July 17th, 2023 — the Neon sale day, was circled as “moontime” — a shot at that “life-changing” profit for all Neon’s token holders. They were expecting no less than X20 from each dollar invested. But when the dust settled, all they got was a measly X2, which left most of them feeling bummed.
Let’s break it down and see where things went sideways and what Neon could’ve done differently to avoid this letdown.
Hold tight, and let’s dive into this listing drama.
What’s Neon and where did all the hype start.
Neon Labs rolled out the EVM that lets developers create Ethereum apps on the Solana blockchain. Essentially, it connects Ethereum and Solana, giving us cheaper and faster transactions for Ethereum dApps by tapping into Solana’s speedy capabilities.
Sounds great, right? The metrics, tokenomics, and the overall project seemed super promising. Neon continued to be hyped in crypto media, at blockchain conferences, and among various big communities which were shilling Neon heavily.
OTC sellers making a profit before the listing kicks off.
Then TGE has come on the 8th of July. No surprise that 50M tokens were sold out in 29 mins at the price of 10 cents. Neon was making some serious noise.
Now, let’s do the math: even if you had one regular allocation of $500 with an expected X20 you should have got the $10000 out of thin air. Things get even more exciting when you decide to buy several allocations on OTC.
Ah, but here’s the twist in the Neon sale saga — the real excitement was mainly felt by those who were selling their allocations on the OTC market.
Prices were soaring like crazy, reaching astonishing heights of $2000 — $4000 per account.
The demand was through the roof, fueled by the community’s expectations of a massive return, which would have easily covered the initial allocation expenses.
Here are just some of the “WTB” (want-to-buy) messages on OTC just to illustrate the above:
A red flag
Just 4 days before the sale, NEON decided to make some changes to its metrics, which included adding more token supply to Gate CEX. This move sparked FUD in the community. But alas, it was already too late. The project was being hyped and pushed aggressively by various big crypto communities. The FOMO was real, and it seemed like everyone was in a rush not to miss out on this golden ticket.
The rainy day for Neon investors.
The sale kicked off on 2 CEXes simultaneously — Bybit and Gate, but… not on Coinlist! While everyone was expecting it to start on Coinlist, it didn’t happen in the first 1.5 hours. Why was the Coinlist sale so late?
We can only try to guess here, but it might be that it was done on purpose and Neon had the following plan here: liquidate tokens on those two CEXes and then bring the liquidity to Coinlist. However, things didn’t go as expected, as it turned out that there was little interest from buyers. The tokens didn’t find much demand, and the plan to transfer liquidity to Coinlist didn’t materialize as anticipated.
The charts speak for themselves here:
Those who never hodl
Looks like Neon couldn’t sustain the price on Gate and Bybit because there wasn’t much buying interest.
Neon didn’t realize that the majority of their audience are sybils, also known as multi-account holders.
These folks use listing only for a quick profit, not for long-term holding or belief in the project.
Sybils tried to make quick gains at the beginning on Gate and Bybit, but then they mostly stopped trading and waited for Coinlist to open to sell all their tokens there. NEON’s plan was to liquidate tokens on these two CEXes and then bring liquidity to Coinlist, but it didn’t work out as expected because there was little demand from buyers.
This tactic might have been successful during the DeFi summer or meme-coin craze, and especially during a bull run. However, in the current tough market conditions, Sybils and multi-account holders are primarily interested in selling the token rather than holding it for the long term.
And, to be honest, Sybils are never here for the long haul, and that’s why it’s crucial to carefully consider who you allow to participate in your TGE and sale to avoid potential issues and market pressures.
Coinlist is adding fuel to the fire
When Coinlist finally joined the sale, things took a turn for the worse. The platform encountered issues with handling withdrawals. Initially, only a few lucky users were able to smoothly withdraw their funds, but soon after, the process came to a halt for the majority of participants who found themselves unable to access their money until the next day.
As of today (July 24, 2023), some users still have not received their tokens on Coinlist. Numerous withdrawals are still pending and have not been processed yet.
