raised more than $225 million for crypto projects. Along with the boom of public chains, Launchpad has followed the development trend of the public chain on which it is based, and provided key financial support and development assistance for its native ecosystem.

We have witnessed the rapid development of projects within the Solana ecosystem, with a considerable improvement in terms of both quantity and quality. In 2021, Solana’s Q3 performance in the secondary market was remarkable, and the price growth also reflected the high market expectation for the implementation of projects within the thriving Solana ecosystem. At the moment, most of the Solana-based projects remain in their infancy or funding stage, and Launchpad can also support these early-stage projects regarding funding and public exposure. Moreover, a Launchpad that promises high quality can help investors choose and empower promising projects.

Today, we will examine Launchpad from three aspects: 1) How it evolved; 2) How it works; and an introduction to the Launchpad projects within the Solana ecosystem.

I. Launchpad — A funding channel developed through constant evolutions
It has been long since the last time we heard the term “ICO” (Initial Coin Offering), which used to be synonymous with crypto fundraising. As the most common funding channel for early crypto projects, ICO stands for the first issuance of a token through crowdfunding or sale commonly used financing mechanism. The advantage of ICO lies in the fact that it can circumvent strict funding rules and regulations, which makes it very friendly to start-ups for developers. With ICO, a project team can complete the fundraising process simply through a website supporting crypto wallets. However, for the average investor, ICO is full of uncertainty: There is no third-party audit, and some of the teams are all anonymous. Furthermore, some projects don’t even have any sound UI or project visualization.
Due to the significant information asymmetry and the lack of supervision as well as information disclosure, China banned ICO on September 4, 2017. Compared to China’s ICO ban, United States adopted the policy of “accredited investor”. Under such a policy, only investors who are deemed to have the ability to make informed decisions and a certain financial status can take part in ICOs.
Following the boom of ICOs, funding channels of crypto projects saw a series of innovations, covering new funding channels such as IEO, DAICO, ETO, STO, etc. In particular, IDO (Initial DEX Offering) is the most innovative approach. In the beginning, DEXs (Decentralized Exchanges) only featured the exchange between different tokens. Later on, they also introduced the Launchpad function, which attracts more project teams and provides a “secure” funding channel. Compared with ICO, IDO’s advantage is that it eliminates the intermediaries and allows project teams to directly list their tokens on DEXs, which means that new projects can have more opportunities to interact with decentralized investment communities. As such, IDO is more consistent with the peer-to-peer blockchain model and the spirit of decentralization. Moreover, IDO also protects project teams from malicious third parties and avoids the problems caused by hacking and cognitive errors. In addition, with IDO, investors can immediately store the purchased tokens in crypto wallets that allow them to hold the private key by themselves. Despite its many benefits, IDO has also brought some challenges. For instance, due to the lack of effective regulatory authorities, IDO projects significantly differ from one another in terms of project quality. Furthermore, as it does not require any meticulous KYC process, many fraud projects have entered the market through IDO and hurt the interests of investors. To set the stage for IDO, project teams have to spend an enormous amount of manpower and resources attracting public interest, which incurs opportunity costs, i.e. resources that could have been diverted to R&D or project operation. The creation of Launchpad has addressed such problems and retained some of the advantages of IDO, making it a satisfying compromise at the current stage.

II. How Launchpad works

Andrew Adcock, CEO of Crowd for Angels, summed up the role of Launchpad and why it is essential: “Firstly, they provide knowledge transfer. Secondly, they provide a key network of investors, service providers and stakeholders. Finally, they can also provide a vital source of early-stage finance”.
From Andrew’s comments, we can tell that a Launchpad has three major functions:

1.Provision of information

The team of Launchpad engages with project teams for intensive and detailed communication. Normally, it will assign project teams with technical experts, who are seasoned crypto insiders with strategic insights. These professionals have more advantages than the average individual investor in terms of the crypto fundamentals as well as macro-level market conditions. Meanwhile, the Launchpad team can also directly talk with project teams and get first-hand information concerning the project progress, the pros and cons of the project, and the visions and capacity of the project team.

2. Community platform

Although many start-up teams have developed strong R&D capabilities and brilliant visions, they do not excel at community operations and marketing. Project teams often have to spend an enormous amount of manpower and financial resources building communities and conducting promotions. In this regard, Launchpad also provides support. Normally, all Launchpad projects attract considerable user traffic to their community. Experienced in building a community, the Launchpad team understands how to conduct promotions and how to attract user traffic. The team regularly co-hosts events together with crypto exchanges, media networks, and KOLs for public exposure, which is one of the major reasons why Launchpad is appealing to project teams. By sharing the client resources with project teams while offering extensive community promotions, Launchpad helps projects become more popular and makes funding easier.

3. Funding

For project teams, the most important function of Launchpad is funding. Compared with the DEX-based IDO, Launchpad features more stringent project reviews. Normally, only the outstanding project teams can pass the reviews and enter the stage of IDO.

