Launchpad: DAO Maker — My Analysis & Valuation by Comparison
Disclaimer: The information contained herein is for informational purposes only. Nothing herein shall be construed as financial advice and is solely the opinions of the author who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The author does not guarantee any particular outcome.
The Wild West — Investing in Cryptocurrencies
Comparing the current market conditions in the cryptocurrency space against the top 3 exchanges in the world, cryptocurrency is unregulated and very nascent. At the same time, it is filled with abundant opportunities for growth. As of today, according to Coingecko, there are over 10,000 cryptocurrencies in the market, with a total market capitalisation of US$ 2.7 trillion.
As a retail investor entering the cryptocurrency market, I have a few objectives in mind:
- Invest in blockchain ventures with the opportunity for significant returns, potentially 100x or more.
- Minimise the risk of investing in scam ventures and overall having negative returns.
- Learn about the ecosystem and stay aligned with the latest trends in the space.
In order to gain a better understanding of the landscape, I conducted a backtest to understand the probability of returns across all the available cryptocurrencies on CoinGecko, segmented by market capitalisation as of 11th May 2020.
As many who invests in cryptocurrencies would believe, the Bitcoin Halving event signals the beginning of each bull cycle. Hence, for my analysis, I chose to segment the market by market capitalisation as of the last Bitcoin Halving, 11th May 2020. Back then, there was a total of 2,884 cryptocurrencies.
And below is the probability breakdown of making a positive return, as of 12th Nov 2021, in each of the market segments.
According to the table above, I had an 87.5% probability of making a positive return and an 18.8% probability of making a 10x return if I had invested in any of the top 50 cryptocurrencies. However, it is considerably difficult to achieve more than 100x returns.
With the basic understanding of risk/reward ratios, the results shown above are very much expected. In order to achieve higher returns, I'll have to take on more risk by investing in early-stage blockchain ventures with smaller market capitalisation.
Navigating in the Wild West — Launchpads
What if it is possible to invest in early-stage blockchain ventures to achieve higher returns while managing the risk of making a loss comparable to investing in cryptocurrencies with large market capitalisation.
My proposed solution is to invest in early-stage blockchain ventures through launchpads, specifically DAOPad by DAO Maker.
Since its launch in Feb 2021, DAOPad has raised a total of more than US$ 21 million for more than 60 blockchain ventures on their platform through Strong Hold Offerings (SHOs) to retail investors. The majority of the blockchain ventures raised on DAOPad had initial market valuations of less than US$ 10 million, this puts retail investors in a good position to achieve more than 100x returns on their initial investments.
Compared to investing in a small market capitalisation cryptocurrencies in the open market, I am 10 times less likely to make a loss if I were to invest through DAOPad. Also, I have higher odds of making more than 50x returns.
DAOPad by DAO Maker — Competitive Advantage
DAOPad is not a permissionless launchpad, all projects launched on DAOpad go through a strict selection and due diligence process conducted by the team.
At the core, DAOPad is more than a launchpad for new blockchain ventures to raise funds from retail investors. They serve as an incubator for early-stage blockchain ventures.
Drawing parallels from the traditional startup ecosystem, DAO Maker serves as the Y Combinator/500 Startups for early-stage blockchain ventures. Some of the key products/services they offer are:
- Social Mining — It is a B2B2C SaaS solution that enables tokenised startups to kickstart their community creation, online exposure, and build organised community ecosystems that self-regulate the community’s support for the project.
- dTeams — It helps projects build and manage decentralised teams by providing a user-friendly overview for payments to global ambassadors, that operate as a part of geo-distributed operations satellites. Stakeholders can participate in the decision-making of their satellites’ operations and goals, request budgeting, and even grow their localised teams to scale and build an international presence for projects.
- Exchange Listing Advisory — DAO Maker has built a powerful network among the industry’s primary exchanges, including those with fiat pairs. Among them includes Binance, Gate, KuCoin, BitMax, Huobi, and several other major exchanges.
With their value-added services and products, they are able to assist the early-stage blockchain ventures with the right advice, partnerships and community to maximise their chance of a successful and sustainable token launch.
$DAO Token — Token Utility
The main utility of the $DAO token is to participate in the lottery to win an SHO allocation to invest in early-stage blockchain ventures.
At DAOPad, SHO participants are segmented into 5 tranches according to their DAO holdings, as seen below.