Coinlist’s mishandling of the withdrawal process exacerbated the already disappointing situation. The frustration and uncertainty among investors only grew as they faced delays in accessing their funds.
Among those who suffered most were smaller investors who bought allocations on OTC platforms, paying up to 7 times the initial price, hoping for at least a 20x return.
Those who won were still Neon itself and, ironically, the OTC-sellers, who made way more profits than those driven by NEON-related FOMO.
Unraveling the whys and the need for anti-sybil protection.
Prior to the sale, there were some peculiar moves that raised eyebrows. It appeared that priority allocation was given to almost all Discord followers of NEON. Later, many allocations were inexplicably withdrawn before the sale, leaving investors puzzled.
Then came the day of the sale, and it was met with massive sell pressure. The culprit? A swarm of Sybils taking part in the sale.
Let’s face the truth: NEON had been heavily hyped and shilled by several prominent crypto communities, with promises of unrealistic X20-X40 profits. The FOMO on a life-changing payday fueled an extreme demand for NEON token allocations, all with one purpose — to sell on the 17th of July.
It became perplexing why an average user who bought an allocation for, say, 4k, would even consider purchasing more tokens during the sale. It simply made no sense.
Adding fuel to the drama, NEON’s tokens were 100% unlocked with no vesting period which also provoked the tokens offload into the market.
Another issue is the way Coinlist tried to eliminate sybils:
As it was stated on Coinlist, 7000 users were eligible for prioritized access to Neon’s sales.
According to Appra’s analytics, approximately 40–50% of them were Sybils aka multi-accounts.
The reason for this is that Coinlist actually lacks a solid built-in scoring protocol which would be based on the on-chain reputation of the user.
Coinlist’s efforts to tackle the Sybil problem during NEON’s listing fell short due to an old-fashioned web2 approach.
Their method solely relied on cutting multi-accounts based on IP and regular KYC checks, completely disregarding on-chain activity. As a consequence, smaller investors with just 1–2 accounts ended up being caught in the net, while savvy sybil operators with dozens or even hundreds of accounts remained unscathed. These sybil farms were well-prepared to evade IP checks using proxies and other tools, rendering Coinlist’s outdated web2 approach ineffective.
In essence, Coinlist’s approach focused on eliminating smaller investors, leaving the primary threat of Sybils untouched and unharmed. These sybil operators were precisely the ones responsible for the significant sell pressure observed during NEON’s listing. Despite attempts by NEON or its market makers to boost the price, their efforts were futile against the strength and preparedness of the sybil community.
The only way to effectively eliminate the majority of Sybils was to make thorough analytics of the audience and check their on-chain reputation and behavior patterns. This is exactly what we do in Appra. We offer A to Z web3 and on-chain analytics as well as comprehensive research of the wallets to prevent the projects from the situation Neon got into.
Web2 metrics are not enough anymore against contemporary multi accounts holders. They win their bread on token sales, that’s why they care about every wallet and protect it. We continuously strive to be one step further in analyzing their on-chain behavior, ensuring a smooth sale process, and safeguarding the integrity of the community.
Another good practice which, for a strange reason, was ignored by Neon, would have been listed on Coingecko and Coinmarketcap before the main listing on CEXes. Funny thing here is that actually smaller projects like, for instance, meme-coins which are listed on DEXes, usually try to find their way to CoinMarketCap while bigger projects tend to overlook this important step.
Indeed, Neon’s listing was a real eye-opener for investors and projects alike.
For investors — no matter how crazy the hype gets, always DYOR (do your own research)! Don’t just fall for the noise and FOMO. Take a deep dive into the project’s details, dig into the tech, the team, the tokenomics — everything! This way, you’ll make smarter choices and steer clear of potential disappointments.
And for our fellow crypto projects out there — know your tribe! Understanding your community is like having a secret weapon. Fight those sneaky Sybils and protect the true believers in your project. (Appra can help you here) Treat your loyal supporters like the VIPs they are, and they’ll have your back through thick and thin.
Being open and honest with your community is the name of the game.
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