Topic: What could be considered red flags with tokenomics of new projects? (Read 163 times)

It depends on the investor, at least to me keeping any amount of coins in reserve for the themselves is a read flag, and my reasoning by this is that they are just keeping those coins in the case the project becomes successful and then they become very rich because of it, Satoshi the benchmark against what any other developer must be compared did not kept any coins for himself, and the coins he got were obtained by mining bitcoin with his computer and keeping the network safe.

I think that if 10% are allocated for the members of the team than that his absolutely ok and a very good value. I saw good and hyped new projects launching that had like 20 or even 25% allocated for the team and their token sales were still successful. More than 20% allocation for the team are definitely to much though in my opinion.
Regarding the lockup time for team tokens. I think those tokens should have a lockup of minimum 1 year after the TGE and then after that 1 year those tokens should also only gradually unlock. Like 10% unlocked after 1 year and then again 10% unlock after each coming month. Everything below 1 year would definitely be a red flag for me.

It's not really a red flag since the team needs money along the way to continue to develop and market the platform, it's still within range, some developers kept 20% of the allocation

If I were an investor I will look if there is a locking period of the shares of the developers, they will be motivated to work on their project until the token is unlocked and with a good price in the market.


But what if they did not reach the soft cap and just depend on the money that they got so they will have to rely on the locked token for their future profit, the first thing I look at is how motivated the team is and if they are really capable. 

As far as I know, there is no specific figure that can be regarded a red indicator when it comes to team allotment in new crypto ventures. A 10% allocation, on the other hand, may not be a major worry, but it is still worth examining. It all relies on the environment and goal of the endeavor.

The locked duration of the team's token allocation is an excellent approach to prevent the team from selling their tokens. It assures investors that the crew is dedicated to the project and believes in its long-term success. However, as previously said, it is not a perfect method. There are always possible flaws or methods for the team to sell their tokens.

When a project raises three times its objective in a presale, it's a good indicator. However, this does not necessarily imply that the team does not need any token allocation. The cash received during the presale may not be sufficient to cover all of the project's development costs, and the team may still need tokens for incentive and pay.

The argument that token allocation is for development is acceptable, however keep in mind that money earned during the presale should also be utilized for the same reason. The allocation of the team should be appropriate and transparent so that investors understand how their money are being spent.

Honestly? It's the token itself, if it is a regular token with nothing in it, then I won't invest into it at all. There are too many projects with just regular token with absolutely no flavour, they add the flavour in later on with what you can do with it, give it a usecase, like "oh you can buy things from our website to make even more tokens" type of thing. That's not going to be ok with me, I won't invest into anything like that.

If someone wants my money, they need to innovate and improve the token world and they need to add something new to it, which would mean that they know what they are doing, no guarantee it will be profitable, but at least it's a way to eliminate %99 of the tokens.

Well there are many red flags on new Crypto-currency projects this days. So many of them aren’t what the claim to be and they base the foundation of their project on lies.

The tokenomics of a project is meant to help you prospective investor of the project to determine if it’s worth it, now the project team knows this and they give fake tokenomics, fake amounts of coins in circulation and so on. And this attitude also goes on to its road map too.

IMO, people are not gonna to take this as a problem.
1. 10% are quite small, some of project can take around 20-25%
2. We have locked system.
3. If the price token are more than the original price, people are not gonna care it at all.

But most of important for crypto user is number 3. Because what ? because profit is the things they only care at all, do they care about the project? not only around 2-5% who care about that. The rest only profit.

High team token allocation is a big red flag how much is locked and what the lock time is and the percentage unlocking could help reduce a dump at the start of the project but what tou should also know is that some smart scammed project team can have perfect plans of pulling the exit scam on investors when they list expect it, such as building to token to a.food height and after the token gain traction with price pumped, the token gets extra minting without public announcement and there after get dumped before the investors could know it e.g Luna coin exit scam is similar to this.

In the first place, tokenomics was one good reference to find out if the projects have the potential to give profit in the future.
We can only prove that the new projects have the potential to become successful if at least 50% of their target has been reached or achieved.
But if the target sales are below 50% of their aim sales, most of the time some projects tell this to become transparent to
their community who entrusted them. But others are not, even if they didn't meet 50% of their target sales they will still say it is successful
even if it is not because they are scammers.

Not bad, but it isn't the only factor you should take into account when reviewing a project. Not sure how much is alarming but I reckon anything above 30 you'd need to make them answer some questions as to why it was allocated that way I guess.
Naturally, it's better than letting their team dump their tokens at the start and possibly crashing the ecosystem of the market. The longer the tokens are locked, the more it shows that the team isn't really considering that the project is dead and they believe it's still worth working on.

Projects don't necessarily set their target to be the comfortable amount they need, it may be the minimum they actually need. And besides, tokens for the team can be said to be their shares of said project.

No. I've seen other project teams take a bigger cut than that, 20% - 30%, then state that some of it are supposedly allocated to "marketing" and even "future" usage, whatever that is. LOL

Yes but it depends on how long it is locked and how many of the team's holdings are locked. If it is just 1% out of their total holdings, then that's nonsense.

Depends on what type of project or company they are trying to build. Some startups need enough funding to even begin development while others don't need much. Team allocations are usually used for marketing, especially with projects or startups that are so keen on using their own token for that purpose rather than the raised funds.

Same as above. What's important is that the project team is transparent about it, where the tokens and raised funds go, and how they use it.
Much of these details are usually in the token's economics or in their whitepapers (if they have one). If you can't find it, it doesn't hurt to ask the project team directly.

Thats 10% of the total supply well we need to give credits to the developers right? I think its not bad at all, since most projects have did this in the past.

This is usually been disclosed at the beginning of their project. Its also good to have team locked for a longer period especially it will be good in eyes of the investors that team doesnt have any plans to sell and yet focus on the project more.

Its hard to call red flag when team allocates %10 to themselves. But I can directly say its yellow flag. Sometimes developers stay anonym so it raises questions...
I think if team keeps creating different coin projects (there are examples to this on Bitcointalk forum even) its definitely red flag. It means they are mainly trying to raise money not develop a project properly.
Answer for your question is: I think locking allocated coin is functional decision. Its not best option we have out there. But its at least safer.

So 10%? No, that's not a red flag by itself but there are other questions. Is the team doxxed? how is that money being used, or is that just instant salary for the team without any lock time?

Better solution then not having a lock time? Best solution for this would be that employed people would be using money they raised so they wouldn't NEED to sell their tokens right from the start.
But if there would be a lock time it should be gradual in order to prevent huge dumps.

They wouldn't need the tokens. But if they believe in the project, obviously they want the tokens as well. It all depends on the funding. If team was legit and smart they had turned everything they rised to fiat money and not be irresponsibe and speculate with their funds. In that way they can make a budget for potentially several years for development. So they can calculate what they afford to hire and for how long. And they wouldn't need to panic sale their own shares just to keep themselves above the water.

Team having tokens is a fuel for conspiracies. And i would like to see team committing to using them securing the chain there's some sort of PoS system.

I have some questions about fund raising of new crypto projects and what could possibly be considered a red flag when checking out their tokenomics, especially the team allocation and fund raising, I hope this is the right section for this.


If a token supply of a project is 100 million and the team is taking 10 million for themselves is this a red flag? If No, how much is alarming allocation for team of a new project?

My second question is about the locked period of team token allocation, have this proven to be a better solution to avoid dumping from the team themselves?

If a new project successfully raised 3x of their target in any presale isn't that enough to get the project to where they plan? So why the need for the team to still acquire some token allocation for themselves?

Some will say that token allocation is for development, what about the money the project raised?