Launching Tokens

Don't do it!

Seriously, don’t do it. Launching tokens will result in heartache, torch your reputation (if you have one), and result in little to no actual income (if you’re earnest about doing it right).

Regardless, people persist. In this article I’ll discuss a wide variety of topics related to token launches based on my observations from the last few years, and firsthand experience repeatedly helping people launch tokens over the last half year.

Scoping

I’m not qualified to discuss some things, like launching a token for an L1 with first day CEX listings. I’m barely qualified to discuss launching a token for a protocol that actually intends to do things. I’m not familiar enough with the weird bundling / pump and dump scams on Solana, although I’ve probably heard the same rumors you have.

This article will focus on launch mechanisms for smaller, honorable token creators that want to make a community, or a meme, or a small protocol with fee sharing or something.

But first, there are a few topics you should understand before considering how the token should be distributed.

Why a token

Amazing question. Why DO you need a token?

If you have a successful product already, you probably don’t need one, and the only reason to create one is to cash out. Which can be fine, if done properly.

You might need one as part of your business model. For example, $joe existed so that they could incentivize LPs, and people could speculate on the price going up faster than people dumped it. And also so the founder could dump it.

If you have an L1, you need a token for economic security, but that’s out of scope for this article.

Many tokens are launched explicitly for speculation and/or blatant theft (e.g. bundled and dumped on more gullible speculators), this describes basically every token launched on pump fun.

More recently there have been ‘community’ tokens launched, where the idea is that shared ownership in the token binds people together to create a community. This is similar to what people were doing with NFTs last cycle, except the art gets posted on Twitter instead of attached to your share of the float.

‘Successful’ tokens

It seems clear that a successful token is one where the price goes up. This is a casino and people are happy if they make money, angry if they lose money. Doesn’t matter how hard you work or how honorable your intentions are, price go up is the final decision maker on this.

And to be fair, the founding team does have some (marginal) ability to affect price upwards. Stuff like how they launched, how they manage liquidity, how they market, how they behave in public. But 99% of the people here just want to dump for a profit, and most coins will go to zero.

Realistically, the founding team only has the ability to send the token downwards (other than shenanigans like pulling LP and using it to buy). Like maybe by issuing violent threats. Or going on vacation immediately after launch and never coming back. Or getting caught fucking a horse.

It’s funny, and a bit sad, when comparing against tokens like Fartcoin. No one has any expectations for those tokens. Meanwhile on Avax, you have to have a goddamn 5-year dev plan for how you plan to succeed, madness.

The ‘developer’ vs the ‘dev’

Just want to pop in here and mention that the guy pushing the buttons is a software developer (typically) but people often use ‘dev’ to refer to the person launching the token project, and sometimes conflate the two.

They’re different things. As a developer, I push buttons for money. As long as it’s not crime, I’ll take money to do it (some caveats apply). I have pushed buttons for many projects, and I will push more buttons in the future. I take no responsibility for the future of those projects, other than if any mistakes occur during launch.

Price action

So obviously, everyone wants to buy low, see a huge profit spike, and then dump for generational wealth. And this will happen to some people. For memecoins, this is basically what you’re hoping for.

For the founder of any kind of legitimate ‘utility’ coin, you’d prefer a slow and steady ‘up and to the right’ pattern where as a token generates more value, that gets recognized, and the price reflects it in a rational way without going insane.

Good luck with that.

In reality, many tokens will go right to zero, most tokens will go to zero over a few weeks, and even legitimate utility tokens will swing wildly up and down as people reflexively buy and sell shifts in momentum.

Launch hazards

Keeping your token alive long term is one thing, but the few seconds, minutes, and days just after launching is a whole other bag of snakes.

Launch failure

We haven’t seen too much of this recently, but it’s very easy to fuck up your launch. This stuff is complicated, relatively hard to test, you only get one chance, and a lot of ‘devs’ are literally 20 year old retards who read a solidity tutorial once.