III. Launchpad projects within the Solana ecosystem

Different from the ecosystem of other public chains, the Solana ecosystem features low service fees, high transactions, and high scalability. In the early days of the Solana boom, its token price rose by as much as 2,600%, with increasing trading volumes. At its height, as all the major crypto media networks sang the praises of Solana, its daily turnover exceeded $1 billion. Thanks to its strong underlying technologies, Solana completes 50,000 transactions per second, which is far superior to the processing speed of 10-plus transactions/second of Bitcoin and Ethereum. Solana’s prosperous ecosystem covers all major blockchain segments, spanning DeFi, infrastructure, NFT, tools, wallets, games, Dapps, development, etc.
As Solana’s exponential growth is only a short-term trend, projects in its ecosystem have not kept up with its growth. Many of the outstanding projects remain in the stage of development and have not been launched, which is where Launchpad comes in. The popularity of the public chain ecosystem and the development of Launchpad are mutually reinforcing: As the ecosystem becomes more popular, more opportunities will become available to Launchpad; and the growth of Launchpad also draws user traffic and funding to the ecosystem. With Launchpad, investors can quickly identify the projects that may issue tokens. Moreover, project teams can achieve direct and fast funding through the platform built by Launchpad, without excessive roadshows.
On the one hand, Solana has hosted a great variety of blockchain hackathon contests, which gathered droves of tech developers. On the other hand, the rise of public chains has attracted the attention of communities and investors around the world. Where there is demand, there will always be supply. In the enabling environment of Solana, Launchpad projects will surely thrive. Next, we can carry out a simple analysis of Launchpad projects in the Solana ecosystem.

1. Introduction to Launchpad projects in the Solana ecosystem

(1) Raydium

As a DEX based on Solana, Raydium boasts inherent advantages in terms of Launchpad operation and information acquisition. There are two types of pools available for projects in AcceleRaytor(Raydium’s Launchpad): the Community Pool and the Ray Pool. The Community Pool is meant to be open to the wider community, with participation and eligibility determined by the project team. The Ray Pool is only open to users who received lottery tickets by staking Ray tokens. Recently, the primary rules of the Ray Pool changed from a mechanism of equal distribution to mechanism of time-weighted lottery, i.e. the number of tokens a participant may receive depends on how many Ray tokens investors hold and the time they were acquired. Since its launch, AcceleRaytor has witnessed the IDO of several outstanding projects. Among the first projects, MEDIA recorded a growth rate of over 1,000% soon after its launch. Subsequent projects like Mercurial Finance have also performed well. To date, more than seven projects have raised funds on AcceleRaytor.
The Raydium team had introduced some stringent criteria for the screening of IDO projects. In public interviews, members of the team have disclosed their criteria for screening projects: Firstly, projects should have a working product and can ensure that there will be an utility of the token in the short term; Secondly, the team will conduct due diligence on project teams, focusing on their technical capacity and background; last but not the least, Raydium will also assess the economic model of the project.
Positioned as an all-encompassing DeFi protocol, Raydium is backed by a massive DEX user group and many DEX projects. Compared with other Launchpad projects, Raydium has many advantages. In addition to IDO services, it also offers post-IDO services like order book-based trading or AMM trades. Through Raydium, users can access the orders and liquidity of the entire Serum ecosystem.

(2) Solstarter

Backed by its reputation as the first IDO platform on Solana, Solstarter has become extremely popular and evoked high expectations from the market. At the time of writing, the application of Solstarter is yet to be launched. However, its community is very appealing to users. Its core product is not much different than other Launchpads. The IDO process on Solstarter consists of three rounds. Depending on the SOS tokens users staked, Solstarter has also introduced four tiers. In the first round, IDO project tokens will be allocated proportionally among participants who meet the staking requirements. The remaining tokens will enter the next round and will be allocated on a first-come, first-served basis, starting from the highest-ranking participants.
The highlight of Solstarter lies in its community. Thanks to the team’s blockchain expertise and successful SNS operation, its community has become extremely popular. For example, Solstarter’s CEO Roy Blackstone, who has over 30,000 followers on Twitter, bootstrapped Doki Doki, which is very popular recently. Having founded CoinDust, Radiance, and Noble5, its COO NekoZ has extensive experience in crypto operation and has more than 155,000 followers on Twitter. The Solstarter team also includes Sheel Patel, who is an MIT graduate that has been following the crypto space for years. Sheel had worked for Tesla in the machine learning department and has 65,000 followers on Twitter. Moreover, Solstarter is also funded by big-name investors, including DeFiance, Alameda, rarestone, spartan, hashed, coin98, etc. In October 2021, it had attracted more than 200,000 Twitter followers had more than 110,000 Telegram followers even before project activation. However, Solstarter still has not offered an accurate launch schedule. It has not released any new tweets in months. It remains unclear as to why the project has not tried to monetize its enormous popularity.

