Introduction
This report aims to help Sovryn decision-makers evaluate the viability of adopting a launchpad or incubator model. It draws on examples of existing launchpad/incubator projects, highlights Sovryn’s strengths and weaknesses, and poses key questions about the strategic fit of this approach.
1. Overview of Examined Launchpads/Incubators
Below is a concise list of the projects we’ve examined, along with brief descriptions:
- Binance Launchpad
- Operated by Binance, one of the largest crypto exchanges.
- Specializes in Initial Exchange Offerings (IEOs) and provides immediate liquidity and large user reach.
- Polkastarter
- Decentralized launchpad initially focused on Polkadot, now supports multiple chains.
- Uses a tiered/lottery approach for allocations, requiring users to hold/stake POLS.
- DAO Maker
- Known for "SHOs" (Strong Holder Offerings) and in-depth incubation services.
- Encourages long-term holder participation, distributing allocations to "strong hands."
- TrustSwap
- Provides token-locking, escrow, and vesting services, alongside a launchpad.
- Multi-chain focus, distributing a portion of fees to SWAP stakers.
- DuckDAO
- Positions itself as a "community-driven VC," incubating early-stage projects.
- Tiers of $DUCK tokens provide different levels of access to private or seed-round deals.
- Red Kite (by PolkaFoundry)
- Multichain launchpad with a focus on stringent KYC and project quality.
- Known for IDOs in gaming and metaverse niches.
- Other Chain-Specific Launchpads
- Examples: Solstarter (Solana), CardStarter (Cardano).
- Typically require staking the chain’s native token for participation, providing a focused ecosystem.
- PAID Network
- Operates "Ignition," a DeFi-focused launchpad and legal-agreement platform.
- Experienced a major exploit in 2021 but continued with a token swap and IDOs afterward.
- SwissBorg
- More of a wealth management platform than a pure launchpad, but includes community-driven token models.
- Strong compliance stance out of Switzerland, focusing on yield and investment tools.
- Seedify
- Specialized in "GameFi" (blockchain gaming) launchpad/incubation.
- Hosts Initial Game Offerings (IGOs), requiring SFUND staking for better allocations.
2. Sovryn’s Characteristics: Alignment and Challenges
2.1 Alignment with a Launchpad/Incubator Model
- Technical Expertise: Sovryn’s background in forking and launching DeFi protocols (trading, lending, governance, stablecoins) is directly applicable to guiding new projects.
- Existing DeFi Infrastructure: Experience with stablecoins, Bitcoin-backed lending, and perpetuals provides a knowledge base that can be leveraged to advise emerging projects.
- Bitcoin-Centric Vision: Sovryn’s unique positioning on Rootstock (RSK) and potential expansions to BitcoinOS, B^2, or other Bitcoin-based rollups could attract projects seeking direct exposure to Bitcoin-based DeFi.
- Community & Governance: Sovryn has an engaged community and an established governance token (SOV). This can be extended to new projects for mentorship, governance, or technical support.
2.2 Weaknesses and Risks
- Small Team Bandwidth: With around two dozen people (including only a handful of Solidity coders and front-end devs), managing an incubator or launchpad may stretch resources if too many projects join at once. This could be mitigated by contract coders.
- Struggling Past Products: A past attempt at a launchpad did not succeed, and the perpetuals platform didn’t gain traction"—indicating potential product-market fit issues or technical challenges.
- Rootstock Market Limitations: The RSK ecosystem is relatively small; historically, DeFi for Bitcoiners has been slow to adopt.
- Limited Community Funding: If Sovryn’s existing community is not large enough to provide significant funding for new projects, it may be harder to attract top-tier initiatives without external investment support.
- Need for Marketing & Partnerships: Sovryn historically has not had strong marketing success. A launchpad/incubator model requires robust outreach and partner networks.
3. Three Projects for Further Investigation
3.1 TrustSwap
Rationale: Offers a multi-chain launchpad along with token-locking and escrow services"—services that parallel Sovryn’s own experience with DeFi and stablecoin-related tools. This platform’s moderate size and DeFi orientation may provide practical lessons for Sovryn.
Successful Launches:
- Glitch (GLCH) raised funds through TrustSwap and garnered a strong community early on, with notable price appreciation during the 2021 DeFi boom.
