Retail vs. Venture Capital: Finding the Balance in Web3
The limitations of Fair Launch platforms and new alternatives
This report was written by Tiger Research, analyzing the imbalance of investment opportunities in the cryptocurrency market. It also explores potential solutions offered by Fair Launch platforms and new approaches.
TL;DR
The imbalance of investment opportunities between retail and venture capital in the cryptocurrency market is a topic of ongoing discussion.
Fair Launch platform seeks to provide fair investment opportunities to address this imbalance, but it still faces structural limitations.
Innovative approaches, such as offering on- and off-chain data-based investment opportunities and experimenting with transparent Fair Launch mechanisms using AI agents, are gaining attention.
1. Introduction
Launchpad platforms like Pump.fun and DAOS.Fun are gaining momentum in the cryptocurrency market. They are known for their high trading volumes and active user engagement. Unlike traditional ICOs and IEOs, these platforms adopt the Fair Launch method. This method allows all users to invest freely from the moment of token issuance, without a presale to venture capitalists.
It has attracted significant attention by allowing retail investors to participate from the start, share in the value, and benefit from a fair distribution of tokens. This trend highlights the long-standing exclusion of retail investors from investment opportunities and raises expectations for a more inclusive investment model.
This report will analyze whether the Fair Launch platform can resolve investment imbalances for retail investors and support the sustainable growth of the cryptocurrency market.
2. Retail vs. Venture Capital: The Background of the Conflict
The imbalance of investment opportunities between retail investors and venture capitalists has been a persistent structural issue in traditional financial markets and continues in the cryptocurrency market as well. Venture capitalists acquire large amounts of tokens at low prices during private sales. They later sell these tokens at higher prices on the public market to secure profits. This process leaves retail investors at a disadvantage. They are forced to enter the market at already inflated prices. This deepens frustration over the lack of fair investment opportunities.
This issue is supported by concrete data. According to Binance Research, the crypto market's Market Cap (MC)/Fully Diluted Valuation (FDV) ratio dropped steadily from 41.2% in 2022 to 12.3% in 2024. This indicates a decreasing proportion of tokens actively traded in the market and an increasing proportion of locked supply. The limited supply inflates token prices artificially, benefiting early investors like venture capitalists. However, when a large amount of locked supply enters the market during token unlocks, oversupply causes prices to drop. Retail investors bear the brunt of these losses. Ultimately, inflated token prices at launch often result in financial setbacks for retail investors.
Retail investors are naturally drawn to Fair Launch platforms in this context. By distributing all tokens from the outset, these platforms remove the risks associated with token unlocking. They provide a fair starting point for all participants. This model fosters a balanced token distribution and a healthier ecosystem, meeting retail investors' desire for early and active involvement in projects.
3. Fair Launch Platforms: A Fair Alternative or Another Imbalance?
Fair Launch platforms offer new opportunities for retail investors and position themselves as an alternative to traditional structures. However, questions remain about whether they fully address the imbalance in investment opportunities. On the surface, these platforms create a fair environment where all participants start equally. In practice, however, they expose new forms of imbalance and challenges.
For instance, Pump.fun faces challenges with automated tools like Token Generation Event (TGE) snipers and trend bots that often preempt trades, pushing retail investors to the back of the line. Additionally, some projects undermine fairness by using practices like whitelisting, which prioritizes certain groups, or forming cabals to offer insiders favorable terms. Cabals are informal groups that come together to exert power based on shared interests. These issues erode the very fairness that Fair Launch platforms aim to provide. They show that the imbalance has merely shifted, while retail investors still struggle to participate on fair terms.
What’s worse is that this pattern now repeats in shorter cycles. Fair Launch platforms often skip the vetting processes previously handled by venture capitalists, exposing retail investors to greater risks. This perpetuates the imbalance in investment opportunities, creating an even more challenging environment for retail investors.
4. Underlying Causes of Investment Opportunity Imbalance
Fair Launch platforms do not fully address the imbalance in investment opportunities. To understand this issue, we must look at it from a more fundamental perspective. The imbalance is not just about retail investors versus venture capitalists or fairness in opportunities. More importantly, it threatens the long-term sustainability of the ecosystem.
If a project only seeks funding, opening investment opportunities to everyone might seem logical. However, a token-based ecosystem is not just about securing investments. It must grow with its investors and ecosystem participants to continuously create and develop value. This requires genuine participants who focus on more than just short-term profits. They must also be committed to working together and contributing to the ecosystem's long-term development.