(4) Solanium

Solanium has also developed its own criteria for screening projects. The Solanium team focuses on the quality of crypto projects and the team behind them, as well as their token economy. Solanium will then conduct a comprehensive rating of the project based on its community and the current market environment. Thanks to a well-established community (over 370,000 Twitter followers and nearly 120,000 Telegram followers) and the unique and careful screening of projects, projects listed on Solanium have all performed well. As of October 13, 2021, over 19 million SLIM tokens have been staked, with a total value of more than $54 million. On Solanium, nine first-class projects built in the Solana ecosystem are going through or have completed IDO, including star projects such as Waggle Network, Flippies NFT, Cyclos, Port Fiance, and DeFi Land, with an average ROI (ATH) of over 10X. Different from Raydium, which provides liquidity by itself, Solarium relies on Raydium for liquidity. Despite this, the Launchpad functions of Raydium are purer. Additionally, Solanium has also created many successful cases. As long as the project teams stay away from any mistake, Solanium may overtake AcceleRaytor as the industry Launchpad.

(5) Solster

As a rising star among Launchpads in the Solana ecosystem, Solster incorporates decentralized exchange (DEX) for crypto trading, token swap, token staking, and lottery platform. Designed similarly to Solstarter, Solster has also introduced a tiered mechanism of token distribution. In the first round, tokens will be distributed to STR stakers depending on the staking amount, the share in the liquidity pool, and the KYC level. In the second round, tokens will be distributed to users whose wallets store STR but did not stake. The third round will be open to all users. Meanwhile, according to the amount and time of staking, Solster has also divided users into four tiers, which come with different voting rights and priorities for token purchase.
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Members of the Solster team are mainly from India and are experienced blockchain practitioners. Its CEO, a leading member of the Indian Blockchain Association, has been working in the blockchain space for over a decade. Furthermore, many of Solster’ team members are former staff at the Solana public chain. Solster is funded by investment institutions including ViaBTC Capital, SWGI, Chain flow, TokenInsight, etc. Its native token, STR, has demonstrated terrific track records since it was listed. It has reached out to many promising projects, which will be soon launched on Solster. Backed by a pragmatic team, Solster will soon introduce functions such as stake. It is a project worth looking into.
Apart from the above projects, Solana also features Launchpad projects that are still under development, such as Solpad, Solcubator, Hiro LaunchDAO, and Valholla.

2. Rating and analysis of Launchpad projects

Overall, Reydium and Solanium are both well-established Launchpad projects in the Solana ecosystem. The two stand out from their peers in all aspects. As the first Launchpad project on Solana, Raydium boasts an advantage for AMM. In the early stage, it pooled many high-quality projects, including ALTAS, which is an outstanding project that recorded an ROI (ATH) of 100X and improved the average ROI on Raydium. As a latecomer, Solanium has overtaken Raydium in terms of the speed and efficiency of token listing. Recently, it has listed many trending projects. Major components of Solana include DeFi Land, Port Finance, and Cyclos. Solster is the latest challenger that has shown huge potential. Of course, Solster’s future development will depend on the projects to be listed on it. As for Solstarter, which has become popular but has not made any move, we will wait and see what stories it will unfold.

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Based on the above, we have proposed a rating mechanism for Launchpad projects, with a full mark of 5. The rating features an analysis of different platforms in terms of community, team capacity, investment institution, and the quality and quantity of projects:

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IV. Conclusion

Through the above business models of Launchpad, we can tell that Launchpad projects are very similar to each other and that their core competitiveness lies in the following aspects:
— How the community is operated and the project popularity.
— The project quality, i.e. whether the project can bring steady streams of high returns to investors.
— The team background, i.e. whether the project can offer developers sufficient support in terms of technology, connections, funding, community, etc.
Only by acing in all three aspects can a Launchpad project build a positive fund flow and attract more user traffic for crypto projects through resources like its community, thereby gathering more outstanding developers and enabling sustainable growth.
Within the Solana ecosystem, Launchpad is undoubtedly one of the driving factors for the implementation of crypto projects. The booming Solana ecosystem has also provided a powering underpinning for Launchpad projects. How to stand out from the many competitors is a challenge facing all Launchpad projects. For many potential IDO projects, what is needed is not funding, but other forms of empowerment, such as guidance and consultation for community operation and future roadmap. This constitutes the fundamental building block for the long-term prosperity of a Launchpad project.

About ViaBTC Capital
Combining services such as funding, resource support, and post-investment assistance, ViaBTC Capital is an ecosystem-based investment platform that focuses on Web 3.0 and Layer 2 projects or DApps for DeFi, NFT, or DAO. We believe that this new subsidiary, relying on the rich industry resources of ViaBTC Group, will speed up the development of the blockchain industry by gathering the relevant technologies, talents, projects, and capital across the globe.