G3 ACADEMY/LOCKDROP
Lockdrops — Are they really a good token launch mechanism?
A new method of token distribution without fundraising.
In recent years, blockchain-based projects have been using various methods to distribute their tokens and raise funds, such as Initial Coin Offerings (ICO), Initial Dex Offerings (IDO), or public sales.
In the aforementioned methods, most token holders will consider selling the token on exchanges after receiving these tokens, as they had got in at a discounted price. Logically speaking, it was just a good r/r play. However, with such selling pressure, combine with certain lack of liquidity, newly launched token can go through periods of extreme volatility.
This leaves the holders with a lot to be desired, as they may see their tokens’ value plummet in a matter of hours or days after the initial launch. This instability can make it difficult for investors to make informed decisions about when to buy, sell or hold, and can also damage the reputation of the project.
Due to these reasons, projects that want to create a stronger community of supporters have migrated to a new equitable distribution method: a LOCKDROP.
So, what is a lockdrop?
Lockdrop can now be regarded as an upgraded version of airdrop because it is also used to distribute tokens but does not require a project raising funds. On the other hand, lockdrops require users to lock up collaterals for a certain period of time in exchange for new tokens of said project.
Essentially, lockdrops aim to encourage long-term commitment to a project by incentivizing users to hold onto their tokens for a set duration, which can range from days to years. In most cases, the length of the lockup in combination with the face value of the locked collateral determines the number of new tokens a user receives.
Lockdrops offer benefits to both users and projects: users receive new tokens without having to purchase them, and projects can instantly attract TVL (Total Value Locked) and other significant on-chain metrics at at an effective expense since participants are committing capital for a certain period.
This can provide the project with a headstart while also creating a dedicated community of long-term holders who are invested in the success of the project. Additionally, lockdrops can help to prevent the extreme price volatility often seen with other token distribution methods, as participants are incentivized to hold their tokens for a certain period rather than immediately selling them.
The first iterations
Edgeware Lockdrop
The idea of lockdrop was initially proposed by Commonwealth Labs for their Edgeware network, which operated on the Polkadot Blockchain. During the 2019 lockdrop event, Edgeware distributed nearly 90% of its tokens using this mechanism. The founders of Edgeware, Raymond Zhong and Dillon Chen, believed that Lockdrop would be more appealing to the right kind of innovators as compared to traditional methods like ICOs or Airdrops.
Astroport Lockdrop
Astroport, a decentralized exchange (DEX) built on the Terra Classic blockchain, was arguably one of the most successful lockdrops in the history of Defi. The lockdrop event, which allowed users to lock up their LUNA tokens for a certain period of time to earn ASTRO tokens, attracted over $1bn worth of capital. In addition to the capital influx, Astroport also received a boost from LPs of Terraswap, another decentralized exchange built on the Terra blockchain. These LPs ported over their assets, which will soon be part of Astroport’s total value locked (TVL) once liquidity is properly migrated over.
Lockdrop vs Airdrop
Airdrops have long been a popular way for new projects to gain traction and reward early adopters, especially recently with the successful launch of Blur or the much awaited announcement of Arbitrum.
However, traditional airdrops often do not require any significant commitment from the user, resulting in a low retention rate and little to no engagement with the project beyond simply holding the tokens received. Lately, such terms as “sybil attack” or “airdrop hunters” are oftenly perceived as negative, admist the bear market where projects despartely need real users.
This is where the concept of lockdrop comes in, offering a unique and more effective approach to incentivize and reward token holders. Lockdrop is a unique token distribution mechanism that serves several purpose. Here are some reasons why we need a lockdrop:
- Fair distribution: Lockdrop is designed to distribute tokens fairly among users who are willing to commit their existing tokens for a predetermined duration. This ensures that early adopters and long-term supporters of the project receive a share of the tokens.
- Long-term commitment: By requiring users to lock up their tokens for a specific period of time, lockdrops incentivize long-term commitment to a project. This can help to reduce volatility in the token price and increase the project’s overall stability.
- Community building: By incentivizing users to hold onto their tokens and support the project’s long-term growth, lockdrops can attract dedicated supporters who are invested in the project’s success.
- Network security: By requiring users to lock up their tokens, projects can discourage malicious actors from attempting to manipulate the network. This helps to ensure the project’s overall security and stability.
What can you expect from Goal3?
Overall, we see the lockdrop as an integral part of our growth strategy and a powerful tool to achieve our vision of building a decentralized sportsbook that empowers users and rewards long-term participation. The approach see us slowly scale from our initial launch to an establishment of a decentralized, community-owned sportsbook with deep liquidity on the zkSync network.
The lockdrop mechanism is a unique way for Goal3 to both incentivize long-term holding of its native token and encourage liquidity provision on the sportsbook launch on the zkSync Era Mainnet.
By requiring participants to lock up capital for a certain period, we are effectively bootstrapping the liquidity for the sportsbook in a transparent and decentralized manner. This mechanism aligns with our goal of creating a sustainable permissionless sportsbook that benefits all stakeholders, including users, investors, and the broader community.
Join Our Journey
Goal3 is on a mission to revolutionize the sports betting industry through decentralization. Join us on our journey and be a part of the future of sports betting. Follow Goal3 on Medium for the latest news and insights in the world of decentralized sports betting. Don’t miss out, follow us today!
