The article discusses the paradigm shift in cryptocurrency fundraising, from ICOs to community sales.
Community Sales: The Future of Crypto Fundraising
The world of cryptocurrency and blockchain technology has evolved significantly since its inception. From the initial hype surrounding ICOs to the more recent trend of private funding rounds, the landscape has changed dramatically. However, a new wave of crypto fundraising is emerging, one that is more inclusive, transparent, and sustainable – community sales.
The ICO Era
The ICO boom of 2016-2017 promised to democratize investment opportunities, allowing retail investors to participate in the early stages of Web3 projects. However, the lack of clear regulatory frameworks led to widespread fraud, rug pulls, and market manipulation. This chaotic environment, rampant exploitation, and regulatory uncertainty eventually forced projects to abandon ICOs in favor of private rounds accessible to well-connected angel investors and venture capitalists.
Private Funding Problems
While private funding initially brought much-needed stability and credibility, it introduced new problems. Many tokens launched with excessively high FDVs (Fully Diluted Valuation) and a low circulating token supply. These tokens entered exchanges with the majority of supply locked, resulting in sky-high valuations that did not meet demand. Retail investors, attracted by initial hype, often became collateral damage, leading to devalued tokens and damaged trust. Most of these tokens will likely never recover, discouraging investments in new projects and undermining community-building efforts.
Airdrops as an Unsustainable Alternative
Airdrops, designed to distribute tokens widely and spark interest in the community for a project, often fail to produce meaningful, sustainable engagement. Instead, they frequently become targets for Sybil attackers employing multiple accounts to maximize token gains or airdrop mercenaries hopping from one project to the next, quickly dumping tokens, depressing prices, and undermining project credibility. Without genuine financial commitment and interest in the project beyond the airdrop, recipients had little incentive to hold tokens or participate actively in the community.
Community Sales: The New Cool Kid on the Block(chain)
Community sales represent a practical, strategic alternative to private funding and token airdrops, offering a structured way to engage retail investors meaningfully and transparently. Modern community sales on platforms like Legion and Echo feature robust regulatory frameworks, with thorough KYC and AML processes ensuring regulatory compliance and security. These inclusive fundraising opportunities require participants to make real capital commitments, even if modest, cultivating genuine stakeholder interest and reducing short-term speculation.
Democratizing Access
One of the most significant advantages of community sales is their ability to democratize access. Investors gain entry under equitable terms, similar or sometimes superior to those previously reserved for venture capitalists. With minimum investments often as low as $100, community sales encourage broad participation, helping to build a genuinely decentralized and committed investor base. Investors who financially commit are far more likely to become long-term holders and active community members.
Win-Win for Projects, Other Investors, and the Community
For Web3 projects, community sales offer profound benefits beyond immediate capital raising. Early community involvement leads to a more distributed investor base, reducing concentration risk and diverse future users. Projects with broadly distributed tokens consistently exhibit more stable prices, higher community activity, and healthier onchain engagement.
Community sales significantly enhance a project’s market reputation. Embracing transparent, inclusive fundraising sends a clear signal to the market and prospective users – the project prioritizes collaboration and community involvement over the extraction of value. This transparency builds grassroots evangelism, drives organic growth, and creates a loyal community base committed to the project’s ongoing success.
Professional investors should embrace community sales and actively encourage their portfolio companies to allocate to the community. By doing so, they will not only benefit from the increased stability and sustainability of their investments but also contribute to the long-term growth and development of the Web3 ecosystem.
About the Author
Darius Moukhtarzadeh is a Research Strategist at 21Shares, a pioneer in cryptocurrency indexes and exchange-traded products. With a background in finance and economics, he has developed a unique insight into the intersection of cryptocurrency and traditional finance.
Disclaimer
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