There are a lot of things you can do wrong when pushing your token live, the more complicated the launch, the more things that can go wrong. I’ve seen people airdropped multiple times, not airdropped at all, accidentally send the dev funds to the wrong place, burn or lock the LP incorrectly.

We even have Defi Advisors adding LP in the wrong range and accidentally nuking their token!

Sniping

The most well-known hazard is getting your token ‘sniped’. There’s a lot of discussion about what ’sniping’ means, and I’ve written about this quite a lot, but the end result is that a lot of supply is acquired cheaply and gets sold after ‘real people’ have bid the price up much higher.

Sniping is very challenging to prevent, and honestly I think you should mainly focus on ensuring that there’s no motivation to snipe the token instead of fighting the snipers.

Distribution

This refers to the amount of float that is in the hands of any individual person, the concern being that that person could decide to exit and nuke the token, aka FSH (Full Stack Hitler).

Historically people have attempted (poorly) to prevent this using per wallet limits on token ownership, something easily bypassed technologically.

More recently, presales that tie social identity to allocation have come in vogue, which are more effective.

Airdrops

This specifically excludes presale allocation airdrops.

I have no idea what makes an airdrop effective. People want airdrops so they can dump them, full stop.

For some tokens, an airdrop is a way of compensating for fees collected. Basically an over complicated presale mechanism, more recently has become transparent via ‘points’. This seems right and fair to me.

But other tokens that airdrop to users who haven’t contributed anything are hoping to get exposure, I guess? It rarely works out. People get free tokens, they dump them, they don’t suddenly become invested in the ecosystem.

Vesting

There have been a number of presale launches on Avax recently with zero vesting. At first I questioned this, but after some discussion I was convinced that this was a good thing for a few reasons:

1. Get people who don’t want to be a part of your community, out of your community ASAP

2. Higher float available at launch discourages sniping and normalizes the chart faster

3. Dripping float out into the hands of people just ensures a slow death as people claim and dump like clockwork

Liquidity

People have all kinds of crazy ideas about liquidity. They say things like “there’s too much liquidity” or “dev needs to add more liquidity”. These people have no idea what they’re talking about.

But neither do I, honestly. The most intelligent-sounding thing anyone ever said to me on the topic was “there needs to be enough liquidity to facilitate trading without suppressing price discovery” which sounds really smart but I have no idea how that translates to actual numbers.

Presales

If you do a presale, the ratio of token to Avax that gets added to the LP needs to match or exceed the price of the presale. If you mess that up, it’s basically a scam (people buying from the LP get a better price than presale).

For a presale, you need to have some kind of sell-side liquidity, typically people put in the range of 50%-70% of the raise (if it’s not a scam).

Single sided liquidity

Another way to launch is to pick a starting price, and add tokens on a curve to infinity. If you’re not doing a presale, I suggest this mechanism because if you do a 50:50 LP you’re likely to start at an insufficient price relative to demand.

Tokenomics

I don’t have a lot of commentary on this. How much the dev team keeps, whether they keep raise funds, token, or both. How much gets airdropped and to whom. There’s a lot of stuff that basically up for debate.

Really the only thing I have any advice for you on is initial liquidity, which I’ve covered above.

Token Generation Events (TGE)

There are a lot of ways to do the initial distribution of your token, and they all have pros and cons, but some are worse than others.

Note that I’m just discussing the initial distribution here! I’ll discuss some modifications to the launch afterwards.

Stealth

This is when you announce your project with no marketing and add LP at some random time. It is the worst kind of launch. Especially if you do a classic 50:50 LP, since you lose that money forever and you will inevitably set the price way too low.

You’ll also get accused of crime forever (sniping your own launch) and unfair distribution, etc, no matter how noble your intentions. Unsurprisingly, this type of launch is very popular with criminals (Delaunch).

Just don’t do it.

