Launchpads & IDOs: Decentralized Crowdfunding on Top of Bitcoin
The decentralized nature of the cryptocurrency market has enabled new and unique ways for projects to gather funds through crowdfunding campaigns. The old large structures needed to raise funds have found strong competitors in the blockchain industry.
Different names have been given to crowdfunding campaigns for crypto and blockchain-related projects. Some of them were Initial Coin Offerings (ICOs), Initial Exchange Offerings (IEOs), Initial DEX Offerings (IDOs) or Security Token Offerings (STOs) among others. Although these names have some differences, they all share one common feature: retail investors are now able to participate on these campaigns.
All this innovation has been made possible thanks to the expansion of cryptocurrency-related infrastructure. We do not only talk about centralized options but also about decentralized exchanges (DEXs) and other solutions.
In this context, Bitcoin’s network has played a very important role. When discussing decentralized exchanges and the decentralized finance (DeFi) market, we cannot avoid talking about RSK’s involvement through a wide range of projects. Thanks to RSK’s initiatives, we have seen how Bitcoin is becoming increasingly useful for investors to keep control of their funds at all times. Solutions such as Sovryn are just the beginning of a fast-growing ecosystem on top of Bitcoin’s blockchain.
On this post we will analyze what is an IDO and the first launchpad on top of Bitcoin.
The Decentralized Approach: What are Initial DEX Offerings?
Users that have been in the cryptocurrency market for a while have already heard about Initial DEX Offerings (IDOs). In this post, we are going to focus on these three main types of crowdfunding options to understand how IDOs could probably become the standard solution for projects to attract investors.
To understand what IDOs are, we should start with ICOs. ICOs became very popular throughout 2017 as they allowed new crypto projects to gather funds and work on their initiatives. In order for these projects to raise funds, they sold a token to the market, usually on top of the Ethereum (ETH) network using the ERC-20 standard.
Investors were able to purchase these tokens for ETH or BTC making the whole fundraising process much easier for all parts involved. Some of these initiatives were able to gather several million USD through ICO campaigns, which usually focused on aggressive marketing campaigns.
Due to the easy access that these projects had to investors, many of them faded away or disappeared in just months. This left a very negative impact on the cryptocurrency market as investors from all over the world lost large amounts of money in projects that sometimes were exit scams or simply not profitable.
In order to bring back credibility to the blockchain-based crowdfunding market, some cryptocurrency exchanges launched back in 2018 their fundraising platforms to hold Initial Exchange Offerings. The main difference with ICOs is that exchanges whitelisted projects and checked whether their initiatives were achievable or not. Exchange users were then able to get access to the tokens sold by these projects.
Another difference between ICOs and IEOs relates to the number of coins available for public sale. In general, IEOs allocated a smaller amount of coins to public sales. Another thing that is worth mentioning about IEOs is related to the fact that they are not as decentralized as ICOs.
This brings us to Initial DEX Offerings (IDOs) which are fully decentralized and conducted on top of decentralized exchanges. While IEOs require centralized platforms to be promoted, IDOs solely rely on decentralized liquidity platforms. Thanks to IDOs, projects can launch their tokens through these liquidity protocols.
Launchpad for Bitcoin Thanks to RSK: Enter Origins
Sovryn, which works as a decentralized Bitcoin trading and lending platform, has also enabled IDOs on top of Bitcoin thanks to its Origin launchpad. RSK’s advantage is clear for projects: rather than depending on small and sometimes centralized blockchain networks, it’s better to rely on Bitcoin’s massive security.
Thanks to RSK and its PowPeg, developers created the first decentralized Bitcoin trading and lending platform called Sovryn. Sovryn delivers a fast, easy-to-use, secure and reliable swapping and lending platform. Everything is processed in a decentralized network and relying on Bitcoin’s ultimate security. Users can also add more advanced features such as margin trading, which is a feature usually present in centralized exchanges solely. Another key feature is the possibility to borrow and lend on top of Bitcoin. Some of the tokens currently available for users to borrow and lend include rUSDT, DoC, XUSD, rBTC and BRPO.
Liquidity is also a very important aspect of the Sovryn protocol as it helps traders to buy and sell the currencies they want without having to depend on a costly order book. At the time of writing, Sovryn has different liquidity pools available, including SOV/rBTC, XUSD/rBTC, FISH/rBTC, rUSDT/rBTC and many others. In this way, users get immediate liquidity if they want to buy or sell these currencies. The APY on these liquidity pools changes depending on different factors such as demand and liquidity.
As stated on Sovryn’s website: “Ethereum, Polkadot, Solana, Polygon all have decentralized capital raising platforms by which new projects can jumpstart their funding and communities. Bitcoin DeFi is, at the very least, equally deserving of a launchpad for newly emerging projects focused on extending financial capabilities on top of Bitcoin.
Sovryn built the Origins platform for the purpose of launching its own ecosystem. Because of the success of Origins in generating Sovryn’s Bitocracy and the SOV governance token, it only makes sense that projects building for the Sovryn ecosystem, who share the Sovryn mission, have a place to launch their own tokens and governance.”
The Bitcoin-based launchpad will have a native $OG token for coordination and staking. As described on this post: “The Origins project will necessitate a token for coordination and staking in the project. The token allows for the governance of what things can be launched on Origins, and will be used as a vetting mechanism to prevent scams and bad actors. OG holders have the power to govern the Origins treasury and how funds are used for the Origins subprotocol. Staking OG can be a means of securing allocations via a pool/lottery system and queueing token sale participants to avoid gas wars.
Origins is being developed and launched by the Sovryn Bitocracy. The majority of revenue coming from the Origins subprotocol will go towards OG stakers, with a portion dedicated to SOV stakers. But in essence, Origins will be its own self-governing protocol that manages its own local platform, while anchored and supported by the Sovryn Bitocracy. As Sovryn scales beyond its core Bitcoin DeFi offerings, it is important for Sovryn to distribute the governance of new products to focused, self-starting communities.
The Sovryn community has proven its ability to instantiate its vision by providing it with the right funding required to develop its trading and lending platform. The same thing was done with Babelfish, and we will continue to learn and improve from these situations. Origins will be a dynamic system over time.
The long-term vision for Origins is to provide a mechanism for the Sovryn community to kick start new projects and grow the ecosystem, while securing the funding to build the future that we believe in. This future includes an entire suite of products, services, and protocols that give access to permissionless finance on Bitcoin and build the operating system for self-sovereignty.
All of these projects will be things that are tradable on the Sovryn exchange, become collateral types, allow for lending/borrowing/margin trading, providing an additional use case for SOV.”
In this guide, we have discussed Launchpads, ICOs, IEOs and IDOs. The decentralized finance market is playing a key role in the whole blockchain industry and projects such as RSK are making it possible for the ecosystem to grow even further by including a launchpad on top of Bitcoin. Exciting times ahead for those projects that truly share the vision of Satoshi and want to raise funds in a completely decentralized and secure way.