A deep dive into the workstreams and key components of a fungible token launch, and why having an experienced execution partner is critical to launch success.
Content.
- Introduction.
- Community — Managing engagement mechanisms.
- Tokenomics and Whitepaper — Designing token utility, economics and flow models, drafting token whitepaper.
- Legal Framework — Efficiently navigating compliance and enabling protections.
- Technical — Software development cycle across smart contracts, front end UI, token distribution, product integrations, audits and testing.
- Market Strategy — Listings strategy, exchange integrations and market maker coordination.
- Decentralization — Coordinating components to create and launch a DAO.
- Program Management and Launch Sequencing — Orchestrate roadmaps and workstreams, manage timelines and resources, navigate risks and dependencies, coordinate launch event.
- Conclusion.
Introduction.
Launching a native fungible token represents a significant milestone that can greatly contribute to the growth and development of a Web3 project. It requires the coordination of numerous elements to ensure a successful launch, including designing the token’s economics and mechanics, drafting the whitepaper, overseeing technical development, ensuring compliance, defining a communications strategy, and facilitating integration with exchanges, to name a few. All these components culminate in a carefully coordinated launch event that involves multiple teams working in unison.
Our Web3 advisory practice at HLV has developed comprehensive playbooks and strategies that ensure consistency in managing token launch processes, while accommodating the unique characteristics of each individual project.
In this article, we provide an overview of the essential components and workstreams involved in a typical fungible token launch. Additionally, we will emphasize the crucial role of strong operational coordination in effectively managing the complexities associated with this process.
Community.
Web3 applications and protocols are built on the principles of empowering users and community members through enhanced control mechanisms, ownership, engagement, participation, and alignment of incentives, which can be facilitated through the use of fungible tokens that can serve as utility, rewards, and governance tokens. The success of these projects heavily relies on the strength of their communities, encompassing both early supporters and adopters, and future participants.
Early supporters and adopters play a vital role in the sustained growth of a project. They contribute to the community and possess a deep understanding of its objectives, and play an active role in bringing them about. These early adopters are often allocated a portion of the token supply as an incentive for their contributions. This allocation is typically distributed through methods such as a claim or airdrop, as well as ongoing token-based incentives.
Furthermore, tokens can also be allocated as incentives to attract developers, partners, and investors, encouraging their involvement in the project and ecosystem.
Tokenomics.
There are several aspects of tokenomics development and management to consider when preparing for a fungible token launch, including:
- Token specifications: Defining the key parameters of the token, such as token name, type, supply and inflation, token contract upgradability and other characteristics.
- Distribution schedule: Determining the supply allocation, unlock and vesting schedules and mechanics for token distribution to different stakeholders.
- Token economy design: Creating a robust token economy by identifying use cases, implementing mechanisms for token “sinks” and “faucets”, determining token emission rates and mechanics, designing the token flow models, and conducting scenario analyses.
- Airdrops and claims: Planning and executing an airdrop or facilitating a day-one claim process to ensure initial token distribution to the intended recipients and bootstrap the token economy.
- Platform and product dependencies: Identifying any dependencies on specific platforms or products and ensuring compatibility and integration.
- Post-launch token rewards: Considering strategies for incentivizing token holders and rewarding community participation after the token launch.
- Governance features: Determining the governance mechanisms and features that will enable token holders to participate in decision-making processes.
All these aspects converge in finalizing the tokenomics scope for the launch, along with key documentation and the whitepaper. While adjustments can be made throughout the project’s course, it is crucial to align on this scope and establish the tokenomics requirements early on, especially when there are product or technical dependencies involved. This approach helps manage scope creep and mitigates execution risks leading up to the token launch event.
For a more in depth look at tokenomics considerations, one of HLV’s Tokenomics Strategist shared some thoughts in an article on Tokenomics: The Principles of Design.
Legal Framework.
The legal workstream in a fungible token project holds significant importance throughout the entire process and impacts all workstreams. While the requirements may differ for each project, having an efficient legal framework can simplify the process and ensure consistency.
A few of the areas the legal framework helps address include:
- Legal structure.
- Token utility and token distribution.
- Token economy design.
- DAO setup.
- Whitepaper review.
- External communications.
Overall, having an efficient legal framework in place and working with experienced legal counsel can help mitigate legal risks, ensure compliance with relevant laws and regulations, and provide consistency throughout the project. It’s important to note that the specific legal requirements and considerations may vary depending on the nature of the token utility, jurisdictions involved, and other factors, so it’s important to consult with your legal advisors.
Tech Architecture and Software Development.
