Introduction: Welcome to the Secondary Market
What does it mean to become a publicly traded protocol? This section will discuss how valuations are set by supply & demand once your token is listed on exchanges and "price discovery" occurs in the Secondary Market. Forgd will provide you with tactical feedback on how to avoid common pitfalls such as “low float; high FDV”, predatory relationships with market makers, and supply side imbalances that can lead to “down only” price action once listed.
The tasks involved in this phase of the guide will build off of the exercises you completed in Phase 1 and may lead you to make adjustments to your supply & demand as you optimize for post-TGE performance. A basic principle will guide most of our insights and decisions: token price matters.
Tokens have the ability to convert network participants to stakeholders, but users are still rational actors. If token price consistently declines, users will not be incentivized to perform tasks that are essential to scale the network.
Every adjustment we make to your Tokenomics & Protocol Value Flows should optimize for long term, sustainable price performance. Focusing on this, while being sure not to compromise the core ethos of your project or protocol performance will put your project in the best position to succeed. If you neglect token price performance, you may conduct your token generation event ("TGE") and unknowingly put your token in a position to fail.
Price Matters! Negative Feedback Loop
Poor token price performance catalyzes a negative feedback loop – for example:
- Poor Token price performance means that network incentives are “hollow” with unattractive monetary value (regardless of the quantity of tokens rewarded)
- Hollow incentives leads to an inability to attract customers
- An inability to attract customers means that there is unlikely to be much activity on the protocol.
- Low protocol usage means there will be minimal revenues generated on-chain.
- Low revenues means that there is no “value” being captured that can then be accrued back to token holders.
- No value accrual or “feedback loop” means that the speculative demand for the token will diminish, thus further exacerbating the negative token price performance.
And thus, the virtuous cycle repeats itself…
Instead, we want to intelligently fine tune your Tokenomics & Protocol Value flows to so that your token's post-TGE performance trends in a long-term, sustainable growth trajectory. For example, an ideal token launch might look similar to the below:
The content to follow includes in-depth educational content and commentary about less understood inner workings the cryptocurrency ecosystem such as:
- Strategic launch mechanisms & post-TGE "pops"
- How liquidity influences price discovery
- Market maker collaboration & predatory behavior
- Exchange listings and ranking criteria
Each section will also include helpful prompts, and tasks so you can optimize the Tokenomics & Protocol Value Flows you designed in the (first phase of this guide).