How do crypto projects get the money to build and pay developers?

With this flurry of new projects and ideas appearing in crypto, a new problem arose: these projects, not necessarily big or connected enough to be VC-backed, needed a way to raise funds for their operations and development, as well as to provide inital liquidity for their token on AMMs. At first, Initial Coin Offerings (ICO) were used, resembling classic fundraising events but more retail-oriented and with tokens as a reward for investors instead of shares. However, seeing as Initial Coin Offerings (ICO) were centralized and increasingly regulated, new models appeared, often operated by launchpads as decentralized (therefore considered trust-less) intermediaries.

These launchpads would allow project teams to sell part of the supply of their tokens before release, and raise funds through this sale. This is usually referred to as an Initial Decentralized Offering (IDO).

These often include one or more of the following mechanics:

• Selling only to people who hold/stake/provide liquidity for the launchpad’s token

• Dutch auction → Price that gets lower with each buy, same price for all at the end

• Buying with launchpad’s token or liquidity → Initial Farm Offering (IFO)

• Instant locking of some or all raised funds as liquidity (to “prevent rug-pulls”)

• Seeding liquidity with a Liquidity Bootstrapping Pool (LBP), setting the initial price and gradually adapting to the pool

Major projects will often opt for major launchpads and even sometimes multiple launchpads to reach a bigger audience and benefit from a bigger fundraising capacity, but of course any project at this early stage can just as much be a hidden gem as it can be a “rug pull” or scam.

Examples:

• Polkastarter: Multi-chain launchpad originally focused on Polkadot projects

• The DAO Maker: Ethereum launchpad

• Ignition Launchpad: Ethereum Launchpad

• PancakeSwap: AMM with an IFO section for fund raises, main fundraising platform on BSC

• Avalaunch: Avalanche C-Chain launchpad

• Fjord Foundry: Multi-chain LBP platform for Balancer

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