Bonding curves

Stuff like pump.fun is effectively a stealth launch, except even more scammy. The curve for acquiring tokens prior to ‘migration’ is even worse than a very thinly added LP.

There’s really no reason for a bonding curve to exist. You can just launch a token single sided on a full curve. The reason people use those products is to acquire supply cheaply and dump on people. The epitome of the casino.

Fair

This is only slightly less bad than stealth, you’ve announced your project and told people when it will launch, and then you add a small amount of LP and all the tokens. This was very popular a few years ago, notably $coq launched this way.

This is a terrible way to launch. These launches commonly have 1% ownership limits on them, and launch with < $10K in LP. They are easily botted to zero, the protections do nothing. The only reason $coq survived was that it came first, no one expected the response, and also because of exogenous factors we don’t discuss in polite company.

Dutch auction

I haven’t seen too many of these recently, but the idea is that the price per token starts high and then decreases over time. People can buy at any point, but they only end up paying the ‘final’ price for the token, essentially when all tokens have been sold (they get refunded any overpayments).

This is an interesting idea, I think the issue is that it’s hard to gauge sentiment and set the parameters in advance properly. People either end up buying out the launch immediately at way too high of a price, or the token inevitably closes at the lowest possible price.

There’s also no mechanism to ensure smooth distribution, unless you KYC or something. Perhaps this could be solved through whitelisting verified social accounts or something (new meta!?)

Liquidity bootstrapping pool (LBP)

There are a number of sites that provide this service (Fjord), where a project can pair their token with some other asset and let users buy and sell prior to launch to find the launch price.

This is a bit harder to understand than a Dutch auction, but the price is actually higher for early buyers. The risk of trying to buy later at a lower price is that you might miss out entirely.

You can trade in and out of a LBP prior to the launch completing, which is a big difference from a Dutch auction. Anecdotally, this kind of launch seems more common, I’ve seen a lot more LBP launches than DA launches.

Decreasing tax

This is a similar idea to Dutch auction, where the launch occurs on a Dex like usual, but the token itself ‘taxes’ purchases during the launch window. Effectively, you pay a decreasing price over time to buy tokens (*, until the tax is fully removed. Everyone can decide for themselves the price that the token is worth buying at, and earlier buyers pay more (similar to a LBP).

Notably, this harshly punishes snipers who buy in the first few blocks of launch. I’ve seen this happen, and them barely break even or lose money, good tech.

It avoids issues with setting the Dutch auction parameters correctly by effectively setting an infinity price to start and eliminates the ‘everyone gets lowest price’ degenerate behavior.

This does have some downsides though; mechanically it is quite difficult to pull off smoothly, and confusing for end users (needs a custom launch site even though it’s already on a Dex). Some users who are not aware of the mechanics will get burned.

Presale

In a presale, users supply funds in exchange for a promise of tokens at launch. They are happy to do this because it gets them in ‘early’ and the expect the price of the token to go up.

Recently, in an attempt to even out the distribution, presale allocations have been (at least theoretically) tied to social profiles, which are much harder to fake than wallets. This has inevitably resulted in a lot of drama about who gets what allocation.

Regardless of what you think about the drama, a presale is strictly superior to many kinds of launches. A lot of people get the majority of the float at the same price, there is no mechanical advantage to those purchases, and the distribution is guaranteed to be at least more even than buys from an open market.

I think one of the most significant problems with this kind of launch is the fact that the presale size available hasn’t met the demand for the presale, leading to a massive pump on launch, and an inevitable decline.

Initial token trading

People are understandably concerned about how to make token launches ‘more fair’. The key concern being a sniper taking a lot of tokens, and then dumping them immediately for a huge profit.

I already mentioned that I think this is a fool’s errand, but for completeness I’ll discuss some of the options you can ‘add on’ to your TGE.

Custom Dex

Launch your token on a custom Dex with limits of your choice. I wrote a whole article about this, read that post.

