Introduction: Proactive listing is key

By definition, your token generation event (“TGE”) will unlock tokens and introduce them into the circulating supply. As tokens enter the circulating supply and are distributed to various groups such as early investors or core contributors, or emitted via protocol incentives, the recipients of these tokens will look to trade the tokens with others. As a project, you have four choices:

1. You can exercise a completely “laissez faire” approach and allow token recipients to seed liquidity pools “permissionlessly”.
2. You can proactively seed some liquidity pools on decentralized exchanges.
3. You can partner with centralized exchanges to list your token.
4. You can proactively seed some liquidity pools on decentralized exchanges and also partner with centralized exchanges to list your token.

At Forgd, we strongly recommend option #4.

We'll discuss the benefits of a strategic listing plan in the content to follow.

Robust Price Discovery:

Proactively listing your token on popular exchanges will facilitate robust price discovery and legitimize your valuation.

If you celebrate your TGE by seeding DEX liquidity pools with a significant amount of capital and also collaborate with CEXs to list your token, you will allow these early token recipients to sell into a highly liquid Secondary Market. A robust and active Secondary Market will also allow prospective buyers of the token to build their token positions at favorable prices, without adversely impacting the market, making them more willing to transact in large quantities. An abundance of activity in the Secondary Market immediately following your TGE will facilitate very efficient Price Discovery. Recall that Price Discovery is the overall process, whether explicit or inferred, of setting the price for a token (see: Price Discovery – How Fair Value is Determined in the Secondary Market to learn more about the process).

If you curated your pre-TGE valuations thoughtfully relative to comparable projects and executed your TGE pricing strategically (see: post-TGE “pop”), then the resulting Price Discovery in the Secondary market should involve some volatility, but not an unreasonable amount. To be clear, there will still be aggressive peaks (i.e., green candles) and valleys (i.e., red candles) in token price in the first few hours after listing as early token recipients seek to take profit and eager buyers attempt to stockpile tokens, but the abundance of liquidity and variety of market participants all interacting at once will provide a very strong foundation for your token to start its lifecycle as a “publicly traded asset.”

Efficient Price Discovery following TGE is a very positive thing as it will essentially “cement” an initial valuation for your project. Given the abundance of trade volume from various market participants, you can have confidence that this initial valuation is a strong representation of how the global crypto community values your token as well. In sum, proactively seeding DEX liquidity pools and listing your token on popular CEXs will encourage more efficient Price Discovery. Efficient price discovery will feature:

• Lots of trade volume.
• Lots of liquidity (both from your Market Maker as well as other “organic” market participants).
• Somewhat minimized price volatility.
• Directionally “exciting” price action

See the image below for an example of a token with efficient Price Discovery and encouraging price performance immediately following its TGE.

If you are not proactive in your listing endeavors at TGE, you will inherently set your project up for failure. To be clear, there are successful projects that have facilitated their TGE, neither seeded DEX liquidity pools nor listed their token on CEXs, and exercised a “laissez-faire” approach to the Secondary Market; however, these projects are the exception, not the norm. For a majority of projects, if you do not proactively seed DEX liquidity pools and partner with CEXs for listing, your token will experience inefficient and weak Price Discovery and its market will likely feature:

• Low trade volume
• Shallow Liquidity
• Wide spreads
• Unexciting, “down only” price-performance

Given that anyone that holds tokens can seed a liquidity pool on a DEX in a permissionless manner, a decentralized trading venue will inevitably open once tokens are distributed to the network. Once the DEX is seeded, trading will commence. If the DEX liquidity pool is not seeded with an ample amount of tokens, some buying and selling will occur, but Price Discovery will be inefficient. Inefficient Price Discovery occurs when there are very few buyers and sellers interacting in an illiquid Secondary Market. The consequence of inefficient Price Discovery is that a price is set for an asset that does not properly reflect what the broader market may believe is fair value.

For example, many projects conduct a community wide airdrop to celebrate their TGE. Some of the recipients of this airdrop may seed a liquidity pool with the hopes of selling their tokens to prospective buyers. Prospective investors may find this liquidity pool and see it as an opportunity to purchase tokens. If there is only a small amount of tokens allocated to the liquidity pool, then the consequence of the buying may be a significant market impact. Even a small number of buyers have the potential to induce market impact in an illiquid environment. The market impact might increase the price of the token significantly.

While the initial spike in token price may provide some temporary excitement, the resulting valuation may not be a proper representation of what the market (or even your team) believes to be a fair valuation. If the resulting token price is too heavily inflated and implies an egregious valuation relative to the project’s comparables, then token holders will rush to the market to sell what they believe to be overvalued tokens. The consequence of this sell pressure would be price depreciation which may then catalyze a snowball effect of “down only” price action.

As discussed, token price performance is a critically important metric as it relates to incentivizing individuals to contribute time, energy, and resources to your project. If your token’s price consistently declines or is incredibly volatile due to inefficient price discovery, then users will not be motivated to perform desired tasks that are essential to scaling your network.

