Forward the Original Title‘Evaluatting a Token Sale: A Practical Guide’

We’re in a season of token sales and TGEs, but not all sales are worth attending. How do you determine if a sale is worthwhile? Let me share my framework using @KintoXYZ as an example.

In 2016, token sales offered significant opportunities. By 2017, ICOs had reached the peak of inflated expectations, much like AI agents did in late December.

Today, token sales resemble a roulette game. Occasionally, they can deliver a 10x return, though that’s more the exception than the norm. According to Cryptorank, only 30% of token sales in January ended with a positive ROI. Among these 30%, there are some true hidden gems.

So, how do you determine if a token sale is worth your attention?

In this article, I will be using the example of Kinto to illustrate my thinking.

Step 1: Analyzing the Product

In brief, when analyzing a token sale, you should break down the protocol into its components and evaluate each part based on its maturity, demand, and innovation.

For the product, I consider the following:

• Narrative
• Product state
• Metrics and traction
• Competitive advantage

When you analyze the narrative, think of the Gartner Hype Cycle:

If the protocol category is:

• Close to the innovation trigger: 5 points (e.g., BNB memes earlier this week)
• Close to the peak of inflated expectations: 0 points (e.g., new AI Agents or AI Agent launchpads on new chains)
• Close to the disillusionment zone: 1 point (e.g., many DePIN/GameFi protocols now)
• Slope of enlightenment: 3 points (e.g., many RWA protocols are here)
• Plateau of productivity: 1 point (e.g., most DeFi protocols will be here)

Why do we assign just one point to both the disillusionment and productivity zone protocols? When a narrative enters the disillusionment zone, it might either be forgotten or revived in a new form (like ERC404). In the productivity zone, the narrative remains neutral, failing to contribute to the virality of the protocol.

Similarly, we assign 0–5 points for each parameter:

• Is the protocol already a leader in its category by TVL? 5 points.
• Is it still in the testnet stage? 2 points.
• Is the competitor landscape very crowded with a few clear and well-known leaders? 1 point.

Feel free to ask yourself as many questions as needed. Just ensure you record all questions and answers to calculate the average score later.

The Example of Kinto

As promised, I will illustrate the process of analyzing a token sale using Kinto as an example.

Here’s a quick overview to help you understand the specifics of this product.

Kinto is an institutional-grade modular exchange, a layer in-between of a traditional bank account and a Web3 walletthat focuses on providing secure access to on-chain finance.

In other words, Kinto builds an environment at the edge of two worlds that has:

• KYC, AML & fraud monitoring at the blockchain level;
• KYC is more private and secure than on CEXs because no user data is stored, and users choose their KYC providers;
• Transactions can only be performed by verified participants achieving Sybil Resistance;
• Every user has a smart contract wallet powered by Account Abstraction that aims to be invisible;
• Chain abstraction level Misubi: Kinto was the first to release chain-abstracted swaps, chain-abstracted lending, and then chain-abstracted perpetuals via @HyperliquidX;
• As a 100% KYC’ed Ethereum Layer 2 protocol with built-in insurance, Kinto vastly reduces regulatory and financial risks.

** Note that despite having KYC Kinto is decentralized, user-owned, and non-custodial.

In short? A wallet + on-chain exchange with built-in KYC & AML and TradFi assets.

You might think that Kinto is competing against Hyperliquid, but that’s not the case. Instead, Kinto offers users direct access to Hyperliquid, facilitates lending and borrowing across multiple chains on Aave, and enables swapping on any AMM on Ethereum, Arbitrum, Base, and more. It serves as a layer of DeFi abstraction.

For end users, Kinto functions as a wallet with CEX features like fiat on-ramps, and it’s gas-free yet fully on-chain, decentralized, and permissionless—all of which is currently live.

Now, let’s use our framework to answer the key questions.

1. What’s the category for Kinto? It’s at the intersection of infrastructure and trading with several keywords: ‘for institutionals’, ‘financial ecosystem’, ‘chain abstraction’, and ‘aggregator’. There’s definitely some novelty here; I don’t personally know any product apart from Kinto that would build a KYC’ed DeFichain – but how demanded will be this solution when compared to centralized counterparties? In the chain abstraction category, will it win the competition with Particle’s Universal Accounts which is also developing fast? We need more time to judge, so I’d give Kinto 3 points here, with a potential to increase as the activity rises.
2. What’s the stage of Kinto’s development? Kinto has been live on the mainnet for quite a while, since March 2024, boasting a TVS (Total value secured) of $47M, according to L2Beat. However, the 30d operations count is not very high – just 34K – and the total number of wallets is 147K. I’d give Kinto 4 points here.
3. How good is Kinto’s trading offering? In addition to traditional Web3 assets, Kinto provides access to a wide range of popular TradFi assets. This feature sets it apart from both CEXes and DEXes, with options like Nvidia, Meta, Uber, and the S&P 500. Such diversity can attract a specific type of user to Kinto, earning it a solid 5 points in this category.
   

The more questions you ask, the more accurate your final product mark will be. Ensure that each question carries similar weight; otherwise, your final score may not be very precise.

In the Kinto case, my final product mark was 3.6.

