Interpretation of Binance Lauchpool’s new model: a revolution in the token economic system

Original Title: "Binance FairMode, a new token system, is nurturing huge opportunities"

Original Author: Riyue Xiaochu

Many people may not have noticed that Fair Mode has appeared in Binance's new launchpool, with its focus not on the project, but on the transformation of the token economic system.

Binance, as the industry leader, has sent an important signal with FairMode. Leveraging its influence, the new token system will put projects on a long-term path of healthy development, with the potential to give birth to great companies and opportunities for hundredfold or even thousandfold growth in the future.

I have always believed that in addition to decentralization and immutable innovation, the innovation of token economic systems is the second magical tool of blockchain. There is a saying that goes: how to divide the cake determines how big the cake can be. A good cake division plan must incentivize all parties, unite everyone, and then take the project to the stars and the sea. Tokens have more advantages than traditional company equity, so several new token distribution plans in the blockchain industry, such as ICO in 17, Defi mining in 20, and inscription mint in 23, have brought about huge changes and contain enormous opportunities.

What is widely criticized in the current market is the institutional model. Due to the influx of a large amount of institutional funds from the United States, the valuation of projects is made very high, and then after being listed on the exchange, the growth space left for our secondary market is relatively small. What's even worse is that it's difficult for the project party to work well after having a lot of money.

Binance FairMode is an innovative attempt at a new token economy. At first glance, it may seem familiar with teams, investment institutions, development funds, airdrops, launchpools, and more.

It is indeed so, but the difference in Fair Mode is the token ratio. The token allocation ratio is very important, even crucial. For example, if you and two friends work hard together to start a business. After a year, the performance is good, but if your share is only 5%, will you still have the motivation to work hard next year? But if you have 30%, then you will definitely want to work harder next year and create more success. So you see, with different allocation ratios, your attitude is completely different.

So what's different about Fari Mode? Let me explain it to you.

1. Long-term Development Fund

This time, the NFPrompt of Fair Mode has introduced a long-term development fund, accounting for 27%. It means that the tokens allocated to the "long-term development fund" cannot be spent or sold, and they will not enter circulation. After being allocated, they can participate in the ecosystem through staking and share rewards and benefits from the project, but they have no governance rights. The staking rewards obtained can be used for the long-term operation and sustainable growth of the project.

This long-term development fund is a major innovation that has never been seen in other projects. Its features are 1) it will not circulate in the future, and 2) it can only be used to pledge dividends from system revenue for long-term project operation. This means that 1) only 73% of the project's representatives are actually in circulation, and 2) it incentivizes project parties to work hard to increase project revenue.

2. Fair distribution of large-scale chips and increased community discourse

Of the initial circulation, 21% is fairly distributed to retail investors, including 11% from Binance's launchpool and 10% from airdrops. In comparison, most projects have an initial circulation of around 15%, but only distribute 5% or less fairly, with the rest being controlled by the team for marketing and liquidity purposes. However, in FairMode, the community holds up to 21% of the tokens, while the team only holds 15%, giving the community more say in future DAO votes. With more tokens in their possession, the community is more motivated to build alongside the project team.

Additionally, the token ratio for Binance Launchpool has significantly increased. Previously, tokens such as Hook and Edu were around 5%, but this time it has increased to as much as 11%. This not only provides more benefits to Binance users, but also increases fair distribution of tokens.

3. Initial circulation increase means FDV increase and future unlocking decrease

When the same market capitalization is reached, an increase in initial circulation represents a decrease in FDV, and future unlocking is greatly reduced. The initial circulation of NFPrompt is 25%, and after excluding the long-term development fund that will never circulate, there will be 43% of chips circulating in the future. That is, there will be less than twice the amount of chips circulating in the next 6 years. In comparison, most projects have an initial circulation of around 10%, and there will be 90% of chips circulating in the future. That is, there will be 9 times the amount of chips circulating in the next 6 years (possibly 3-5 years).

Often, we encounter situations where a project holds the same market capitalization for a year, but the coin price is cut in half. This is because the circulation has doubled within a year. With FairMode, this situation will never happen again.

Many projects nowadays use the trick of controlling the majority of circulating chips in their own hands to push up the opening price, and then slowly sell off and let retail investors in the secondary market take over. However, FairMode has 25% initial circulation, 4% controlled by the project party, and 21% fairly distributed. With a large number of chips circulating outside, the project party cannot control the market to achieve a high opening price, so the opening price is naturally low, and there is a lot of room for future price growth.

4. The proportion of team members and investors has greatly decreased, which means that the future selling pressure will be reduced, which is conducive to long-term development.

This time, the NFPrompt team+investors only account for 25% of the Fair Mode project, compared to cyber's 47.2%, arkham's 40.5%, arb's 44%, and Op's 44%. Therefore, compared to typical projects, Fair Mode has a much lower token ratio in terms of team+investor institutions, and much lower indeed.

Here it is also explained that the proportion of teams and institutions has decreased, but the unlocking time has not decreased, with a lock-up period of 1 year and an unlocking period of 5 years. It is not shorter than other projects. The team's chips cannot be too many, otherwise the coin price will not rise and will be sold, and who will work hard.

Although many people advocate for 100% fair launch tokens, I personally think that it only applies to a small number of projects. Most projects require a well-designed token distribution plan like FairMode to incentivize all parties and lay a solid foundation for future price growth.

1) The initial circulation increases, resulting in a decrease in FDV. The amount that will circulate in the coming years will be significantly reduced.

2) Greatly reduce the ratio of institutions and teams, and lock them up for a long time. Encourage the team to work hard, instead of holding tokens with zero cost and cashing out as soon as they go up.

3) At the beginning of a large amount of chip allocation, it is fairly distributed to the community and relevant personnel. On the one hand, this gives more weight to the community's voice and motivates the community and project team to build together. On the other hand, it eliminates the possibility of the project team controlling the chips to open at a high price, leaving a lot of room for future secondary growth.

The first project, FairMode, is NFPrompt. Although there are mixed opinions about it in the market, it is an interesting experiment in this new token economy system and worth paying attention to. More importantly, as a leader in the industry, Binance has sent an important signal by using FairMode. With its influence, the new token system can enter a long-term benign development track, nurturing some great companies.

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