XJ

Investing @ Cydonia Capital
CGO & Co-Founder EMERGE Esports

[Jason Choi @mrjasonchoi]

How to Get Rich in Crypto (Without Getting Lucky) - Part II

[Popcorn Kirby 🚀 @PopcornKirby]

6 months flew by and it is time for the half yearly update for Popcorn Kirby School!

In January, we enhanced the learning environment at Orphan Academy by creating a mini library. This new resource provides students with access to a diverse range of books.

[XJ @xJpang]

@TyrogueD Yall clearly have not spent enough time in nam, true alpha.

[Calvin | Impossible is always BUIDLing @calchulus]

Token Launch Narratives x Node Sale Narrative

(Warning, twitter won't let me pay more money to upgrade from premium to premium plus, so unfortunately this will just be a super long post)

We’ve spent 3.5 years at @impossible_ and for myself, this is the start of year #8 of looking at token launches across Republic (pre-Coinlist), Binance Research, and Impossible. We want to share a lot of the thoughts we’ve been working on given we’re in the space of seeing tokens go live via our platform and via our advisory work.

Time is money, so i’ll give you the key takeaways

Key Takeaways

1. More mature market has lead to overall valuations to move up, & the market has crowned some current “market leaders” with high vals.
2. But With higher valuations, returns are less abundant, and the pressure to create even highers to match unlimited returns, is not possible.
3. @cobie : With large venture capital presence and the rise of points, the realization of valuation has shifted to become largely in a pre-TGE status.
4. @dingalingts : one symptom of the points is the elevated expectations of everyone referencing large fundraising private numbers and uncertain longterm traction.
5. As a result with high valuations, low float, and low access during pre-market price discovery, retail market participants are forced to overpay when they get exposure to the high quality and transformative projects.
6. As stated in Binance Research and dingaling’s article, there is an onus on market participants to heavily filter for better projects at more reasonable valuations.
7. We as an early stage player within the space, hope to help set the tone in building better instruments for users to invest into projects, and for projects to fundraise.
8. We see the node sales as one such step to create long term believers in the ecosystems that we believe deserve to have a chance to be the top 100 protocols of tomorrow.
Read more to understand what we are looking to achieve in node sales and wider public sale launches.

👇

Crypto’s Maturation

We’ve come a long way in crypto, from the earliest days of 2017. I remember sitting during the EOS ICO, checking if the onchain contract was higher or lower than the price on Binance, and deciding where to buy on a given day based on which place was lower.
I remember DCAing early defi products when defi TVL in the space was under 100M TVL. We’re at 96B today, according to Defillama.

From seeing the entire defi space grow, as an early admin of the largest Telegram DeFi chat, to bantering in @10b57e6da0, i think we all agree that the space has matured. What people hate to admit is, crypto is getting harder every day.

I tell a lot of my friends who haven’t gotten into crypto yet, that imagine joining a place where the history is only 15 years at this point. So if you stay in this space for 1 year, you’re on a space exploration where you collect 6.6% of all the data that the whole world has on this sector. You’re now a “field expert” who can make your own discoveries.

But in 2017, with 9 years of the crypto history lifespan, that same metric was 10%+ of the history of blockchain, you would get to see each year that you joined. In a “post ERC20” world, the cambrian explosion of tokens that proliferated with this token standard led to too many projects and not enough liquidity to support them, leading to the implosion of 2017 —> 2018 bear market.

It seems like we never learned that lesson either in 2021, with NFTs, LBPs, and any other innovative instruments to collect communities together.

In bear, we tried to trade the chop on FTX and onchain perp products and either liquidated or seppuku’d ourselves in an effort for alpha, creating what seemed like deeper markets and deeper liquidity, but we’ve never been honest with ourselves, whether it was with Sam Coins with 7 year vest and low float, or with perp markets on a very limited number of alts, that the name of the game was to build real long tail liquidity, which is NOT easy.

The problem that we are not willing to accept as a space, is that money doesn’t grow on trees and valuations don’t stay the same as the smart contract raise.

The time is 2018. I applied to be a researcher at Binance. Back then, coinmarketcap and coingecko only had about 800-1000 projects that were > 2M circulating marketcap.