- Yield.app (YLD) held a successful token sale that fueled rapid user acquisition for its DeFi banking platform.
Unsuccessful Launches:
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Sifchain (EROWAN) initially showed promise as a cross-chain DEX but struggled to retain liquidity, leading to a sharp decline in token value and user activity.
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MobiePay (MBX) launched with the goal of seamless crypto-to-fiat payments yet failed to maintain user adoption and momentum following initial hype.
3.2 DAO Maker
Rationale: Known for "SHOs" (Strong Holder Offerings) and deeper incubation services that go beyond quick token sales, DAO Maker’s approach aligns well with Sovryn’s governance focus and DeFi expertise, especially if Sovryn aims to offer advisory and strategic support.
Successful Launches:
- My Neighbor Alice (ALICE) leveraged DAO Maker’s community-driven fundraising, gained immediate exchange listings, and remained a recognizable brand in blockchain gaming.
- Efinity (EFI), a Polkadot-based NFT project, used DAO Maker’s model for a high-visibility launch and showcased strong early-stage market traction.
Unsuccessful Launches:
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DeFi Bridge (example) attracted initial funding but failed to meet roadmap milestones and gradually lost both liquidity and market interest.
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Project X (example) launched via an SHO yet could not deliver core features on time, resulting in delistings and waning community support.
3.3 DuckDAO
Rationale: Positions itself as a “community-driven VC" that supports early-stage projects with funding, marketing, and advisory. For Sovryn”—especially if aiming to compensate for a smaller community"—this approach of shared incubation and co-investment could be insightful.
Successful Launches:
- Bondly used DuckDAO’s network and marketing push to secure partnerships and wide adoption in the NFT space, creating early momentum.
- Shadows Network (DOWS) had a strong launch phase, garnering significant attention around synthetic assets before the market cooled.
Unsuccessful Launches:
- YieldX (example) received initial community backing yet never fully launched its promised product suite, causing investors to lose confidence.
- Project XYZ (example) debuted with an ambitious DeFi roadmap but faced security shortfalls and ultimately failed to maintain liquidity post-launch.
4. General Trends in Launchpads/Incubators
- Bull vs. Bear Market Cycles
- Launchpad activity spikes in bull markets as retail and institutional appetite for new tokens grows. In bear markets, the number of IDOs/IGOs drops dramatically.
- Shifts to Incubation
- Many platforms that initially focused on quick token sales (IDO/IEO) have pivoted to deeper incubation, offering advisory and marketing support"—often a more sustainable model.
- Emphasis on Lockups & Staking
- Almost all successful platforms have some mechanism for staking or holding tokens to access sales, aligning participant incentives and reducing short-term dumping.
- Regulatory & Compliance
- Increasingly, platforms require KYC and exclude certain jurisdictions (especially the U.S.) due to securities laws. Multi-chain or decentralized setups sometimes skirt stricter regulations, but the risk remains.
- Security Risks
- Audits, vesting schedules, and strong due diligence have become crucial to avoid rug pulls, exploits, or major reputational damage.
5. Key Questions for Sovryn
- Is There Value in Launching Tokens for Others When Token Creation Is Easy?
- Potential Value: Curated support (advisory, liquidity, marketing, security audits) can differentiate Sovryn’s services from a quick, do-it-yourself token launch. The brand/reputation of a well-run launchpad can be a big draw.
- Challenge: Competition is fierce. Sovryn must offer unique Bitcoin-centric expertise and possibly funnel liquidity from existing Sovryn DeFi users.
- Is There Value in Having an Initial Governance Structure Under SOV?
- Pros: Could add legitimacy and structure for new projects, leveraging Sovryn’s existing governance processes.
- Cons: Some projects may prefer independent governance. Overly bundling everything under SOV might limit a project’s autonomy.
- Could SOV Be Staked Separately as the Initial Governance Token?
- Benefits: This could reward committed community members and align them with the success of newly launched projects.
- Risks: Requires a robust incentive design to ensure stakers remain motivated and to avoid short-term speculation or frequent unstaking.
- How Could Sovryn Help with Fundraising Given a Smaller Community?
- Potential Solutions:
- Partner with other networks or VCs to co-invest.
- Provide specialized "Bitcoin DeFi" advisory that’s hard to find elsewhere.
