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Token Launch Strategy

8 min
intermediate

Decisions to document before a token launch

A token launch introduces supply, allocation, trading, and possibly governance rules. Document what the token does, who can change those rules, and what holders are entitled to before announcing the launch.

Designing Tokenomics

Before any code is written, the team must answer five questions:

1. Total Supply

How many tokens will ever exist? Common approaches:

  • Fixed supply (like Bitcoin): 21 million BTC, never more. Creates scarcity.
  • Inflationary (like Ethereum post-merge): Small issuance rate, offset by fee burning. Supply grows slowly or shrinks depending on usage.
  • Deflationary with burns: A percentage of every transaction is burned. Supply shrinks over time.

2. Allocation

Who gets the tokens?

Typical Token Allocation Community / Ecosystem - 40% Team - 20% 🔒 vested Investors - 15% 🔒 vested Treasury - 15% Liquidity - 10% Unlocked at TGE Locked + vesting
Recipient Typical Range Purpose
Community/Ecosystem 30-50% Airdrops, grants, incentive programs
Team & Advisors 15-25% Compensation (always vested)
Investors 10-20% Seed, Series A (always vested)
Treasury 10-20% Protocol development fund
Liquidity 5-10% DEX trading pools at launch

Red flag: if the team + investors hold over 50%, the community has limited governance power and faces heavy future sell pressure from insider unlocks.

3. Vesting Schedule

All insider tokens should vest. A standard structure:

Team: 12-month cliff → 36-month linear unlock
Investors: 6-month cliff → 24-month linear unlock
Community: No cliff, distributed via usage incentives

Check unlock schedules against the underlying contracts and agreements. An unlock changes transferability; its effect on price depends on liquidity, demand, and holder behavior.

4. Utility

What can holders do with the token?

  • Governance: Vote on protocol parameters (Uniswap's UNI)
  • Fee discount: Reduced trading fees when holding the token (BNB on Binance)
  • Staking: Lock tokens to secure the network and earn rewards (ETH)
  • Access: Required to use certain protocol features (LINK for Chainlink oracles)

Explain the rights and functions the token actually has. A proposed future use should be labeled as a plan rather than an existing feature.

5. Value Accrual

How does protocol revenue flow back to token holders?

  • Fee sharing: A portion of protocol revenue is distributed to stakers (Curve's veCRV model)
  • Buyback and burn: Protocol uses revenue to buy tokens from the open market and destroy them (reducing supply)
  • Treasury growth: Revenue accumulates in a governance-controlled treasury

The Launch Sequence

Pre-Launch (Months Before)

  1. Audit the token contract (ERC-20 with vesting logic).
  2. Set up vesting contracts for team and investors using tools like Sablier or Hedgey.
  3. Establish initial DEX liquidity - typically through a Liquidity Bootstrapping Pool (LBP) on Balancer, which starts at a high price and decreases until demand stabilizes.
  4. Finalize airdrop criteria (snapshot block number, eligibility rules).

Launch Day (TGE)

  1. Deploy the token contract to mainnet.
  2. Seed DEX liquidity pools (e.g., TOKEN/ETH on Uniswap).
  3. Execute the airdrop - distribute tokens to eligible wallets.
  4. Publish all contract addresses, tokenomics documentation, and vesting schedules publicly.

Post-Launch (Ongoing)

  1. Monitor liquidity depth - thin liquidity causes extreme price swings.
  2. Track token distribution - is it concentrating in few wallets?
  3. Manage governance proposals - the community now has voting power.
  4. Communicate unlock schedules in advance to avoid surprise sell-offs.

Common Mistakes

  • No vesting for insiders: Immediate selling by team/investors destroys community trust.
  • Over-promising utility: Claiming the token will be used for everything, then delivering nothing.
  • Insufficient initial liquidity: If the DEX pool is too small, early buyers face extreme slippage and bots extract value.
  • Opaque allocation: Not publishing a clear breakdown of who holds what.

Key takeaways

  • Tokenomics is the economic architecture of a token - supply, allocation, vesting, utility, and value accrual.
  • Insider tokens (team, investors) must vest. Standard: 12-month cliff, 36-month unlock.
  • Publish the actual circulating allocation, remaining supply, and unlock schedule for the launch.
  • A token without clear utility or value accrual mechanism is pure speculation.

Quiz: Token Launch Strategy

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What are 'tokenomics'?