In sum, the permissionless nature of tokens in Web3 means that a decentralized trading venue will be created after TGE regardless of whether or not your project chooses to seed a liquidity pool. If you choose to allow the liquidity pool to be seeded “organically” and do not deposit assets to ensure there is adequate liquidity, the resulting marketplace will be prone to massive price volatility, feature low volume, and facilitate poor Price Discovery. Given the inevitability of a marketplace being created, you should proactively seed DEX liquidity pools following TGE. Furthermore, you should partner with various CEXs to list your token given that having the asset trade on a large number of diverse venues will further improve Price Discovery and promote increased volume and liquidity in the Secondary Market.

Improved User Experience:

Exchanges Improve User Experience (“UX”) for End Users – especially Centralized Exchanges.

While a token generation event technically symbolizes a project’s transition to the Secondary Market, this milestone can be somewhat underwhelming given that most onlookers – such as prospective protocol users and speculators – cannot access the tokens. The act of listing the token on exchanges allows end users to seamlessly access the token. In this sense, getting a token listed on an exchange improves end user experience for a blockchain project significantly by facilitating interaction between buyers and sellers via trading, rather than requiring tokens to be transferred on-chain to change hands.

It is important to remember that many speculative investors are still not familiar with the concept of online wallets, DEXs, or interacting directly with smart contracts. Listing on centralized exchanges offers a familiar user experience for these speculators by allowing them to interact directly with a desktop frontend or mobile application.

Increased Marketing Reach:

Listing your Token on Exchanges will Increase your Marketing Reach.

Listing on an exchange serves as one of the most high profile “marketing” events that a project will be able to celebrate with its users. In fact, when a project announces the date of its token issuance, most media outlets will focus their coverage on the date of a token’s listing on an exchange, rather than its TGE as the Web3 equivalent of the project’s initial public offerings (“IPO”). Again, this is because the exchange listing offers significantly improved

Listing on a top-tier exchange grants a project access to the platform’s existing pool of customers – which can often number in the tens of millions. Centralized exchanges tend to market new token listings aggressively to their user base through direct email marketing, and social media campaigns. Many platforms will also conduct trading competitions and promotional airdrops to rally their users to trade the newly listed token. Although many of the active users on exchanges are profit-motivated traders, many utilitarian investors trade on exchanges to access tokens to then use for their intended purpose (such as staking or platform payment). Many speculative investors that purchase a newly listed token will integrate themselves into the project’s existing community via social media channels or offline meetups. These platform users will often catalyze important discussion and debate within the project’s community — sometimes in pursuit of a trading edge, while other times just to quench intellectual curiosity. Regardless of their intention, the addition of these speculative investors to a project’s underlying community most certainly carries some value.

The remainder of this section will help you navigate the listing process – which is often purposefully obfuscated – by centralized platforms to ensure their role as “gatekeepers” and ability to charge projects fees to list. Some of the major topics we’ll discuss are as follows:

• What metrics should you use to assess exchanges as a potential listing partner?
• What are the pros and cons associated with listing on CEXs & DEXs?
• What are the major risks associated with listing on exchanges?
• How do you start the process of listing your token on an exchange?

What metrics should you use to assess exchanges?

If you were to ask 100 different people for their opinions on the top 10 exchanges to list your token on, you’d probably get 100 different responses. This is understandable given the multitude of criteria you can use to assess an exchange and the value it may or may not provide to a project and its community. While most projects are familiar with the biggest and best centralized exchanges such as Binance, Coinbase, and Kraken, listing your token on these venues may not always be realistic or attainable. Accordingly, you’ll need to explore other centralized and decentralized venues as part of your initial listing strategy.

At Forgd, we try to simplify the process of assessing exchanges by rating popular exchanges across six metrics that should be top of mind for all projects seeking to list their token. We rank exchanges based on the following criteria:

Forgd ranks major centralized and decentralized exchanges across these metrics with a score of 10 representing the most favorable rating and a score of 1 representing the least favorable rating. See below for an example of these metrics and rankings:

You can review ratings of all major exchanges by visiting Listing & Liquidity by Forgd.

“Follow-on” listings

After a successful launch and initial listing, the next step is to strategically expand your token's availability. This process should be data-driven to ensure a controlled expansion of your token's liquidity profile, mitigate the risk of fragmentation, and foster organic community growth.

The timing of follow-on listings is crucial. A rushed listing can lead to unfavorable results, while a planned listing, synchronized with market conditions and project maturity, can spur token adoption and organic growth.

Follow-on listings should help establish a robust liquidity regime. This involves the judicious selection of listing venues, discerning the optimum number of market makers, devising an ideal token distribution model, and aligning the overall strategy with your project's long-term goals.

Forgd provides insights into balancing between CEXs and DEXs, and guides you on partnerships that can drive token growth. In summary, follow-on listings are a strategic process that involves expanding your token's availability, understanding the workings of CEXs, timing the listings correctly, establishing a robust liquidity regime, and balancing between CEXs and DEXs.