Decoy LP

Many launches have been adding fake LP that they create, leave for X seconds, and then remove. The intention is to bait snipers into incorrectly buying the fake LP, and scare them off buying the real LP.

There has been some controversy over how legitimate this tactic is, but regardless it’s become significantly less effective recently, as snipers have pivoted to scraping Twitter for the CA announcement.

You can read this article on the $wink launch.

Factory-based launches

This is common for ‘launchpad’ type things, where a contract is created that will subsequently create the token at a later point, add liquidity, etc. But it can also be done for a standalone launch to ensure that the token creation and provisioning takes place in a single transaction.

This doesn’t do much to prevent a dedicated sniper, although many non-technical TG snipers will require a CA in advance to ‘snipe’ and it will defeat those.

Token modifications

There are a variety of ways that you can modify your ERC-20 token to attempt to prevent sniping at launch, mostly bad, and problematic because they flag Dexscreener.

Here I’ll list a bunch of things that are relatively trivial to evade for a botter. That doesn’t mean you shouldn’t do them, just realize that they’re not an effective strategy on their own. But most of them also negatively impact real users.

Note: ‘wallet’ below is shorthand for either the wallet address the token goes to, or the transaction initiator (they can be different things, especially when botting).

• Blackout period - token cannot be transferred in the first X blocks

  • Lockout period - if the token is transferred in the first X blocks, it’s locked forever for that wallet

• Time limits - wallet can only transfer X times within Y blocks

• Amount limits - wallet can only contain/transfer X% of the token

• Tax period - see decreasing tax section above

So how should we launch tokens?

I’ll say it again, don’t, it will just end in tears. No matter what you do, some people will make money and some people will lose money, and the people who lose money will be angry at you.

But if you do want to launch a token, then there are some things I think you could do to reduce the number of tears.

Don’t stealth or fair launch

Those things are a fucking train wreck. They will go to zero and your reputation will be shot. You’ll never beat the charge that you sniped it.

Do test obsessively

You only get one chance at launching. Test everything, a lot. Have a checklist. Don’t rush. Don’t only have one developer, get a second opinion.

Don’t vest

Unless you have some kind of strategy with very long term vesting and some kind of fee-driven buyback utility, best to get the tokens out in circulation immediately.

Do pre-launch price discovery

Personally I like the LBP and Dutch Auction mechanisms because they give some kind of a way to evaluate demand prior to the token actually being live.

At a bare minimum, you should do a presale if you have any kind of real demand. A presale will ensure that a large % of tokens (typically this has been 70% or more) get into the hands of a lot of people at an equal price.

Don’t limit presale to pump price

Everyone wants to make their presale exclusive so that people will have to buy on the open market and pump the price. Everyone loves ‘token go up’.

I feel like we’ve seen how that goes, and it’s not pretty.

I think most of the issues relate to a mismatch between demand and supply at launch. If more people bought tokens prior to launch, the price would be higher, and there wouldn’t be as much instant appreciation as everyone rushes to buy.

Do provision single-sided buy LP for your presale

I don’t really get the fascination with launching on 50:50 LPs. Everyone who bought into the presale got those tokens at a specific price. Why should anyone have to sell tokens back under that price?

Launching on a 50:50 LP just means that the people who dump faster, get more. Set a floor for your token instead.

Don’t fuck around with your LP

People are always like ‘devs plz pull LP to pump price’ but they don’t understand that reducing LP also means when people dump, they dump harder.

Just stop fucking around with the LP. You don’t really know why you’re doing it, and your justification is probably stupid.

Do keep a dev allocation instead of sniping your launch

This shit never works out. It’s very easy to detect a dev sniping their own launch. Just keep a dev allocation and put the extra money you were going to snipe with into the LP.

Got milk?

This post has gotten quite long, but I’m sure I’ve forgotten some topics. Feel free to ping me to ask me to add content on anything in particular.