Step 2: Understanding Expertise

In the expertise section, I consider all factors that can contribute to a product’s success from HR, intelligence, and BD perspectives. Key areas to focus on include:

• The team: Evaluate past experience, transparency, activity on social media, and developer engagement.
• VCs: Companies need VCs not only for fundraising but also for crucial connections to other projects and opinion leaders.
• Funding amount: Essential for recruiting and development.
• Partners: A broad partner network is vital as it can enhance user onboarding efficiency.

I’d like to illustrate a few important points using the case of Kinto. Many people struggle to find information about the team, but the mechanism is quite simple. Just search for the brand name on X and LinkedIn, and you’ll be able to browse the team’s profiles to evaluate their expertise.

When considering funding rounds, there are a few key points to note:

• A lead VC that continues to participate in subsequent rounds (as seen with Kyber Capital) is a positive indicator of investor confidence.
• On Cryptorank, VCs are categorized into tiers based on their activity. You can also review the performance of their other portfolio companies.

The more projects you analyze in this manner, the quicker your research process becomes, allowing you to identify red and green flags efficiently.

Among Kinto’s partners, there are notable protocols including Caldera, Socket, and Arbitrum.

What score did I give to Kinto?

• Team: 5 points
• VCs: 4 points
• Funding: 4 points
• Partners: 4 points

Average score: 4.25

Step 3: Tokenomics

This is likely one of the trickiest parts, especially given the history of disappointing low float and high FDV launches.

What should we focus on here?

• TGE FDV adequacy (your prior product and expertise analysis is crucial for assessing how adequate the FDV number is)
• Circulating supply
• Token distribution model
• Cliffs and vestings
• Supply and demand utilities
• Short-term and mid-term inflation
• Token sale design

Our task is to answer three key questions:

• Is the protocol launching at an FDV that allows for short-term growth?
• Are there factors that could lead to higher sell pressure once the token is live (such as airdrops, public or whitelist pre-sales, advisor or ambassador tokens, etc.)?
• Does it make sense to hold the token mid-term, considering its utilities?

Let me illustrate this flow by dividing all tokenomics-related facts about Kinto into two sections.

Positive things:

• The design of a bidding auction allows setting a preferred purchase price and promotes fairer FDV discovery
• 70% of $K tokens will be distributed to the community
• The team has a 3 to 4-year vesting schedule.
• No lock for the token sale participants.
• VC round transparency: Kinto raised the latest round at $10 per token ($100M FDV).
• The likely bidding quorum will be in the range between $20 and $30, putting Kinto at $300M FDV which is relatively fair.
• K is not just a governance token, the utilities include an option to use as a payment for full account recovery and extended wallet insurance. Also, all the revenue of the protocol goes to the treasury, and token holders control it via on-chain governance.

Concerns:

• Bidding auction price discovery leaves little room for a heavy post-TGE uptrend.
• Airdrop pressure.

The token won’t be immediately transferrable; to enable transferability before March 31, there should be any two out of these three:

– 20% of token float. To avoid launching with a low float but high FDV, at least 20% of the tokens must be fully unlocked and distributed to participants.

– Governance has reached Phase 2. The first Nios elections were held, and the roll-up achieved Stage One which is imminent (most likely to take place before March 31).

• – $100M in TVL. The network TVL has to pass and stay above $100M for four weeks.

My score for Kinto’s tokenomics: 3.25.

Step 4: Community

The final aspect of token sale research involves evaluating the vibrancy, loyalty, and size of the protocol community. A devoted community combined with a successful product can achieve remarkable results, as demonstrated by Hyperliquid. Therefore, this aspect deserves our attention.

What should we examine?

• Number of smart participants
• Community activity
• Product activity (to gauge the expected post-TGE product retention rate and the actual demand for the token)
• Token sale platform-related demand (some platforms have a very active community of investors, like Coinlist for example).

How to track?

• Analyze the average number of engagements to ensure they are genuine. For instance, if a tweet has a high number of retweets and nearly the same number of likes, it could be fake or result from tasks similar to Galxe. Typically, the retweets-to-likes ratio does not exceed 1:5.
• Use instruments like Moni Discover, TweetScout, or Kaito to track the mindshare and the number of smarts.

On Moni, there’s a noticeable spike in the number of Kinto followers. This is usually associated with:

• Bot followers
• Galxe/Zealy-style campaigns or giveaways

Therefore, we can assume that the realistic number of genuine and engaged Kinto followers on X is around 35K people, which is reasonable considering other metrics.

Smart mentions chart looks nice, so my final score for the Kinto community part was 3.75.

What’s next?

Everything we’ve done up to this point is essential to gauge the adequacy of the launch FDV, assess growth potential, and decide if the project merits your attention.

Calculate the final score for the protocol you’re analyzing and make your decision. Here’s the structure I typically use:

• Below 2.5 → Skip.
• 2.5 – 3 → Consider only if there are strong factors like an innovation trigger zone or a high Kaito mindshare with an active community.
• 3 – 3.5 → If joining, invest a small amount as the risks are high.
• 3.5 – 4 → Likely a tier-3 protocol; with several favorable factors in place it might be a good opportunity. However, investing a large percentage of your portfolio is not recommended.
• 4 – 4.5 → A good product; attending the sale is worthwhile.
• 4.5 – 5 → This is a gem.

The average score for Kinto I got is 3.71.

Disclaimer：

1. This article is reprinted from [@stacy_muur]. All copyrights belong to the original author [@stacy_muur]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.

2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.

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