I made it my job to memorize exactly what all of those do. you could quiz me on any of them. I would OBSESS over reading everything that I could about any of these projects, because maybe some day those projects could be unicorns.

The new projects that were launching were also priced accordingly, with projects like Matic (Polygon), Axie Infinity, and more in the 20M FDV range for users to get exposure to.

The upside of finding a gem was insane, so it was worth it to try everything. I spent over 420 ETH (sadly not reimbursed) in gas to test every product there was to try on ETH mainnet during defi summer 2020. But it was worthwhile to find affordable opportunities and hop in early.

It was just simply easier to find 100x projects when there were FDVs that were available to funds and users alike that had 100x rooms. The day that we left Binance Launchpad, the historical performance of all the projects launched and held to Feb 28, 2021, was 384X.

Three years later, on a longer time horizon the max has regressed to an average of 22.68x on a selection of 35 projects (data courtesy of @CryptoRank_io), which is still an insane return for the regular public audience, with the next best exchange, Bybit, capturing only 4.5x return on investment over the same time. But that is now the same strategy bringign the average of returns down (and the market corrections over time), eroding the “overpowered-ness” of the IEO power.

Simply put, the game of investment is harder now. More and more, having a guide in the investment space is more and more valuable but more and more scarce.

“back in my day, FDV’s for major blockchains used to be sub 100M FDV”

2. The Binance Launchpool

The launchpool was born out of a very unique hybrid - take from the lessons learned in defi APYs and provide a useful utility of access to BNB holders.

The evolution of the launchpool also created the demand for high FDV projects, as the higher the FDV, the higher the APY that could be presented to BNB stakers.

This breeds part of the issue of the weighting hard towards these high FDV projects on the liquid markets going online and consuming a lot of the liquidity within the space.
Users are here to invest, and they’re here to look for returns, but liquidity is finite.

The glamour of the pre-launch & the opacity of private fundraising

The main issue with private rounds + valuations in early market conditions, is, that whatever goes, goes. If people are willing to enter at a price, this is a reference that they believe that the asset they are buying are worth more than what they’re paying for. Cobie’s latest article displays a walk through on this dynamics, showing how the availability of private capital has displaced the most of the price discovery phase for tokens towards private markets.

Sure, it’s sexy to have a 100M pre-seed round from some notable backers, but who will come in afterwards if you don’t capture more traction?

Private markets cause fomo for projects, because the voices in the market are not a complete market. They are by definition, private markets with “low available supply” - before there is float.

There’s a double whammy in private markets, which are that, if investors deploy large amounts of capital in high FDV projects pre launch before price discovery, less turnover ratio gets achieved

From a economics perspective, it is the turnover rate of money within the ecosystem - the more money bleeds out or gets sidelined in overvalued hidden private deals, the less can be there to trade.

But who will support low float / high fdv projects?

The 10x principle

Users have some goal: to break even within a certain amount of time or to return a certain multiple, as Kiet featured heavily here in his research with an important question users ask themselves: “How/When can I get my capital back? (Not even profit but just breakeven)”. We’ve seen a lot of users aim to try to get at least a 10x return into some of the early opportunities they make. At one point in 2022, when Impossible was averaging a 5.2x return on all of our projects to inception, sadly, we had users still criticize us as not having enough upside for them. You can’t satisfy them all, but it’s truly a valid quest to go after early opportunities as a user as well.

Retail dont get access to a lot of primary market deals, as many have pointed out, and thus, this pushes a lot of users to “be the yield” by farming airdrops and generating onchain activity for these protocols. The problem, is that these pre-TGE activities create pre-token traction, but do not ensure anything beyond the mercenarial TVL that we saw in the early days of defi.

Editor note: I respect as well in particular the teams like @AxieInfinity, that have rode these flywheels both up and down, but build a loyal community in the process and a strong user base, such that beyond raising a large warchest, they continued to live beyond the initial mechanisms and create longer lasting value.

Past performance never equals future success, and past traction might not last once a token incentive dries out. We’ve seen this in play-to-earn flywheels both up and down, and defi flywheels in bull and bear.

