Bring Back ICOs: Distributed Token Launch (DTL)
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Bring Back ICOs: Distributed Token Launch (DTL)
DTL's core focus is putting tokens and their technology into the hands of real users, not just speculators.
Navigating Web3 tides with focused insightsAuthor: Anagram
Translation: TechFlow
Venture capital has never innovated in financing structures—they’ve simply found ways to invest in companies earlier than before. Don’t get me wrong, VCs injecting capital into early-stage tech has undoubtedly accelerated innovation, but this comes at the cost of the communities meant to be served by the products.
Cryptocurrency itself is a technology with novel properties—permissionless, composable, and decentralized. These new attributes open up fresh opportunities for community-driven funding models. With emerging technologies and new demands, we’re seeing creative thinking around capital formation for the first time since IPOs.
In 2017, token offerings (ICOs) began gaining attention and quickly captured investor interest. However, when the bear market arrived in 2018, many projects—and their tokens—collapsed. The ICO crash also attracted intense scrutiny from the public, institutions, and most importantly, regulators.
As retail funding for decentralized technologies waned, new sources emerged, and traditional venture capital structures reasserted themselves.
Along this path, intermittent funding mechanisms were experimented with—Initial DApp Offerings (IDO) and Initial Exchange Offerings (IEO). But under the shadow of negative public perception following the ICO era, crypto fundraising shifted toward private rounds, further excluding the community. Today’s crypto fundraising looks much like traditional VC—from seed to Series A and B, culminating in a token launch.
Venture capital is a powerful mechanism for funding innovation. The current wave of VC investment drives valuations upward, giving founders ample capital to build groundbreaking new products and technologies. We’ve participated in many such funding rounds and have seen our portfolio companies make tangible impacts on the world. Yet, on the other hand, we recognize that these high-valuation VC investments restrict the community from participating in any meaningful way.
VC involvement need not disappear—in many cases, it's essential for the survival of early-stage projects building on the technological frontier. But when capital floods into crypto due to asymmetric opportunities, foundations compete for returns rather than longevity.
In effect, private capital dumps onto communities who will ultimately determine the success or failure of these new ventures. Community members and small retail investors—not private funds—are critical to any network’s future. Decentralization happens because of them—the community and builders. Users and owners should overlap as much as possible.
The Power of Micro-Communities
At their core, micro-communities are small, focused groups where like-minded individuals deeply engage around specific interests or goals. In crypto, these micro-communities can organically raise billions in value and often represent the edge-case participants most likely to become initial holders. For example, the Ordinals community sparked massive interest within the Bitcoin ecosystem, driving the emergence of new projects such as Bitcoin-based stablecoins, while network activity—especially fee-based activity—surged. Ordinals emerged as a byproduct of a spontaneous user-driven experiment in the public market.
In the case of memes, Bonk was created as a community reward token alongside Bonk Bot, a trading app built for Telegram, eventually leading to six additional DApps supporting Bonk and paving the way for Pump.fun to pioneer a novel funding mechanism leveraging community-generated memes to achieve escape velocity. Bonk rewarded users across Solana, turning them into owners through revenue generated by the Bonk ecosystem, thereby enabling the development of potentially infinite future products. In both cases, organic distribution and fair, decentralized funding created value, which led to greater interest and further experimentation—fueling even more value creation. People care about projects they feel aligned with, driving further creativity and growth within these ecosystems.
What Can We Learn From Memes?
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Distribute to build community
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Community builds and claims value
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Build products for the community
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Community becomes more valuable
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Investors want to back new projects and communities building within the ecosystem
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Initial meme becomes more valuable
Democratizing Funding
Crypto-native bootstrapping is possible and can transcend the boundaries of traditional funding methods. For instance, the barrier to entry for crypto startups is extremely low. A set of smart contracts and a strong idea can fundamentally disrupt legacy systems and change the world—meaning many new companies will emerge, but also that innovation accelerates rapidly. Knowledge is open-source; existing breakthroughs become useful components of new systems. Crypto projects have uniquely high leverage from a human capital perspective. Traditional companies scale linearly—Uber needs more drivers to serve more passengers. Low-level open-source infrastructure can be built by one person and used by billions.
Because these are typically high-leverage human protocols—more akin to cities than companies—democratized funding, while suitable for any business, finds its ideal starting point in crypto. ICOs were an incredible mechanism for capital formation in crypto and should have endured. They put tokens directly into community hands early. They decentralized networks early. They reduced ownership concentration from day one.
Yes, some didn’t go well. But this isn’t so different from traditional investing, especially venture capital. In fact, it’s better. Over 90% of VC-backed startups go to zero or stall out. Yet only 47% of ICO investments went to zero. The difference is that in crypto, we all witness these failures unfold in real-time on liquid markets. In traditional VC, disasters are masked by a (hopefully) successful fund.
Distributed Token Launch (DTL)
The central focus of DTL is putting tokens and the underlying technology into the hands of real users—not just speculators. The latter is inevitable, but end-users must remain the priority. The ideal version involves no financial capital at all—airdrops on day one, free token grants for GitHub contributions, offering 3% of the token supply to a CTO on Twitter in exchange for tasks, crowdsourcing top shitposters via voting on farcaster to run jokerace.
Token grants should be prioritized to attract talent in any form and bring builders into the project—not just a standard "ecosystem fund" that unlocks over four years. Instead, tokens under this strategy are immediately available, aiming to bring key talent into the ecosystem from day one—such as hiring a CFO or developer relations lead. While we don’t yet have a three-step playbook to overturn funding models or a guaranteed script for optimal launches, we’re beginning to implement some of these ideas in practice. More to come...
Conclusion
For the first time in financial history, there exists a system that continuously evolves a toolkit for rewarding permissionless experimentation, enabling institutions, currencies, and irrevocable contracts to be created rapidly and with technical precision. We should avoid downplaying the impact of this permissionless value creation. Decentralization and long-term coordination happen where communities and builders intersect—these two groups should overlap as much as possible. One of the primary motivations in crypto is to build a future where communities are economically incentivized and empowered to create products that serve their own needs rather than those of rent-seeking monopolies. To motivate these communities, they must be prioritized in fundraising strategies. Blockchain is a distributed database that establishes trust through mass collaboration rather than through powerful institutions that retain exclusive control and censorship rights—let’s leverage these unique characteristics. We believe blockchain has become a crucible for powerful economic tools whose full scale we have yet to comprehend, and rebuilding new systems of transactions and collaboration within this context is a pursuit worth undertaking.
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