Getting ready to launch a token: What you need to know

Launching and having a live token requires a number of changes to a project’s operations. Getting started early can help projects get ahead of operational challenges, and ensure critical tasks are not an afterthought.

Funding : Most DevCos aim to have at least 3 years of runway post-token launch. These funds can go towards additional products and development work, as well as defending against regulator encroachments. Fundraising after a token launch can be challenging for DevCos. Launching a token typically means that their primary product is now owned by a community, they may not have additional products lined up, and token sales introduce significant legal risk. Projects should plan accordingly, and also make sure that foundations are appropriately sized and capitalized for their expected role .

: Mechanics : The actual mechanics involved in launching a token – delivering tokens to employees and investors, setting up lockups, and more – are complex and can take several months to get into place. Get started early.

: Communications : Public communications leading up to and following a token issuance matter … a lot. Ensuring the project team, and especially its leadership, have a strict communications policy in place that’s tailored to the token launch strategy is critical. A single errant statement by a CEO can put an entire project at risk. For more guidance, see this post

: Employee incentives : Projects often use tokens as incentive-based rewards for employees and advisors. Structuring in the years prior to a token launch is fairly straightforward, but as projects approach a token launch, new complexities arise. For example, given the volatility of token prices, some projects find that it doesn’t make sense to grant tokens over multiple-year periods, and instead prefer to offer awards on a yearly basis, typically structured as restricted token units (RTUs). Projects should ask their counsel to run through all of the variations they have seen to combat token price volatility.

Partnership incentives : Projects can also use tokens to align the incentives of independent developers with the project’s goals. Before launch, awards to developers can be structured as partnership agreements, often featuring development and user metric-based milestones. After launch, projects can rely on ecosystem funds and grant programs to incentivize developers; or they can choose programmatic incentive programs (like Liquity , which automatically rewards frontend operators for bringing users to the protocol), which can more effectively enable anyone to participate and build.

: Operational decentralization: Shifting from centralized operational efforts to a broad, unaffiliated community engagement requires significant changes . Off-chain activities – like protocol development, marketing, and governance – may be critical to a project’s success. And decentralizing them involves a strategic distribution of roles and responsibilities within the community so that no single group or entity has enough influence to risk encroaching on U.S. securities laws. A common pitfall for DAOs, for example, is inadvertently centralizing governance, which can lead to regulatory and operational bottlenecks. Steering a project toward decentralization while remaining compliant and resilient requires detailed planning with respect to both on-chain and off-chain activities. Ultimately, the goal is to drive community interactions and contributions to achieve “sufficient decentralization.”

As we stress in other pieces in this series, there is no one-size-fits-all guidance for token launches. Rather, these are just a few criteria to consider when planning a launch, alongside trusted counsel.

Every token launch will look different, depending on the practical realities of the project, from what’s considered sufficient decentralization to the degree of readiness across all five of these categories. Ultimately when a token launches will depend on a variety of circumstances that exist beyond careful planning.

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