Which Comes First: Launching a Token or Finding Market Fit? Timing Is Key
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Which Comes First: Launching a Token or Finding Market Fit? Timing Is Key
Unless your product genuinely requires a token, it's better to wait until achieving product-market fit before considering token issuance.
Navigating Web3 tides with focused insightsAuthor: Builders
Translation: TechFlow
According to American entrepreneur Eric Ries, product-market fit (PMF) refers to "the moment a startup finally discovers a large market for which its product resonates."
Although Web2 and Web3 startups differ, the classic wisdom about product-market fit still holds true in crypto: either achieve it, or fail.
This raises an important question: should you reach product-market fit before launching a token?
The simple answer is that it depends on how essential the token is to achieving PMF. The role of the token within your product will determine the optimal timing for its introduction.
In this article, we'll explore the risks of launching a token before achieving product-market fit, and identify specific scenarios where doing so may be appropriate.
The Problem with Launching a Token Before Product-Market Fit
Frankly, many tokens in the market play no critical role in the products they are meant to serve.
For crypto products that do not rely on tokens to function, teams should strive to achieve product-market fit before launching a token. This is because the decentralized nature of these projects often makes post-launch adjustments extremely difficult. For example, governance tokens may be an important part of a project’s ecosystem, but they are not necessarily core to the product itself.
Introducing a token too early can hinder the path to product-market fit by distorting incentives, influencing user behavior, and prematurely locking in certain product features. Moreover, while adjusting a token's economic model after launch is typically very hard—even when such changes are crucial for achieving PMF. Although token incentives can attract users initially, they cannot guarantee long-term retention or resolve underlying product issues that should have been addressed prior to launch.
When It Makes Sense to Launch a Token Before Product-Market Fit
For a small number of crypto products whose design is fundamentally built around the token (though such cases are rare), the token is essential to the product's functionality and must be launched before achieving product-market fit.
In certain cases, tokens are vital to achieving PMF—such as Layer 1 blockchains that rely on miners or validators for economic security, like Bitcoin, Ethereum, Solana, and Binance Chain, or DePin networks like Helium and Dimo, which depend on token issuance to bootstrap supply-side participants in their networks.
While less common, some DeFi protocols genuinely require tokens to properly align incentives across the network (beyond just governance). For these products, the token-based incentive system must function correctly to scale and maintain alignment.
When It Does Not Make Sense to Launch a Token Before Product-Market Fit
Despite the prevalence of token launches, very few crypto products actually depend on tokens to operate. Most commonly, tokens are used to drive user acquisition (or eventually enable liquidity exits). Blur is one of the best examples of this strategy working effectively. By leveraging incentives from its native token, it successfully executed a "vampire attack" against OpenSea, then the leading NFT marketplace.
Tokens can certainly help jumpstart user growth, but if the product hasn't truly achieved product-market fit, activity will inevitably drop sharply once incentives end (see all the major airdrops in 2024 as evidence).
Conversely, if a product already works well on its own, adding token incentives to accelerate user growth—and in many cases enable decentralized governance—can dramatically boost its trajectory.
Take Compound as an example. While it has a native token for governance, that token is not essential to its core product—decentralized lending. Compound had already achieved significant market success before introducing its token.
Likewise, Uniswap captured most of the decentralized exchange market share with its protocol v2, well before launching its token. The subsequent token launch allowed it to effectively fend off SushiSwap’s vampire attack.
More recently, Polymarket achieved strong product-market fit in its decentralized prediction markets, allowing users to bet on real-world event outcomes using USDC instead of a volatile native token.
In summary, unless your product fundamentally requires a token, it's generally better to wait until you've achieved product-market fit before launching one. Otherwise, the token may hinder rather than help your growth.
Legal Disclaimer
Token offerings are not available to residents of the United States (and its territories), Canada, and certain other jurisdictions.
This blog post is published by CoinList Global Services Ltd. or its subsidiaries. CoinList does not provide investment, legal, or tax advice, and this article should not be taken as such. Please review the relevant disclosures, limitations, and risks when using the CoinList website or reading this blog post, available here.
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