Fundraising
Note: Data in this section last updated July 3rd, 2022
Last updated
Note: Data in this section last updated July 3rd, 2022
Last updated
Unlike traditional corporations, who generally raise capital through private placements or IPOs, DAOs don’t use investment banks or the financial markets to raise funds and distribute ownership.
Instead, they must create and issue their own cryptocurrencies (or NFTs) by creating a smart contract on a blockchain such as Ethereum.
In addition to physically creating a token, DAO founders must also determine its “tokenomics” – a portmanteau of “token” and “economics” which refers to the incentives and economic characteristics of a cryptocurrency (i.e. the things that make it valuable to investors and community members).
When launching a token, founders must consider the following:
Supply: How many tokens will initially be issued? How many will ever exist? What’s the schedule for releasing them?
Monetary Policy: Is the token inflationary or deflationary? Is there a mechanism to burn (destroy) tokens?
Allocation: How much of the token will be distributed to founders and investors, and how much will be available to the community? Will there be a vesting or lockup schedule?
Distribution: How will the token be distributed – ICO, IDO, airdrop? How will the founders prevent a “gas war” and ensure a fair and equitable distribution?
Utility: How can users generate passive income from the tokens? Can they stake, mine or yield-farm them?
Like any disruptive technology, the field of tokenomics is constantly evolving. Communities are demanding more sophisticated monetary policy, fairer allocation, more efficient distribution and more utility.
For instance, from 2013 to 2017, the primary mechanism for token distribution was the Initial Coin Offering (ICO) – a method where startups would sell tokens directly to the public, often from their website. As the ICO began to run into legal and regulatory troubles, a new model, known as the Initial Exchange Offering (IEO), became popular. IEOs involve launching the token on a centralized exchange, such as Coinbase or Binance. This soon became prohibitively expensive for many (there were rumors of exchanges charging a minimum of $5 million to list), and we saw this morph into the IDO (similar idea, but for decentralized exchanges). Fast forward to 2021, and we see a variety of distribution methods such as airdrops, parachain crowdloans and seed investments. Some projects have even avoided traditional tokens altogether and opted to launch NFTs with governance rights instead.
The Rapid Evolution of Token Distribution Methods Since 2017
The full scope of tokenomics is well out of the purview of this article, but the important takeaway is that it’s a rapidly evolving field, and successful founders must do all they can to stay ahead of the market and maximize value for their communities.
While this may seem daunting, there are fortunately several tools, such as Coinvise, available to help.
To understand how fundraising tools work, let’s take a look at Coinvise – a platform that makes it extremely easy for users to launch their own cryptocurrency token.
To mint a token, users need to navigate to coinvise.co, connect their wallet and enter the proposed name, symbol, supply and description of the token. Once that information is provided, users simply click “Create”, approve the transaction, and receive the funds in their wallet!
The entire process takes about 30 seconds, requires zero technical knowledge and is effectively free (other than gas costs, the platform does not charge a fee or take a percentage).
Coinvise Allows Anyone to Create a Cryptocurrency in Under 30 Seconds
Coinvise currently supports tokens on the Ethereum and Polygon blockchains, and also comes with a variety of additional features to help manage the token’s ecosystem including:
Token Metrics: Coinvise provides an informational dashboard that lets DAOs view key token metrics such as the price, market cap, fully diluted market cap and trading volume and also see a list of the top stakeholders by percentage held
Airdrops: DAOs can send tokens directly to thousands of users at once via a unique link, QR code, email list or list of wallet addresses. This has a variety of benefits and is often used to either reward supporters (such as ENS’s airdrop of over $500M of tokens to NFT holders) or serve as a fundraising tool (e.g. LooksRare airdropped 120 million tokens to anyone with a history of using OpenSea, instantly creating a market value of over $300 million).
Vesting Schedules: Coinvise allows the creation of vesting schedules which “lock” tokens up for a specified period of time, making them unable to trade. This is a helpful practice that is common in the corporate world as it allows organizations to retain employees, prevent early investors from sharing and show that founders are in it for the long haul.
Rewards: DAOs can create rewards (also known as “quests” or “bounties”) to compensate users for performing specific actions, such as creating a website, launching a marketing campaign or fixing a bug. Reward programs are helpful in that they incentive community members, benefit early adoptors and attract new members.
Coinvise is quickly becoming a popular tool in the Web3 landscape, and has attracted over 15,000 members and 500+ creators.
In addition to Coinvise, some of the most popular fundraising tools include Mirror, Juicebox and Fairmint.