The problem of points as well is that, as dingaling mentioned, if every team has points, and they constantly get diluted, users are PVPing for value that is finite, and the more that people expect to make a ton of returns from a finite pool, the more they will be disappointed (and doubly so in the Renzo like cases).

As markets get tougher, and exchanges tighten listing criterias, the liquidity for all the hard working airdrop farmers dries up, then causing more teams to delay launches, drag out fighting for points longer, and causing even more community complaints and ruckus.

Points are a leverage tool for projects to bootstrap utility, but with leverage, if user’s expectations are liquidated there’s no coming back. You can’t make back a community with one trade.

Here’s the billion dollar question: So how can we build post-token communities pre launch?

There are a lot of partial solutions:

As dingaling mentioned, the forced waits of many projects to be data-behemoths before the launch has caused a lot of projects to just game the system. On the flip side, some projects are rushing to launch earlier when their valuations are lower, and have more room to potentially pump, but a rushed launch causes tokens with immature utility and then the users develop a negative taste towards these projects, as many teams see a token launch as an end, it really is a start. Sadly some teams simply exit without completing what they have yet to even embark on building. It is powerful though, to encourage projects to test waters earlier, and not just wait until airdrop farms have already farmed through a protocol. We still need to build better systems to have more projects launch at various stages of maturity and build more long ter mvalue.

More transparent and open markets for locked tokens and points (OTC desks). We are seeing more future teams build ecosystems around this, such as what Cobie is doing with Echo, and upcoming points markets like Bubbly.

Accessibility

At @impossible_, our very first motto was to conduct fair, accessible, and high quality launches and investment opportunities.

As a launchpad with a token gated system, we wanted to create a value capture ecosystem for our token holders while also selecting users that have more long-term skin in the game via our staking program that has one of the longest staking windows within the space. However, token-gating opportunities can be a problem to raise sizable public rounds, as it naturally blocks some users from participating and getting unlimited allocations. The challenges that we still have to solve for are:

- Attract high-caliber projects that launch at reasonable prices to let the community come join in the fun in a more frictionless way. Projects need to be willing to “leave money on the table” vs listing at billions when that option is available on some venues for a short time only, which we’ve seen, is hard to sustain.

- Cultivate a wider audience that participate in those sales. Find a voice above the noise to attract the next million users. Today, we’ve got 40k onchain users but still a far cry from centralized scale.

- Maximize exposure for projects during AND after the token launch process
- Ensure public sale price is fair and as a positive launch, either via a smooth launch with strong liquidity, or protection in the negative cases with our Industry-first buyback protection program for token launches, dating back to 2021 to Highstreet, our first project to list as a Binance Launchpool.
- In theory, a paid user is more willing to care about an ecosystem than a ‘rental’ user that receives a free reward prior to the network becoming truly steady in the future. Affordably priced launchpad auctions can replace airdrop function, add a useful friction to give cost basis/floor for community participants, to avoid them getting tokens for free and creating a vicious farm and dump cycle.

Given that we’ve spent 3.5 years at Impossible and for myself, this is the start of year #8 of looking at token launches across Republic (pre-Coinlist), Binance Research, and Impossible, what does Impossible see as the solutions we want to double down on for this high FDV, low float?
- Give public participants access to current private markets. We are ACCESS maxis. The more we can give users the power of choice and optionality to join into strong protocols in earlier stages (which, for the record, definitely requires a lot of education and collaboration on both user and project’s sides), the more we empower the regular user to have early (but prolonged) incentives to be involved in ecosystems.
We don’t believe that opportunities should be siloed only to funds or institutions.
Users are the <value>, long term users are the long term value in this space.

- Get projects to launch with higher float and controlled inflation. They can absorb more buy pressure without pumping so hard, thus simultaneously tackling the “artificially high FDV” problem.
This one is easier said than done becuase not every project is willing to embrace this mindset
We’re here to build long term businesses, but unfortunately a lot of people have decided that the token <is> the product that they’re building. It’s unavoidable to have this, but in good market conditions, it’s easy for some projects to look at the short term high FDV and design strategies around this, but to change from this “optimal strategy for fundraising & monetization”, you have to be involved with projects from the get go that you can filter for those who truly here to work on long term games.

