Cryptocurrencies are high-risk investments hence the need for launchpads. The digital asset class is still in its early developmental stages and, therefore, highly volatile and mostly unregulated.
Crypto launchpads or incubators are platforms that enable crypto projects to raise capital from investors. Similar to an IPO, Investors get early-stage access to the projects with the main advantage being the bargain on the price of investing just before the public sale. However, with an unregulated market comes multiple risks.
For instance, at the peak of the 2017 bull market, ICOs allowed investors to make x10, x20 and even x30 returns on their investments in a matter of weeks or months by simply investing in the right ICO.
Compared to more traditional investments, ICOs at the time seemed like a much more attractive investment opportunity for many.
But unfortunately, the hype about ICOs also invited bad actors into the crypto space.
So, as the market cooled off and entered into a prolonged bear market in 2018, most of the ICOs that raised millions with promises to investors disappeared. Granted, some managed to weather the storm of crypto winter and are still around today, but according to reports, 80% of ICOS at the time were scams.
What are Crypto Launchpads?
As mentioned earlier, crypto launchpads are designed to help blockchain projects raise funds. Compared to ICOs, launchpads usually work with well-vetted projects and help them connect with potential investors and raise money.
In most cases, launchpads will invest in the project themselves, incubate it and then offer it to their community at a discounted price. The project will then pay a commission on the token sale during the launch of the project or have other arrangements with the owners of the launchpad.
Many top crypto launchpads have become extremely popular by raising billions of dollars for projects. DuckStarter, for instance, boasts of helping launch over 50 projects with most of those projects hitting ATH (all-time-highs) of over 300% since launch. Other well-known launchpads include Binance Launchpad, TustSwap, DAO Maker, Seedify and GameFi, to mention a few.
Each launchpad has a different approach to vetting and launching projects and a unique set of features. However, while some launchpads are scams, most are built to help good projects connect with potential investors and raise money while protecting the investors from fraud.
The emergence of Crypto Launchpads
After the end of the ICO era, crypto launchpads emerged as the new way to invest in crypto safely and quickly for crypto projects. In addition to simplifying the process of raising funds for crypto startups, launchpads also help crypto projects build communities early in their development stage.
They are also an ideal solution for crypto-investors as they offer a way to diversify their portfolio and get in on the ground floor of new and well-vetted upcoming projects.
However, there are also some disadvantages associated with using crypto launchpads. One of the biggest concerns is the high level of risk involved. Many of the projects launched on crypto launchpads are still in their early stages of development and there is no guarantee that they will be successful.
In addition, while there are a few promising projects, not all launchpads are created similarly.
Some launchpads can miss critical details during vetting and deliver a faulty platform or project to investors.
So, while crypto launchpads can offer some advantages, there are some disadvantages.
Here is a look at the pros and cons of using a crypto launchpad.
The Pros of Using Crypto Launchpads
There are several advantages associated with using crypto launchpads. Here is a look at some of the top pros:
- As mentioned, they offer a quick and easy way to raise money for crypto startups: One of the most significant advantages of using a launchpad is that they offer convenience and speed during fundraising. In most cases, a project will only have to apply and the launchpad will take care of the rest.
- They provide a platform for projects to build connections with potential investors: Another significant advantage of launchpads is that they provide a platform for projects to network and connect with investors from around the world. This can be a big help in getting a project off the ground. Most launchpads offer crypto-natives an introduction to projects they would never have had the opportunity to come across.
- They protect crypto-investors: For investors, crypto launchpads offer a layer of protection as the launchpad vets the crypto projects to make sure that only reputable projects are listed. Even though investors are still encouraged to do their own due diligence, they can trust that the launchpads and the projects listed are trustworthy.
The Cons of Using Crypto Launchpads
There are also some disadvantages associated with using crypto launchpads. Here is a look at some of the top cons:
- The high level of risk involved: Despite the vetting provided by the launchpad, the risk is still a significant concern when investing in early-stage projects. Due to current economic conditions, many projects launched on crypto launchpads are still in their early stages and might not survive the market.
- Not all launchpads are the same: Another concern is that not all crypto launchpads are created equal. Some take the projects through a rigorous vetting process, while others might not be as thorough. This can result in a project getting launched that is not ready or that has critical flaws. For instance, a project with a security flaw in its smart contracts can go undetected and lead to major losses for investors.
- They can be subject to manipulation: Another downside of using crypto launchpads is that they can be subject to price manipulation. Due to the high demand for new projects, some launchpads have been known to inflate the price of tokens during the sale. This can lead to investors overpaying for a project and taking on more risk than necessary. Once the token is listed, the price can drop sharply, leading to losses. Some launchpads also come with a restriction for joining their whitelist. This can result in potential investors being left out and feeling frustrated.
- They are unregulated: One of the biggest concerns with crypto launchpads is that they are unregulated. This means there is no government oversight to protect investors from fraud or manipulation. In addition, there have been several scams associated with crypto launchpads. However, multiple governments around the world are drafting laws and regulations for the crypto industry, especially now that the value of the entire market has grown past the $1 trillion mark.
So there you have it, a look at some of the pros and cons of using crypto launchpads. Overall, crypto launchpads are a necessary tool for launching new projects, but they come with a high level of risk. Therefore, doing your research and due diligence before investing in any project is essential. And always remember, never invest more than you can afford to lose.