What is Launchpool? Differences with the Launchpad

Before new cryptocurrency projects can go public, one of the crucial steps is raising funds to kick-start their operations. Initially, the primary method for this was through Initial Coin Offerings (ICOs), which began in 2013. ICOs provided an efficient way for startups to raise funds, were easily accessible to investors, and offered high potential returns within a short timeframe.

However, ICOs had significant drawbacks. Token prices were highly volatile, and investors were often impatient, able to withdraw their funds at any time. This environment made participants vulnerable to malicious actions like rug pulls and the frequent collapse of ICO projects.

To address these issues, alternative fundraising platforms like Launchpads and Launchpools were developed. While both serve the purpose of raising funds, they operate differently. In this guide, we’ll explore what a launchpool is and highlight the main differences between launchpads and launchpools.

What Is a Crypto Launchpool?

A crypto launchpool is a fundraising method for early-stage cryptocurrency projects, allowing investors to deposit their funds into a liquidity pool. In return, participants earn interest on their deposits, a process known as Yield Farming, which is based on a predetermined Annual Percentage Yield (APY) system.

To put it simply, launchpools function similarly to bank savings accounts that generate interest over time. However, launchpools typically offer higher interest rates than traditional banks. The amount of tokens users earn depends on the percentage of their investment in the total pool.

Launchpools are managed by centralized exchanges that list only thoroughly vetted and promising crypto projects. This approach helps reduce the risk of scams, rug pulls, and other fraudulent activities that often affect new projects, providing a reliable and efficient fundraising mechanism.

What Is a Crypto Launchpad?

Amid rising crypto frauds and scams, investors sought a safer way to support new projects. This led to the creation of Launchpads. A Launchpad is a platform that allows cryptocurrency projects to raise capital while giving investors early access to token sales. By investing at the early stages, investors can enter at a lower price before the public launch. This cost-effectiveness has made Launchpads increasingly attractive to project creators and developers for fundraising.

The primary advantage of using a Launchpad is the security it offers both investors and project founders. Each project must undergo a thorough screening process, and user verification is conducted through the KYC (Know Your Customer) method. Projects launched on a reputable Launchpad adhere to strict compliance rules and are subject to Know Your Customer (KYC), Anti-Money Laundering (AML), and Blockchain Analytics (KYT) checks. This rigorous process ensures a high level of safety for investors, reducing the risk of scams and rug pulls.

Launchpad vs. Launchpool

Launchpad and Launchpool are both crowdfunding methods designed to raise funds and support startups, making investing easier and more convenient. However, their operations differ significantly.

Trading of Tokens: Tokens acquired through Launchpad can be traded immediately on the exchange. In contrast, tokens obtained through Launchpool have a designated period before they can be traded.

Risk Involvement: Launchpad involves inherent risks. If the project you invest in fails, your investment is lost. Launchpool, however, carries no such risk.

Limits: Launchpad employs a lottery system to limit the number of tokens any single investor can hold, preventing dominance. Launchpool has no such limits, only restricted by the amount you choose to stake.

Distribution System: Launchpad uses a lottery method to distribute tokens. In contrast, Launchpool distributes tokens to users who are willing to stake their existing tokens.

Who Can Join a Crypto Launchpool?

To join a crypto launchpool, you need an account with the hosting exchange and must complete their KYC (Know Your Customer) process. Additionally, you must hold a minimum amount of tokens in your wallet to meet the staking requirements for the specific launchpool.

Staking Period

The typical staking period for a launchpool ranges from 7 to 30 days. During this time, you earn rewards based on the duration of your stake.

Can Users Unstake Their Assets Anytime?

Yes, users can unstake their crypto assets from the liquidity pool at any time. However, it is more profitable to keep your tokens staked for the entire staking period to maximize your earnings.

Earnings Calculation

Earnings from a launchpool are calculated in a straightforward and transparent manner. New token earnings are calculated hourly from the moment you stake your tokens. The daily earnings are proportional to your share of the total staked tokens in the pool. Essentially, your earnings depend on the number of tokens you have staked compared to the total tokens in the pool.

Once the token is available for trading, typically within 7 days, users can trade the tokens they have earned. Additionally, they can claim their pending rewards from the farming pool at any time.

Launchpool Pros and Cons

Here are some general advantages and disadvantages of launchpools as crypto crowdfunding platforms:

Pros:

- Flexible Unstaking: One of the main benefits of launchpools is the ability to un-stake your tokens at any time, giving investors the flexibility to manage their assets as they see fit.

- Low-Risk Investment: Launchpools are relatively low-risk. Investors simply stake the required tokens without needing advanced trading knowledge. With the security measures of centralized exchanges (CEXs), the risk of fraud is minimal.

- Profitable Returns: The APY model often yields attractive returns, which can be withdrawn at your convenience, making it a potentially profitable investment.

Cons:

- Price Volatility: If the price of the token you are staking drops while it’s in the pool, you could incur a loss.

- Short Staking Period: Launchpools typically have a staking period of 30 to 60 days, which may not be ideal for those interested in long-term yield farming and earning passive income.

- Limited Projects: The number of available launchpool projects is limited. Due to their popularity, it can be challenging to find a variety of projects and acquire a large volume of tokens.

For deeper insights into blockchain technology, check out our Listing.Help Blog.