For better or worse, launching tokens is undoubtedly one of crypto’s killer apps. Nevertheless, and despite significant improvements since the ICO days, this is still an inefficient, flawed process both for project founders and launchpad participants. Founders must navigate a complex legal/regulatory landscape with little in the way of standardisation, as well as choosing between a multitude of potential token launch mechanisms, both centralised and decentralised, with their own set of tradeoffs. Centralised options increase regulatory risk while also being extremely expensive, with teams often giving up >5% of supply to CEXes and market-makers. Decentralised options don’t offer the “stamp of approval” or reach provided by CEX launchpads, and  are often vulnerable to various forms of manipulation by sophisticated users (e.g. Status ICO, Yield Guild Dutch Auction, Mango Markets IDO) and/or have more complex UX patterns (e.g. LBPs, LBA). They also exist in a regulatory grey area that creates risk for founders, leading to a self-selection bias where the founders most likely to be willing to take these risks are those with the least to lose. Launchpad participants often don’t have enough information to make informed decisions, even regarding basic due diligence materials such as previous round valuations, previous investor lock-ups, token cap table, team vesting schedules, CoIs, risks (e.g. multi-sigs), etc. Unsophisticated participants also end up losing out as they get front-run by bots and/or insiders.

We believe there’s an opportunity to standardise processes, both on the legal, mechanism and due diligence front. Using data from the past ~5 years, the winning launchpad would offer 1-3 different mechanisms (e.g. LBP, LBA, dutch auction), leveraging IBC to allow users to participate seamlessly from any chain. It would also have to incorporate some form of on-chain KYC in order to allow projects to conduct compliant token sales–potentially through a strategy of complying with MICA in the EU and other similar laws in other crypto-friendly jurisdictions, while using Regulation S to exclude the US.

But mechanism alone isn’t enough. A decentralised launchpad must be able to recreate the brand value / reach of its centralised counterparts. In order to do this, it must enforce some kind of credible, decentralised due diligence process. This would include verifying basic things such as audits, token lock-ups, token cap table, team vesting schedules, etc. It should also include creating standards and best practices around legal / token design. Finally, there should be some kind of decentralised vetting process or rating system to identify quality projects, perhaps involving quantitative/qualitative research by a whitelisted pool of respected analysts.

Where: The winning launchpad will be cross-chain such that it maximises its ability to reach as many users as possible

Hackathon MVP

Create a launchpad product aimed at investors that allows discovery of new issues and participation in auctions.

Auction Interface: A web and/or mobile experience that allows users to KYC and place bids in any ongoing auctions. A focus on simplifying UX for both KYC and participation is extremely important, though for purposes of an MVP it is not necessary to do “real” KYC.

On-chain logic: Create an auction mechanism that is gated to KYC’d participants via merkle proofs, and issues wrapped tokens with the same merkle logic for any token transfers subsequent to the auction. A good choice for an on-chain auction mechanism would be a Dutch Auction, similar to Sushi’s Miso.

Privacy and sealed bids could be achieved through a commit-reveal scheme. The token price & amount are hashed, and the capital commitment is locked. After the reveal period opens, users can submit their original price & amount which is hashed to compare against the original hash. If valid, the bid is submitted.

Sealed bid auctions could enable cross-chain participation, as latency from relaying transactions does not disadvantage participants on other chains.

Mentor: Bitcoin Sage (Product Lead at Delphi Labs) and Gabe Shapiro (GC Delphi Labs) will be advising on mechanism design and regulatory strategy for this idea.