A robust technical team forms the backbone of implementing and launching a fungible token, handling the technical design, development, and testing of critical technical components. The technical work begins by thoroughly understanding the project’s business requirements and objectives, collaborating closely with product teams, tokenomics, and legal workstreams.
With this understanding, the technical team can translate the requirements into a suitable technical solution. This involves selecting the appropriate blockchain platform, designing the smart contract for the token and airdrop/claiming mechanics, and developing the necessary software for token issuance, distribution, and management.
The outcome of this technical work is a fully functional token deployed on the blockchain and distributable to relevant recipients as per the tokenomics and specifications outlined in the business requirements and reflected in the project’s whitepaper. The technical team may also create additional tools and interfaces to facilitate user interaction with the token and underlying blockchain platform.
The technical workstream covers key areas such as:
- Designing a technical solution aligned with project requirements.
- Defining fungible token specifications and selecting the appropriate blockchain.
- Developing smart contracts for token functionality and airdrop/claim mechanics.
- Coordinating integrations with third-party systems.
- Providing guidance on DAO management tools.
- Managing the smart contract audit cycle to ensure security and reliability.
- Implementing a technical approach for token distribution.
- Conducting technical dress rehearsals to ensure a smooth launch.
Exchange Integration.
Securing listings on various centralized and decentralized exchanges plays a vital role in fostering the network effect for a fungible token during its launch phase. The visibility and success of a token relies heavily on its exposure through exchange listings that enhance the accessibility and liquidity of the token, in turn facilitating wider participation and trading opportunities for users.
It is important to note that each exchange operates with its unique set of requirements, technical specifications, terms, procedures, and timelines for token listings. Careful coordination is required to ensure simultaneous availability across multiple exchanges.
Market makers also play a significant role in exchange listings, as they help provide liquidity and maintain balanced order books, contributing to a healthy ecosystem that facilitates seamless token swaps and price discovery. By engaging established and skilled market makers, projects can facilitate better token liquidity, improve market efficiency, and make the token more attractive to new participants.
Actively managing token access is an essential component of a successful fungible token launch. This ensures broader exposure in multiple regions, visibility, and liquidity, driving the network effect and fostering the token project’s overall success.
DAO Creation.
Establishing a robust framework for a decentralized autonomous organization (DAO) and launching it in conjunction with a fungible token is crucial for community and stakeholder participation, decentralized governance, long-term growth and sustainability, as well as legal compliance within the token ecosystem.
DAOs are driven by dedicated communities, comprising members who have a vested interest in the success of the organization and the underlying ecosystem. A well-designed DAO framework can encourage active engagement and collaboration among community members and fosters innovation and creativity.
Setting up a DAO involves various legal, technical, and strategic components to ensure its longevity. Key considerations in the DAO setup process include:
- Defining the purpose, goals, and vision of the DAO and documenting them effectively.
- Identifying the criteria for DAO membership and recognizing potential core contributors.
- Selecting a suitable DAO administrator to facilitate smooth operations.
- Making governance design decisions, such as proposal and voting mechanics, establishment of special councils or committees, to enable transparent decision-making processes within the DAO.
- Establishing the necessary components for day-to-day DAO operations, including legal structures, technical integrations, discussion forums, crypto wallets, social media platforms, and websites.
- Developing initial DAO governance documentation and formulating initial proposals to kickstart governance activities.
- Establishing DAO treasury management processes, procedures and guardrails to ensure effective and prudent allocation of resources.
By addressing these considerations, a DAO can be set up with a solid foundation, enabling effective governance and ensuring the success and sustainability of the token ecosystem.
For more information about DAOs, HLV team members discuss key elements of DAO structuring and planning in the article DAO: Structure Issues.
Program Management and Launch Sequencing.
Central to the entire token launch process is the crucial role of program management, which entails the efficient coordination and execution of roadmaps and timelines, various work streams and working groups, resources, stakeholders, and decisions.
The program manager holds the responsibility of overseeing the management and communication of scope, dependencies, and execution risks to all relevant parties involved. This role becomes even more vital when coordinating with multiple third-party resources and teams. Given that the token launch is a singular event, executing it properly is of utmost importance for the success of many Web3 projects.
Effective program management ensures that all aspects of the token launch are orchestrated seamlessly, maximizing the chances of a successful and well-executed launch.
Conclusion.
Launching a fungible token is a complex process that requires careful coordination and management of various components, including community engagement, tokenomics, legal compliance, technical development, market strategy and listings, consideration of decentralization aspects and DAO implementation, project management, and launch sequencing.
The success of a token launch largely depends on having a deep understanding of the launch mechanics and key success factors, and being careful about the development and coordination of different components and workstreams. To manage complexities associated with token launches, Web3 projects should work with experienced partners that can guide them through the process.
