This article explores the issue of unequal investment opportunities between retail investors and venture capitalists in the cryptocurrency market, as well as the potential and limitations of fair launch platforms as an alternative. While the fair launch model attempts to provide equal participation opportunities for retail investors, new forms of inequality such as bot interference and insider trading still exist. Innovative projects like Legion and AI-Pool enhance transparency through contribution assessment and AI technology, offering more sustainable solutions and providing new directions for fairness and trust within the Web3 ecosystem.

1. Introduction

Source: rsuthar94，Dune Analytics

Platforms like Pump.fun and DAOS.Fun are experiencing strong growth in the cryptocurrency market. They have gained significant attention due to high trading volumes and active user participation. Unlike traditional ICOs and IEOs, these platforms adopt a fair launch mechanism—allowing all users to freely participate in token investments from the very beginning without having to sell tokens to capital investors in advance. This model has attracted widespread attention by enabling retail investors to participate from the outset, share value, and benefit from the fair distribution of tokens. This trend highlights the longstanding exclusion of retail investors from high-quality investment opportunities, while also raising market expectations for more inclusive investment models.

This report will analyze whether Fair Launch platforms can effectively address the issue of unequal investment opportunities for retail investors and support the sustainable development of the cryptocurrency market.

2. Retail investors and venture capital: the origin of the conflict

The unequal investment opportunities between retail investors and venture capitalists have been a longstanding issue in traditional financial markets, and this problem persists in the cryptocurrency market as well. Venture capitalists acquire large amounts of tokens at low prices during private sales, then sell them at higher prices on the public market to make a profit. This process puts retail investors at a disadvantage, forcing them to enter the market only after prices have already risen, deepening their dissatisfaction with the lack of fair investment opportunities.

MC/FDV for tokens issued in 2024 drops to lowest in nearly three years, source: Binance Research

This issue is supported by data. According to Binance Research, the market capitalization (MC)/Fully Diluted Valuation (FDV) ratio in the cryptocurrency market has continued to decline from 41.2% in 2022 to 12.3% in 2024. This indicates that the proportion of circulating tokens in the market is decreasing, while the proportion of locked supply is increasing. The limited supply artificially drives up token prices, benefiting early investors like venture capitalists. However, when large amounts of locked supply flood the market during unlock periods, oversupply often leads to price crashes, with retail investors bearing the brunt of the losses. Ultimately, the inflated pricing at launch often results in financial losses for retail investors.

In this context, retail investors are naturally drawn to fair launch platforms. These platforms issue all tokens from the beginning, eliminating the risks associated with token unlocks and providing equal starting points for all participants. This model promotes balanced token distribution and the healthier development of the ecosystem, meeting the demand for early participation from retail investors.

3. Fair Launch Platforms: A True Fair Alternative or Another Form of Imbalance?

Fair launch platforms have opened new opportunities for retail investors and positioned themselves as alternatives to traditional investment models. However, there is still debate over whether these platforms truly solve the issue of unequal investment opportunities. On the surface, they create a fair environment where all participants start on equal footing. In practice, however, new forms of inequality and challenges have emerged.

$DRUGS VIP participant list, source: DAOS.fun

Taking Pump.fun as an example, the platform faces challenges brought by automated tools, such as token generation event (TGE) sniper bots and trend bots, which often seize trading opportunities and push retail investors to the back. Additionally, some projects undermine fairness through mechanisms like whitelists, giving preferential treatment to specific groups or forming interest groups that offer insider advantages. These issues erode the original intent of fair launch platforms. The reality is that inequality has not been eliminated, it has merely taken on a different form, and retail investors still struggle to gain fair participation opportunities. Even more concerning is the fact that this model is now repeating at a faster pace. As fair launch platforms often skip the traditional due diligence process of venture capital, they instead expose retail investors to greater risks, further exacerbating the inequality in investment opportunities.

4. The Deep-rooted Causes of Unequal Investment Opportunities

Fair launch platforms have not fundamentally solved the issue of unequal investment opportunities. To truly understand this problem, we need to examine it from a more essential perspective. This inequality is not just limited to the opportunity gap between retail investors and venture capitalists, nor is it just about the fairness of opportunities. More importantly, it threatens the long-term sustainable development of the entire ecosystem.

If a project is solely focused on raising funds, opening investment opportunities to everyone may indeed make sense. However, token-based ecosystems should not only focus on fundraising. They need to grow alongside investors and ecosystem participants, continuously creating and developing value. This requires genuine participants who are not just concerned with short-term profits, but are willing to contribute to the long-term development of the ecosystem.

