How To Research Crypto Launchpads
The 5 steps you need to know before investing in tokens on IEO and IDO launchpads.
Recently, I have been asked about my thoughts on projects on crypto launchpads such as Gamestarter, Polkastarter, Enjinstarter, etc. In this article, I will explain step by step how to do research in order to find the best crypto launchpads.
Before you start investing money in the projects listed by IGO (initial game offering) and IDO (initial DEX offering) launchpads, you should thoroughly research the launchpad to see if they are reliable. Researching them helps you to decide whether you can trust a crypto launchpad with picking good projects for users to invest in.
Before we get down to business let’s quickly sort out a few common answers when it comes to crypto launchpads:
What are crypto launchpads?
Crypto launchpads are centralized or decentralized platforms on which developers can acquire capital for their projects. This capital comes from investors who get direct access to these projects. Some launchpads are operated by big crypto exchanges such as Binance, KuCoin, and Bitpanda.
What’s the difference between IPO, ICO, IEO, IDO, IGO launchpads?
There are a couple of terms being thrown around when it comes to crypto launchpads. Here’s what you need to know:
IPO — initial public offering. In fact, this term is rarely mentioned in the context of launchpads. That’s because it is the process by which a private company can go public by the sale of its stock to the public. So this doesn’t really have much to do with crypto. An IPO is highly regulated by government institutions.
ICO — initial coin offering. This term describes the sale of a new cryptocurrency or token in the crypto market. During an ICO, projects sell their coins on their own websites. Back in 2017, this was one of the hottest things happening in the space with a lot of people getting scammed. Different research in 2018 showed that a significant number of ICO projects in 2017 were worthless.
IEO — initial exchange offering. This is an improved form of an ICO because here project developers offer their product directly on a crypto exchange which makes it easier for investors to buy. An IEO has significant advantages over an ICO as the exchange has to evaluate the project before listing it.
IDO — initial DEX offering. The latest form with the main difference to the IEO is that the whole process takes place on a decentralized exchange.
IGO—initial game offering. Similar to an ICO with the difference being that the launchpad lists gaming projects that are based on NFTs or tokens as their in-game currency and rewards.
Here’s a good visualization showing the main differences between an ICO, IEO, and IDO.
How do crypto launchpads work?
Project developers place their product on a crypto launchpad that thoroughly reviews the project. If the projectmeets all requirements, the launchpad allows users to invest money in the project. The advantage for users is that they can invest in promising projects at an early stage.
How to buy tokens on a launchpad?
Buying tokens on launchpads is usually very simple and comparable to the usual process when buying cryptocurrencies. However, some launchpads require buyers to meet KYC (know your customer) requirements.
Step 1. Research A Crypto Launchpad’s Fundamentals.
In order to trust a launchpad with your money, you need to know whether you can trust it. For that, you need to start with its fundamentals.
Here are questions you need to ask:
- Is the crypto launchpad centralized or decentralized? A lot of centralized platforms are owned by big exchanges. That already gives me a lot of information. For example, I don’t like Bittrex because of the bad user experience it offers. That’s why I will never give their launchpad a try and would rather go with another exchange’s solutions. But do I even want to rely on the big players when I can use a decentralized exchange instead?
- Is the platform built independently or on top of another blockchain? My first impulse here would be to trust launchpads that are based on an established blockchain. In any way, it is important for you to understand how they are connected and why the team behind the launchpad decided to use a certain blockchain over another.
- Who are the people behind a launchpad?
- What do other users say about their experience with this platform?
A lot of these steps (and many more) are covered in detail in my step-by-step tutorial on how to research cryptocurrencies. The research process behind it is basically the same. You can check it out here:
Step 2. Research The Tokens Issued By The Platform.
Launchpads such as Gamestarter, Polkastarter, and Gamefi have their own tokens. For investors, this has some important implications:
- What is the purpose of these tokens? What can holders use them for?
- Can holders get discounts when investing in projects listed on the launchpad?
- Must investors hold the token in order to be qualified to invest?
- Can token holders vote on project listing? If so, do whales get more say in voting or each token holder can only have one vote regardless of how many tokens they hold?
If you want to better understand the different aspects that impact the value of a token I recommend you to check out the article I have written on tokenomics research:
Step 3. Find Out The Process For Listing A Token On A Launchpad.
One of the main tasks of a launchpad is to scrutinize a token before listing it.
As an investor, you need an understanding of what a launchpad's selection criteria are. This is very important because strict selection criteria ensure solid projects will be listed.
What you need to know:
- How can a project apply to get listed on the platform to start raising funds?
- Does the launchpad team do background checks/due diligence on the projects?
- Does the selection team actually meet with the project team to dig up further information?
- What is the rejection rate?
- Who are the people responsible to decide on whether a project gets listed? What are their qualifications?
The issue here is that a lot of launchpads don’t give much information on these questions.
So if the launchpad does not give detailed information on its selection criteria, it is worth going to their Twitter, Telegram, or other social media channels to contact the team directly.
Step 4. Looks At Past Projects Which Have Been Launched By The Platform And Find Out How They Are Doing Now.
Launchpads are usually eager to show potential investors that the tokens issued have increased significantly since the launch. However, this should not be the only criteria to look for.
Here are some of the things you should be checking:
- How many active users does the project have a few months after being listed on a launchpad?
- How big is the community?
- What is the team working on? Are there new developments?
- What does the project’s activity on social media look like? If they are just shilling the price of their token, then it is a red flag.
Step 5. If You Have Concluded That The Launchpad Is Reliable, Analyse The Listed Projects.
As a rule of thumb, it is always a good sign when a launchpad puts as much information as possible about a listed project on its website. Also, remember to always go to the project’s website to cross-check the information.
As for researching the listed token itself, follow the two guides (How To Research Cryptocurrencies & How To Research Tokenomics) I linked to above. They cover the entire process from A to Z.
Final words
Doing an IDO, IGO, IEO, or ICO are all very popular ways for crypto start-ups to raise funds nowadays. I think it is a revolution to the traditional way of acquiring funds from venture capital/private equity companies.
However, you should always keep in mind that the market is still largely unregulated, and most start-ups will fail. As mentioned above, in 2017 there were thousands of projects which raised funds through an ICO. According to research from Boston College the survival rate of these projects after 120 days was only 44.2%.
While the investment reward could be high, the same is true for the risk coming with it. Remember never go all-in and only invest what you can afford to lose.
For more articles I wrote on how to research crypto projects, please check out my list: https://ren-heinrich.medium.com/list/how-to-research-crypto-projects-5fd393fd0be8