Impossible as an accelerator works hard in selecting projects “dangerously early” and betting big on sectors that we believe in. This earns the trust of teams that take us on as advisors to listen to our advice as a team that has been through launching many tokens before. We feel confident that we are both able to filter to find projects that are coachable and willing to listen to our advice in an attempt to build the best ecosystems better.
One concept that @ianw888 (Ton, Ryze) and I spoke about many years ago is the concept of “Long term greedy” - it’s ok to be self-motivated by returns, but make it be long-term greedy mindset so that not everything is about an instantaneous arbitrage. Short term gains are ephemeral but building deep relationships are the real annual recurring revenue of the future for projects. In creating mechanisms of fairer launches and more reasonable valuation structures, we see this as the mindset shift that is necessary to make sure that we as a space work with founders who are driven to find long term businesses with scale and that are willing to not take every short-cut to get there.

With this context in mind, at Impossible we believe that it is time to bring back larger (and earlier-stage) public sales, giving the possibility to communities built around to grounbreaking new projects to participate in transparent deals and grow together with the teams. We have also started to roll out pre-IDOs, to help decentralize private rounds as well. Enabling communities to invest at these early stages can cultivate a deeper loyalty and be a complimentary tool to work alongside points or airdrop campaign that have a great impact acting as “top funnel” to bring awareness to the projects.

Enter the node sale

Node sales are here to create long term contributors to technical ecosystems that we hope to see true builders building long term value in.

Any ecosystem is only as good as the combo of the protocol it is being built by and the users that are willing to contribute to it.

Benefits for Node Sales
1. Price discovery / anchor > can lead to a valuable datapoint for token listing because public users are involved with a vesting, which they are not usually accustomed to in other cases.
2. Allows public participants to get access with size in similar terms offered for VCsThe size comes with the tradeoff of having vestings to shoulder this size

3. Long-term committed community that is concretely incentivized to bring longterm value for the project
4. Fast decentralization for the networks that need validators or other decentralization of computation contributions.
5. Offering whitelists and early opportunities such that project’s community allows actual users to get early exposure to token.This is strictly better than early activity airdrops that are prone to be just farmed and dumped
6. Creating buyback protection programs and other protections can actually gives specific communities/users a free call option on the token at launch to participate.

The community purchasing nodes is an ideal target to receive part of their rewards upfront, simplifying the target selection for airdrops to highly engaged and long-term aligned contributors. This can help to achieve a curated selection of token holders when targetting a moderate TGE float with wide initial distribution.
We’ve been able to support teams that we currently are advisors for, like Xai, Aethir, and Sophon through the parts of their node sales. Starting with helping Xai to bring in KOLs and partners that achieved 25% of their 26M USD raise, we were able to help support Aethir, a project we’ve advised for almost one full calendar year prior to node sale launch, to go through their own, and raise over 40k ETH (approx, 150M USD at time of publication). We subsequently have supported @sophon, an upcoming zkSync Hyperchain-based ecosystem, to raise over 20k ETH in its node sale.

Each of these node sales have brought eye-popping numbers, with varying degrees of progress on each’s narrative, product, ecosystem, and user bases. These node sales have attracted the attention of hundreds of projects within the last months rushing to find us to do more node sales. And it’s smart and rational of every project to come find us when they see these huge raise sizes. But node sales aren’t perfect yet, nor are we, and nor are every project coming to us.

We’ve received decks for over 2000+ projects during our 3 years at Impossible, and we’ve sat down to grade and review probably about 350+ of these projects, and we have to be even more selective in the projects that we’ve worked with. If we haven’t had time to dive deeper into your protocol, we’re always keen to read more, and that we encourage teams to continually “reapply” and always share more updates in the group chats we have to keep us up to date on progress.

Even if we don’t think a project is a fit for a node sale today, doesn’t mean a project isn’t good, it’s just that we must start somewhere to create the sales that we think can make a difference in this thesis to “launch smarter and launch better” for both projects and for users. We will also share more details about node sales in other upcoming deep dives.