In this context, venture capital plays a crucial role. Venture capitalists provide more than just funding. They offer extensive networks, human and material resources, and contribute to the ecosystem's growth. They also validate the stability and reliability of projects through early-stage research and due diligence. This is why some fair launch platforms incentivize vetted participants with early access.
Solving the imbalance in investment opportunities requires more than equalizing access. Long-term growth and sustainability of the ecosystem require a structured approach. This approach should identify participants who can make meaningful contributions and provide them with suitable incentives. This is a fundamental challenge the Web3 ecosystem must address.
5. Finding a New Balance: A Value-Driven Ecosystem
The current cryptocurrency market is caught between two extremes. The fair-launch approach aims to provide equal opportunities for all participants. The traditional model centers on a small group of proven investors. Neither fully realizes the intrinsic value of the Web3 industry.
In this context, we need to focus on a “value-driven participant selection” strategy. This strategy should identify participants who can make substantial contributions to the ecosystem. It should prioritize value over the amount of capital or the type of investor. The strategy should also provide these participants with appropriate investment opportunities. Two recent examples highlight the potential of this new approach.
5.1. Legion: A Platform for Community Investment Rounds
Legion is a community-driven investment platform. It selects investors who can contribute meaningfully to the ecosystem. Legion focuses on providing fair investment opportunities. Its goal is to build sustainable partnerships between projects and investors, not just secure funding.
The core system, the Legion Score, evaluates investors using on- and off-chain data. This includes on-chain activity, social influence, GitHub contributions, and project team endorsements. The system selects investors based on their ability to contribute meaningfully to the ecosystem, not just their financial resources.
Legion opens opportunities to everyone. It helps projects select the right investors for their ecosystem by evaluating their activity and willingness to participate. Investors submit a cover letter along with their Legion score. They outline how they can contribute to the project and explain their plans. This allows them to build a trusting relationship with the project.
This approach increases fairness in investment opportunities. It also fosters meaningful interactions between projects and investors. By doing so, Legion positions itself as a new investment model. It strengthens the credibility and sustainability of crypto markets while building a contribution-driven community ecosystem.
5.2. AI-Pool: A Fair Launch Platform Based on AI Agents
AI-Pool is an experimental fair launch platform based on AI agents, proposed by X user Skely on December 24, 2024. The idea quickly gained attention and spread within hours. Many investors sent funds to the project, raising over $5 million.
Note: Skely's account was suspended due to reports of fake accounts. The exact reason is unclear, as it was reported by a third party. Additionally, the platform is an early, untested, and experimental project, not yet stable or reliable enough. However, the user's idea remains promising.
AI-Pool attempts to address the limitations of existing fair launch platforms by using AI agents. Existing platforms often compromise fairness due to centralized operations and insider trading. AI-Pool, however, manages all processes transparently using a Trusted Execution Environment (TEE). TEE secures the AI wallet’s private key and allows AI agents to operate autonomously. This approach reduces unfairness caused by centralized control and insider trading. It demonstrates a commitment to creating a fairer ecosystem.
AI-Pool is still in its early experimental stages. Even as an independent pool, it faces challenges such as market distortions from automated bots and a lack of liquidity. Despite these issues, AI-Pool ensures fairness in token issuance and initial distribution. It offers a potential solution to the unfair distribution seen on centralized platforms. With further development, AI-Pool could become a model for increasing trust and transparency in the cryptocurrency market.
6. Closing Thoughts
The imbalance of investment opportunities in the crypto market is often framed as a conflict between retail investors and venture capital. However, this is simply a difference in participants. Practices like Key Opinion Leader (KOL) rounds favor certain groups. Even fair launch platforms fail to fully achieve fairness and create new forms of imbalance. A fundamental approach is needed to address the root causes of these imbalances in investment opportunities.
Legion and AI-Pool offer new approaches to address these issues. Legion evaluates investors' on-chain and off-chain data to provide fair investment opportunities. It selects participants who can contribute meaningfully to the ecosystem. AI-Pool uses AI agents to automate processes and improve transparency. This approach addresses issues like centralized control and insider trading. Both projects go beyond capital investment and present new ways to enhance trust and sustainability in the ecosystem.
The core value of the Web3 industry is to offer equal opportunities and a fair environment for all participants through decentralization. To achieve this, we must build a balanced ecosystem that is free from bias. We also need to create a collaborative structure where investors and projects can add value to each other. These efforts will be the first step toward realizing a truly decentralized system.
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