Note: Tranche 0 is exclusive to early investors of DAO Maker only. For new investors, the minimum tranche to participate in the lottery is Tranche 1, which requires a minimum holding of 2000 DAO.
$DAO Token — Value Accrual Mechanism
For any token to accrue in value, it is necessary to have more buy pressure than sell pressure. With their recently revised tokenomics, I expect the DAO token to accrue in value for the following reasons:
- As illustrated above, DAOPad has proven to launch high-quality projects which will serve as a strong pull factor for investors to purchase DAO tokens in order to participate in SHOs.
- Winners of any SHOs are subjected to a locking period determined by the total length of the vesting schedule. For example, the token release schedule of an SHO for the winners is 20% at TGE, and subsequently 20% quarterly. The SHO winners will have to hold their DAO tokens in full for a minimum length of 1 year to receive all the allocated tokens. Failing to do so will forfeit the winners of their allocation. Thus, moving DAO out of circulation and reducing sell pressure after each SHO.
- Despite not being guaranteed an allocation in a SHO, DAO token holders are incentivised to hold on to their DAO tokens and participate in subsequent SHOs. On DAOPad, a Priority System is put in place whereby a participant’s odds of winning the next SHO will be increased upon every failed attempt to win an allocation in a SHO. The odds of winning will be reset only upon winning a SHO.
- With their recent introduction of Venture Yield, all long-term DAO token holders are expected to benefit from all the high-quality early-stage blockchain ventures launched on DAOPad. All winners of a SHO are subjected to the 20% winner fee of their allocated tokens and the fee collected will be distributed to all DAO token holders through the Venture Yield as illustrated below.
With a balanced strategy of increasing buy pressure and reducing sell pressure of the DAO token and tokens of early-stage blockchain ventures launched on DAOPad, I foresee DAO token holders to benefit in the long-term.
Token Distribution — Potential Point of Concern
According to the initial token allocation, a significant percentage (59.08%) of the total token supply is expected to be held by insiders, which consists of institutional/strategic investors, current and future team, advisors, and future strategic partners.
Based on a snapshot of the current token distribution from EthScan, ~85.09% of tokens are held/locked in smart contracts, ~2.65% of tokens are held in exchanges and ~12.25% of tokens are held by regular addresses.
According to the token supply distribution among the regular addresses only, as shown in the table above, it is evident that the majority of tokens are held by the minority.
DAOPad by DAO Maker — Valuation
Investing in launchpads in the cryptocurrency space is similar to investing in a venture capital fund as a limited partner, but with a slight twist. Typically, the quality of venture capital funds is measured by their return on investments (ROI) and the total value of assets under management (AUM).
As there is no precedent analysis to perform a reasonable price multiple on the ROI and/or AUM of a venture capital fund to determine a reasonable valuation of the fund, I’ll attempt to use similar metrics, such as the total value of platform raised and the current total value of platform raised, among the leading launchpads in the cryptocurrency space to arrive at a reasonable benchmark for DAO Maker.
As seen from the table above, DAOPad is ranked top in terms of total platform raise (US$ 21.8 million) and is ranked 2nd highest in terms of ROI (34.37x) on the amount raised. This strongly suggests the confidence that early-stage blockchain ventures have at launching their tokens on DAOPad and the potential for high returns for retail investors who participate in the SHOs.
Among the leading launchpads, the median FDV/Current Value of Platform Raise ratio is at 1.94 and DAOPad is well below at only 1.40. Despite being the best performing launchpad, DAOPad is having a lower than median FDV/Current Value of Platform Raise ratio, this strongly suggests to me that, according to current market standing, DAOPad is undervalued.
From another perspective, if we are to look at the risk profile of the different market segments, investing in DAOPad has similar risk of making a loss as investing in cryptocurrencies with market capitalisation of US$ 100 million and above. Simply assuming that, in the next 5 years, DAOPad can convert 1% of these investors to put 5% of their portfolio to invest in DAOPad, this is equivalent to an estimated total of US$1.5 billion available for SHO platform raise. In my opinion, it is a very attractive future to be involved in high-quality launchpads, such as DAOPad by DAO Maker.
Due to the innovative nature of this space, I am unable to put a price on the $DAO. Instead of valuing $DAO as an investment for price appreciation, I prefer to evaluate $DAO as a membership fee to gain exclusive participation access to high-quality SHOs, I believe that $DAO is undervalued and that being an early participant of DAOPad can be highly advantageous.
Launchpads are like the guide rails in the bowling alley. They give you a better chance at hitting a strike.
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