An Analysis on Token Sale Structures

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Recently, projects have been raising funds on @CamelotDEX's Launchpad. Over $30M has been raised yet few know how Token Sale Structures work before apeing. A Fundamentals Deep Dive into Token Sales 🧵

Here's a gist of the thread: 1️⃣ ICO vs IEO vs IDO 2️⃣ Terminologies 3️⃣ Sale stages 4️⃣ Capped Sales 5️⃣ Capped: Auctions 6️⃣ Capped: Oversubscription 7️⃣ Uncapped Sales 8️⃣ Uncapped: Fair Launch Grab a coffee and enjoy the read 👇

1️⃣ ICO vs IEO vs IDO ICO (Intial Coin offering) is an old and traditional method of fundraising where tokens are sold directly to buyers. ETH for example raised through an ICO. IEO (Initial Exchange offering) involves a CEX as an intermediary such as Binance's Launchpad.

IDOs (Initial DEX offerings) are similar to an IEO except its conducted on a DEX. IDOs gained popularity due to their decentralized nature and the ability to provide liquidity to tokens instantly.

2️⃣ Terminology Hard cap - Max amount a project intends to raise Soft cap - Min amount a project intends to raise Vesting - Tokens are distributed over a period, rather than all at once Lockup - A period in which tokens cannot be sold or transferred.

3️⃣ Sale Stages Presale: Funds raised to kickstart the project. This group typically comprises of early supporters or strategic partners. Private sale: Often larger amounts of capital. Participants are often required to meet certain criteria, such as min investment amounts.

Public sale: Final stage of a fundraising campaign, and it is open to the public. The tokens are sold at the market price, with no discounts or hard/soft caps.

4️⃣ Capped Sales A capped sale sells a fixed number of tokens for a fixed price to raise a specific amount of money. Perpy, $PRY, is one example. It just recently launched its public sale on Camelot to raise $5M. $PRY is a multi-round raise.

Features of the $PRY public sale: Hard cap - $5M Soft cap - $2M (if not hit, will be refunded and canceled) Whitelist - Whitelisted addresses can participate 24H in advance Vesting - 18Mth vesting for unsold tokens Price - Fixed at $0.02

5️⃣ Capped: Auctions I. Sealed-bid (Blind) Auction Sealed-bid auctions are a type of auction where bidders submit their bids privately, without knowing the bids of other participants. Bidders can submit any price they are willing to purchase tokens for.

For example: Project A wants to raise $50K Buyer A bids $10K for 10K tokens ($1/token) Buyer B bids $20K for 10K tokens ($2/token) Buyer C bids $30K for 100K tokens ($0.3/token) Buyer D bids $25K for 50K tokens ($0.5/token) In this case, Buyer A, B and D win the bids.

The token distribution price will be determined by the lowest bid by a buyer (in this case $0.50/token). Since the project only wants to raise $50K, Buyer D, having the lowest bid, is only entitled to $20K worth of tokens.

Blind auctions are not very common for a few reasons: - Lack of transparency since buyers don't know the bid prices - Potential for market manipulation - Unpredictable pricing (unknown FDV) - Limited participation

II. Dutch Auction In a Dutch auction, the price of the token being offered starts high and gradually decreases until it reaches a price at which all the tokens are sold or until the auction ends.

An example is Algorand's $ALGO ICO in 2019 Algorand carried out a series of Dutch Auctions which lasted for fixed periods of time. The price of $ALGO would drop from the initial price until it reached the reserve price or all $ALGO were sold at the clearing price.

Clearing price is the final price which $ALGO is sold at the end of the auction. (ie everyone who bid above or at the clearing price gets $ALGO at the clearing price) Reserve price is the Min. price below which $ALGO will not be sold.

As the price dropped, the number of Algos sold at the auction increased, and the remaining Algos dropped. The auction ended when the demand was met or exceeded the supply or when the reserve price was met. If demand > supply, bids will be fulfilled on an FCFS basis

6️⃣ Capped: Oversubscription In an oversubscription model, the amount of funds raised exceeds the funding goal. The sale continues for a fixed period of time even after the cap is hit

For example, Project A wishes to raise $1M During the sale, $2M was raised (oversubscribed by 2x) At the end of the fundraise, buyers would get 50% refunded to them and receive tokens proportional to their share.

7️⃣ Uncapped Sales An unlimited number of tokens is sold at a fixed price over a fixed time period. All buyers can buy as many tokens as they desire, and there is no cap on the amount raised.

This was rampant in the 2017 ICO mania. Filecoin raised >$200M in an uncapped ICO

Raw uncapped sales are not very common now because: 1. High uncertainty about the valuation buyers are buying at. 2. Nearly every uncapped sale is criticized for being “greedy” Hence, most projects raising funds now have a hard cap.

8️⃣ Uncapped: Fair Launch A fair launch distributes tokens fairly by ensuring that everyone has an equal opportunity to acquire them. It prevents a small group of individuals from obtaining an unfair advantage.

Fair launches help to prevent scenarios where private investors in earlier rounds dump their tokens on buyers when it comes to later fundraising stages.

For example, @FactorDAO raised using a fair launch model on Camelot. $FCTR is an uncapped raise. Depending on your $ contribution during the raise, you'll get a proportional amount of $FCTR after the price discovery phase.

Understanding token launches is just 1 part of becoming a smarter ape. Tokenomics play an important role too. I'd highly recommend taking a look at this thread by @Hercules_Defi to learn more on that 👇 twitter.com/Hercules_Defi/status/1635311048164270080?s=20

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