New Token Metrics Part 1 — Overview of the Current Market
Dear Ferrum Network Community,
As many of you know, we have been hard at work redesigning our token metrics. Over the coming weeks, we will be releasing a series of articles explaining the new metrics: why we changed them, and how they are designed to benefit you — our faithful community members.
In the first of the series, we give you our take on a shift in market trends, identify the problems that arise from this new trend in metrics, and provide a first glance at how we are avoiding these pitfalls by designing metrics that support the interests of all stakeholders and our long-term vision.
If this article ever becomes too technical, do not worry, we are always here to answer your questions on Telegram, so please don’t hesitate to reach out!
A Shift Toward an IEO-like Structure, and its Pros and Cons
During the last few days, we have seen investor sentiment becoming more positive together with a surge in the crypto market with bitcoin leading the way. At the same time, the interest in ‘initial coin offerings’ (ICOs), rose as well.
One of the biggest reasons for this shift in sentiment is the revival of ‘initial exchange offerings’ (IEOs) initiated by Binance, and the associated returns for investors. With the IEO structure becoming more popular, we also saw a shift in what investors consider to be a good token sale structure.
If you want to conduct an IEO you need to optimize for it. In practice, this often means reducing the circulating supply after the token sale to a relatively low amount (often <5% total supply) and then release the remainder of the tokens over a longer period of time.
We are seeing three essential problems arising from such a structure:
- In order to profit from this development, projects that are currently raising funds decided to suddenly change the terms for their massive private sale and lock private investors’ tokens for a long period of time, even if the new terms are totally different from the initial terms;
- These projects change their structure in a way that cripple the mid-to- long-term appreciation of their token, and only focus on the short term. IEO investors started “flipping” their coins again and only try to make an instant profit. When the tokens of previous investors unlock, they are almost always worth significantly less; and
- In order to optimize for the short term, projects tend to release all important news, beneficial structures like staking, and partnership announcements before the IEO. This often results in them not having any fire power left for the post-TGE period.
The reason why many projects make these changes is quite simple: they raised too much money in the past and provided instant liquidity to previous investors. This makes it highly uninteresting for current investors who are looking to invest in low valuation projects and token supply. Everyone is becoming more realistic during the bear market.
Identifying and Avoiding the Pitfalls
Funny enough, with the new hype around IEOs, investors are supporting higher valuation projects again, and it has become easier for projects to raise more capital. On its face, it might make sense to stick to our $6m hard cap and keep our initial sales structure, right? Even after completing our seed, private and public round, we would launch with an initial market cap low enough to allow for proper appreciation.
In theory, yes. But using an antiquated sales model and hoping for the best is not an adequate plan.
In our opinion, the current prevailing structures pursued by projects do not sufficiently benefit the stakeholders. Raising too much, having an unsustainable valuation, thinking short term, and making self-interested decisions is a quick way to extinction.
We want to take a different approach, a better approach. So we designed metrics that are meant to fit this current market, and are fully optimized for both the short and long term, but do not sacrifice one for the other.
What’s Coming Next for Our New Metrics
Within the next weeks and in a series of articles we will announce our new token sale and distribution structure.
The new design will not only be optimized for both the short and long term vision of Ferrum Network, but also be integrated into an overall strategy to avoid the pitfalls mentioned above, and fit nicely into the demands of the market. Each and every step of the token sale structure will be supported by corresponding actions and releases by Ferrum Network.
Let us give you a first glance into what is coming:
- The hard cap will be significantly reduced, and with that a reduced market capitalization after the token sale;
- Proper lock-ups for company tokens will be introduced in order to show our full long-term commitment, and provide a positive effect on the available supply;
- The terms for sales rounds are adjusted for better short term alignment, while also improving those terms;
- And much more to come!
Excited? Be sure to join our Telegram community to not miss the next update and the release of your new structure!
If you want to learn more about Ferrum then be sure to check out our new Bounty Program and learn more about the project while also earning some tokens!
Very Truly Yours,
The Ferrum Network Team
Bitcoin Talk: http://bitcointalk.ferrum.network