What is a Cryptocurrency Launchpad?

Key Takeaways

• Crypto launchpads are platforms that allow for anyone to participate in the initial private sale of new tokens or projects.
• Launchpads give users a certain “tier” based on the amount of platform tokens users lock up on the platform.
• The probability and size of allocation offered to each user is determined by their tier.

Overview

Imagine investing in Apple when they first went public back in 1980 at a price of $22. Having split five times since their initial public offering, this would mean that the split-adjusted cost basis of each share at the time would be about ten cents. At today’s current price of $150, this would translate to a 1500x return, turning a one-thousand dollar investment into one and a half million.

There have been many opportunities even more lucrative than this in the world of traditional finance, and early investors of new projects have made massive gains by being early adopters of such successful projects. However, the issue with the traditional financial sector is that investing in these early projects is often reserved for large venture capitalist firms and the ultra-wealthy.

Cryptocurrency was designed to take the power out of the hands of a single entity and democratize the financial system through decentralization. Investing in new and emerging digital assets was designed with the same principles in mind, leveling the playing field and allowing anyone to invest in new and upcoming projects. This is the idea behind the cryptocurrency launchpad.

What is a Launchpad?

A cryptocurrency launchpad is a decentralized platform on which new tokens and projects can organize and launch a private sale. Launchpads allow new projects to acquire more exposure and interest. The launchpad platform will advertise and list a new ICO or IDO weeks before the initial whitelist opens up, and during this time many users will research the new token. This allows people to do their own due diligence before signing up for the whitelist, as well as attracts new investors. Launchpad platforms exist across a variety of smart contract ecosystems including Solana, Cardano, BSC, Avalanche, etc. They all fundamentally function in the same way.

Launchpad platforms will also audit and filter applications for a listing in order to protect early investors from scams. This allows those who choose to participate to be confident in the projects that they are investing in.

How to Participate

Launchpads are where initial coin offerings (ICO) or initial DEX offerings (IDO) take place. Both are essentially where people can participate in the launch of new tokens before they are offered on public markets.

When a new token gets approved to be released on a certain launchpad, there is a short whitelist period before the actual release takes place. During this time, users are given the chance to sign up for a raffle which determines who gets to participate in the initial coin offering. Getting an allocation for a new token can be a difficult task since there is only a limited number of tokens to be distributed and spots for investors. Launchpad users are given the chance to be whitelisted for allocations, or a portion of the private token sale, depending on their Launchpad “tier”.

Launchpad tiers are determined by how much a single wallet address has staked or provided liquidity for the launchpad’s native token, and determine how many lottery tickets a user has in the raffle. For example, the Solanium launchpad on Solana has its own SLIM token which users must acquire and stake in order to receive a certain tier. Each tier has a different name and card as shown below:

More lottery tickets mean a higher chance of being chosen for allocations and, therefore, users are incentivized to purchase more launchpad tokens. There is a multitude of different Launchpad platforms across smart contract ecosystems including Solana, Avalanche, Cardano, and many more. Each platform has its own tier and lottery mechanism.

Limitations

Launchpads are great because they remove many of the barriers present in the world of traditional finance. However, different platforms have different regulatory restrictions, and many launchpads require their customers to do KYC. This is implemented by many different countries in order to mitigate risk for their citizens as cryptocurrencies are a risky investment class. For this reason, there is a list of countries that have banned their citizens from participating in such initial coin offerings, and therefore it is important to always do your due diligence before participating on these platforms.

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