- Offer cross-chain bridging solutions to attract Ethereum-based liquidity providers.
- Caveat: Reliance on external capital might reduce Sovryn’s direct revenue unless structured properly.
- Potential Solutions:
- What Are Viable Models for Compensating SOV Stakers and the Sovryn Team?
- Token Allocation: Sovryn (and its stakers) receive a portion of newly launched projects’ tokens.
- Fee-Based: Collect platform fees (in stablecoins or BTC) and distribute a percentage to stakers, with the treasury holding the rest.
- Hybrid Model: Part fee, part token allocation"—some immediate return, some long-term upside.
- Does Sovryn Have Sufficient Business and Partner Development Expertise?
Sovryn’s team includes one marketing head and a relatively small community management function. While technically strong, Sovryn may lack the robust business development network that larger launchpads or exchanges leverage. This gap could limit the number of quality projects seeking to launch on Sovryn. Addressing it might mean hiring additional business development personnel, forming strategic alliances, or leveraging partnerships with VC firms to ensure deals and funding opportunities flow through the Sovryn ecosystem. - What Are the Advantages and Disadvantages of Incubating Projects for Others vs. Developing Core Projects That Will Remain Part of Sovryn?
Incubating external projects allows Sovryn to expand its ecosystem without committing extensive resources to long-term maintenance. It can create short-term revenue through launch fees, advisory services, and token allocations. However, there is a risk that resources devoted to incubation will distract from Sovryn’s core roadmap, and successful incubated projects may eventually become independent competitors. By contrast, developing internal, Sovryn-owned projects ensures deeper alignment with the overall mission and grants full control over product evolution. Yet, it also requires greater resource allocation, extended time horizons for returns, and the possibility of higher opportunity costs if internal projects fail to achieve product-market fit.
6. Best Practices Sovryn Could Adopt
- Robust Due Diligence and Vetting
- Thoroughly vet each potential project’s technical foundation, team credentials, and product roadmap to mitigate the risk of rug pulls or non-delivery.
- Consider mandatory audits, clear milestone tracking, and public-facing development updates to build trust with potential investors.
- Structured Staking & Vesting Mechanisms
- Implement tier-based staking of SOV to grant different levels of access to new launches"—similar to the DAO Maker "SHO" or TrustSwap’s tiered token model.
- Enforce locking or vesting schedules for project tokens (received as fees or revenue) to discourage immediate sell pressure and align incentives for long-term growth.
- Community-Centric Launches
- Involve the Sovryn community more deeply in the decision-making process around which projects to incubate or launch"—akin to DuckDAO’s "community-driven VC" angle.
- Leverage governance votes (if feasible) to signal support or rejection of incoming projects, thereby strengthening community buy-in and engagement.
- Multi-Chain or Cross-Ecosystem Partnerships
- Expand beyond Rootstock if the market remains limited, mirroring TrustSwap’s multi-chain approach.
- Seek cross-ecosystem collaborations to bring in additional liquidity, marketing support, and developer interest for newly launched projects.
- Value-Add Advisory & Marketing
- Offer additional services like marketing guidance, tokenomics design, or security audits"—similar to DAO Maker’s and DuckDAO’s deeper incubation offerings.
- Position Sovryn as a specialized resource for Bitcoin-based DeFi knowledge to differentiate from more generic Ethereum-focused launchpads.
- Transparent Communications & Frequent Updates
- Provide regular, transparent updates about each project’s progress, funding, token distribution, and challenges"—important for retaining trust.
- Hold AMAs, weekly syncs, or community calls involving both the Sovryn team and the project teams to keep all stakeholders informed.
By integrating these practices, Sovryn can improve its launchpad/incubator offerings, mitigate common pitfalls, and potentially stand out in a competitive environment"—especially if it highlights its Bitcoin-based DeFi expertise.
Conclusion & Recommendations
A launchpad/incubator model can capitalize on Sovryn’s DeFi expertise"—particularly around Bitcoin-based solutions. However, the team must address the ecosystem’s small size, past product-market fit challenges, and limited marketing reach. If Sovryn decides to move forward:
- Start Selectively: Incubate a small number of high-quality projects that strongly benefit from Bitcoin-based DeFi.
- Strengthen Partnerships: Collaborate with larger investor networks or multi-chain platforms to secure funding and build cross-chain user inflows.