In this context, the role of venture capital is especially crucial. Venture capitalists not only provide financial support but also bring extensive networks, human resources, and material resources. Through early-stage research and due diligence, they validate the stability and reliability of projects. This also explains why some fair launch platforms incentivize vetted participants through early access.

To address the issue of unequal investment opportunities, merely achieving equal access is not enough. The long-term growth and sustainable development of the ecosystem require a structured solution that can identify and incentivize participants who make substantial contributions. This is a fundamental challenge that the Web3 ecosystem urgently needs to address.

5. Finding a New Balance: A Value-Driven Ecosystem

The current cryptocurrency market has fallen into two extremes: on one side, there is the pursuit of absolute equality through fair launch models, and on the other side, there is the traditional model centered around a small group of seasoned investors. Neither of these models fully reflects the intrinsic value of the Web3 industry. Therefore, we need to shift towards a “value-driven participant selection” strategy, which focuses on identifying and attracting participants who can make significant contributions to the ecosystem, emphasizing their value creation abilities rather than simply considering capital size or investor types. Two recent cases have demonstrated the potential of this new approach.

5.1. Legion: Community Investment Round Platform

Legion, as a community-driven investment platform, is dedicated to selecting investors who can create tangible value for the ecosystem. The platform’s goal goes beyond merely raising funds; it focuses on building sustainable partnerships between project teams and investors.

The core of the platform, the Legion Score system, comprehensively evaluates investors based on multi-dimensional data such as on-chain activity, social influence, GitHub contributions, and project team recognition. The scoring system is based on the investor’s actual ability to contribute to the ecosystem, rather than just considering their financial resources. Investors are required to submit a cover letter and Legion score, outlining their potential contributions and participation plans, which helps build a trust bond with project teams. This approach not only enhances the fairness of investment opportunities but also fosters deeper interaction between project teams and investors. Legion is pioneering a new investment model that, while enhancing the credibility of the cryptocurrency market, is also creating a community-driven ecosystem focused on contributions.

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 user Skely on December 24, 2024. The idea quickly gained attention and spread within hours. Many investors injected funds into the project, raising over $5 million. Note: Skely’s account was suspended due to a false account report. The specific reason remains unclear as it was reported by a third party. Additionally, the platform is an early, untested experimental project and is not yet stable or reliable. However, the concept behind the platform remains promising.

AI-Pool seeks to address the pain points of existing fair launch platforms through AI agents. Unlike traditional platforms, which often face issues of centralized operation and insider trading, AI-Pool utilizes Trusted Execution Environments (TEE) to ensure process transparency. TEE protects the private keys of AI wallets and ensures the autonomous operation of AI agents, effectively reducing the unfairness caused by centralized control and insider trading.

Although AI-Pool still faces challenges such as bot interference and liquidity shortages, it demonstrates unique advantages in ensuring fairness in token issuance and initial distribution. This provides a new approach to solving the distribution inequities of centralized platforms. As the technology continues to improve, AI-Pool is expected to become a model for enhancing trust and transparency in the cryptocurrency market.

6. Conclusion

The issue of unequal investment opportunities in the crypto market is often oversimplified as a conflict between retail investors and venture capitalists, but in reality, this is just the surface. Whether it’s the KOL round that favors specific groups or fair launch platforms that fail to fully achieve fairness, these examples reveal the deep-seated inequality in the market. The innovative practices of Legion and AI-Pool offer new solutions to these problems: Legion filters valuable participants through a comprehensive data evaluation system, while AI-Pool enhances process transparency through AI agents. Both projects go beyond simple capital investment, presenting a new direction for increasing ecosystem trust and sustainability.

The core value of the Web3 industry lies in creating equal opportunities and a fair environment for all participants through decentralization. To achieve this goal, we need to build a balanced ecosystem that eliminates bias, while establishing a collaborative mechanism that promotes positive interaction between investors and project teams. These efforts will lay the foundation for a truly decentralized system.

Disclaimer:

1. This article is reproduced from [Marsbit)]. The copyright belongs to the original author [Tiger Research]. If you have any objection to the reprint, please contact Gate Learn team, the team will handle it as soon as possible according to relevant procedures.
2. Disclaimer: The views and opinions expressed in this article represent only the author’s personal views and do not constitute any investment advice.
3. Other language versions of the article are translated by the Gate Learn team. Unless otherwise stated, the translated article may not be copied, distributed or plagiarized.