Fair Token Offerings (FTOs) Info

    What is a Fair Token Offering (FTO)?

    A Fair Token Offering (FTO) is a token launch methodology designed to make token offerings more equitable and accessible for everyday traders and investors. Traditional token offerings often have issues related to access, appreciation, supply, liquidity, and transparency. FTOs aim to address these concerns by ensuring fair participation and realistic valuations.

    Key Components of FTO:

    1. Access: Is the token offering accessible to retail investors?

      Access is crucial for fairness, especially for smaller retail investors. For an offering to be considered fair, at least a portion of the private round should be open to retail investors, even if access is limited by time or deal size. Currently, many launchpads use lottery-based systems that allow only a small portion of investors to participate.

    2. Appreciation: Has the token value increased significantly since the initial round?

      This measures how much the token's value has appreciated since the initial round, usually the seed or private round. Often, token prices multiply many times over in private rounds, meaning early investors have already captured most of the value. Tokens are then sold to retail investors at inflated prices. We advocate for token offerings with realistic valuations that still offer potential upside for public investors.

    3. Supply: Is there a fair supply tradable on the secondary market?

      A Fair Token Offering should have a significant initial float, at least 20%. Some projects, venture capitalists, and launchpads engineer token launches with a low initial float (under 10%) to prop up initial pricing. However, upcoming token unlocks over the next 1-3 years can lead to early investors dumping their tokens, having already profited in private markets. Increased free float and transparency about token unlocks provide retail investors with better investment grounds.

      Supply measures the percentage of the total token supply that is tradable on the secondary market. A higher supply generally indicates a more liquid and accessible market for investors.

    4. Liquidity: Is there a secondary market trading plan in place?

      Early liquidity is a special feature of the crypto market. FTOs should clearly outline the secondary market strategy for investors, whether through decentralized exchanges (DEX), centralized exchanges (CEX), or both.

    5. Transparency: How transparent is the project?

      The crypto sector is notorious for scams like rug pulls, often due to anonymous project teams. FTOs require that the team is publicly known, a fundamental step in preventing such scams. The DIAR (Ducks In A Row) system helps projects achieve the transparency needed for a Fair Token Offering.

    Why are Fair Token Offerings important?

    Crypto investments are inherently risky. By following FTO Ratings, you can gain a better understanding of a project's token offering readiness and assess risks related to tokenomics and other fundamental factors. While FTO ratings do not evaluate a company's business idea, product-market fit, technology, marketing, or community, they provide crucial information on whether you are investing in a worthwhile project or becoming the exit strategy for earlier investors looking to offload their tokens.

    What problems do FTOs aim to solve?

    FTOs address several issues in the crypto space, including: reducing scams and rug pulls through improved transparency, preventing inflated early market caps by limiting private market gains, increasing circulating supplies to enhance liquidity and price discovery, and encouraging the development of new, groundbreaking dApps.