- Offer Differentiated Services: Use Sovryn’s knowledge of Bitcoin rollups and stablecoin/lending infrastructure as a unique selling point.
- Incentivize Governance Participation: Develop a staking structure that balances penalties for early unstaking with attractive rewards, thereby ensuring engaged, long-term community members.
Ultimately, Sovryn must weigh the potential upside in brand-building, revenue streams, and ecosystem growth against the resource demands and competitive nature of launchpads. If done with careful planning and focused execution, an incubator or launchpad could bolster Sovryn’s relevance and catalyze Bitcoin-based DeFi innovation.
Appendix: Models for Investment and Compensation
Research of existing practices shows that the primary situation in which projects airdrop liquid tokens is when they are initially launching their own governance token. In that case, they often airdrop tokens in proportion to a user’s historical usage of the protocol. For example, Uniswap airdropped UNI this way in 2020. The result was that many users sold immediately, but this was part of price discovery and was confined to a very short time at the beginning. It did not seem to harm the project in the long-term.
It is difficult to assess the impact of airdropping a large amount of liquid tokens at the beginning of a project. Since no price exists before the Token Generation Event (TGE) and no market exists, there is no way to compare the price before and after. Furthermore, there is no way to know what might have happened without the liquid token release. Some liquid tokens must be released to form a market and discover a market price. Volatility in the early days of a market is to be expected. Some effort must be made to balance the liquid token supply with the pent-up demand of new investors for the token.
Standard practice is for projects to issue vesting tokens to early investors and team members. 3-, 4-, and 5-year vestings are common. Sometimes these projects allocate a small portion of tokens for liquid airdrops to the user community based on historical participation or to incentivize certain behaviors.
This report focused on three example launchpads: TrustSwap, DAO Maker, and DuckDAO. These organizations share a pattern of receiving a token allocation from projects that they incubate or launch, followed by distributing at least a portion of these tokens to their stakers. However, how and when they do this varies. Most of the time they blend small immediate distributions with longer vesting, thus balancing early rewards for stakers with sustained commitment to the project’s future.
A concrete example of this can be found in the DuckDAO launch of Shadows Network. DuckDAO required that a portion of their DOWS token be distributed up front and the remainder vested.
- 20% of DOWS tokens allocated to DuckDAO’s community participants were unlocked immediately at TGE.
- The remaining 80% were vested linearly over 4 months, with no additional cliff.
- Each month, an additional 20% of the participant’s total allocation became claimable until the full amount was unlocked by the end of the period.
- Team allocations had a vesting allocation with a 1-year cliff followed by monthly unlocks over an additional 1-2 years.
This strategy had a two-fold rationale:
- Immediate Liquidity: A partial TGE release gave early investors a chance to realize some gains or provide liquidity to help bootstrap trading pairs.
- Sustained Engagement: The 4-month vesting prevented a sudden supply flood, encouraging participants to remain involved with Shadows Network (e.g., by using or promoting the platform during that period).
A partial unlock plus a linear vesting schedule is a common approach in DuckDAO launches. DuckDAO negotiates a specific amount for each project. A range of 10%-30% of the community allocation seems to be typical, with rare cases up to 50%. The remaining amount may be unlocked over months or years.
No documented examples were found of:
- releasing the entire incubator allocation to stakers
- releasing the entire staker allocation as liquid tokens
Ideas for Sovryn
Based on precedents from other projects, a fully liquid allocation to stakers by an incubator is essentially unheard of. A potential middle ground could be found by doing one or more of the following:
- Retain a portion of the tokens in the treasury, and allocate the rest to stakers. A 50/50 allocation to stakers would be among the most generous allocations with precedent in other projects.
- Allow stakers to receive either liquid or vesting tokens, but vesting tokens are awarded with a higher allocation weight (43% higher would correspond to a 30% penalty for liquid tokens, analogous to the unstaking penalty for max-staked SOV).
- Allow stakers to receive 100% liquid tokens, but offer SOV incentives to vest the tokens. (This is similar to the previous one, where the previous one essentially offers project token incentives to vest.)
- Allocate a mix of liquid and vesting tokens.
- Allocate only vesting tokens, but make the vesting period short (like 4-6 months). This would spread out the effect of selling but wouldn’t involve a very long wait for liquid tokens.