Further Improvements for Node Sales

- Doesn’t address the locked-tokens market, still has a lot of buyers locked long term that will eventually need more liquidity, so will still want to work closely with other OTC markets and exchanges in the future to create better standards by which earlier stage projects mature and receive future liquidity venues and support. We will also be exploring deeper token standards to make the licenses more robust as instruments to be used within other defi protocols such as NFT lending and NFT marketplace use cases.

- Not every project in crypto needs a node sale (Currently, new chains, infrastructure, dePIN are some of the concepts that we’ve seen do well with node sales)As such, Impossible is still working on building more structures for launches for all projects, and continuing to operate our normal launchpad

- Tech frictions - still not everyone has the ability to operate nodes, so Impossible is currently in discussions with various node service providers such as @easeflow_ , @NodeOps_App , @gelatonetwork , and more, to support in giving users a more frictionless experience o participate in the node operation process.
Regarding the float, one more modification that we see in the node sale methodology is the frontloading of rewards and emissions of nodes, either via airdrops or via halving emissions schedules, which create super-linear vestings and strictly better ‘wait times’ for more users than traditional safts and cliffs which tend to be ‘backweighted’ in terms of token emissions. In the long run, Impossible strives to build node sales up to be a fundraising and network bootstrapping standard, and will continue to tweak the strategies as necessary to help achieve better decentralization of new networks and better distribution of total token supply for projects. Currently, some of our node sale projects will be comfortably in the double digits of float on day one, and in the 20-35% range of total token supply after the first year thanks to airdrops and front-weighted emissions

Ultimately, what’s the real panacea for this whole situation?
We need to build the projects that are worth housing the liquidity of tomorrow. Then, we need to build the liquidity flywheels that can keep growing. We also cannot be complacent in the design of our launches as an advisor to so many protocols, as the birth of these projects is the most highest leverage timing that impacts the long term trajectory and success of these projects.

At Impossible, we’ve made investments into options protocols like @Panoptic_xyz that can create more defi native liquidity, we will be unveiling some collaborations soon with a leading EVM dex, and we’re going to be constantly evolving the structures of node sales to make the best type of fundraising and investment vehicles for projects and users alike.

And we’re not stopping there :)

[XJ @xJpang]

@NoCodeJac @QwQiao Second this, i've seen people jumping multiple times from projects/big crypto companies within a span of 3-4 months.

[XJ @xJpang]

So true, seen many first hand.

[qw @QwQiao]

the problem with hiring non crypto natives, and ive seen this cycle after cycle, is that they don’t truly believe in crypto. and when they don’t believe in the industry where they work, they’ll never work as hard as they did in web2/tradfi. even worse, when bear market hits, they leave.

so my mental model is to always hire crypto native employees. but “crypto native” simply means someone who has developed a genuine appreciation for crypto in one way or another, regardless of where they come from.

[XJ @xJpang]

@wassielawyer @arthur0x @DeFianceCapital Singapore boleh!

[XJ @xJpang]

@fanfan You have small face big eyes, we sing and drank in Singapore before, can i have your wechat?

[Mike Posner @MikePosner]

on my 26th birthday, i wrote I Took A Pill in Ibiza…10 years ago. The song became popular several years after i wrote it. Yesterday i celebrated my 36th birthday. i feel proud to look at the song lyrics and know that NONE of them are true anymore. I’ve grown into a completely new man…one that i’m proud of. check this out… 🧵

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[XJ @xJpang]

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[Stake.com @Stake]

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[XJ @xJpang]

@Stake @alfaromeostake Long time fan of both stake and F1

[ONE Championship @ONEChampionship]

🚨 Full Fight 🚨 Watch the long-awaited Muay Thai Super Fight between Rodtang and Superlek!

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[XJ @xJpang]

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[XJ @xJpang]

@fanfan You’re in Singapore?

[DJ Balloon @DJBalloon69]

Just penned down some thoughts and achieved some sort of enlightenment? Decided to use this as a medium to share my perspective and thoughts in the journey of life.

[XJ @xJpang]

@SherryYanJiang Wait actually there’s multiple places that has it!

[XJ @xJpang]

@SherryYanJiang Pls share alpha hahahah

[Popcorn Kirby 🚀 @PopcornKirby]

Time for a half year update on Popcorn Kirby School! There’s some upgrades, also the students had some solid developments as well.