【Binance FairMode, a New Token System, Nurturing Huge Opportunities】
Many people may not have noticed that Binance's new lauchpool has introduced Fair Mode, which focuses not on the project itself, but on the transformation of the token economic system.
As a leader in the industry, Binance has sent a significant signal with FairMode, using its influence to allow projects to enter a long-term trajectory of healthy development, potentially nurturing some great companies in the future and presenting opportunities for hundredfold or even thousandfold growth.
I have always believed that in addition to the innovation of decentralization and immutable blockchain, the innovation of token economic systems is the second magic weapon. There is a saying: how the pie is divided determines how big the pie can be. A good pie-sharing plan must incentivize all parties' interests, unite everyone, and then lead the project to great success. Tokens have more advantages than traditional company equities, so several new token distribution schemes in the blockchain industry, such as the ICO in 2017, DeFi mining in 2020, and the NFT minting in 2023, have brought about tremendous changes and huge opportunities.
What is currently widely criticized in the market is the institutional model. Due to the large influx of institutional funds from the United States, project valuations are pushed very high, leaving limited room for growth in the secondary market. What's even worse is that it becomes difficult for the project team to work well after having a lot of money.
Binance's FairMode is an innovative attempt at a new token economy. At first glance, it may seem the same, with teams, investment institutions, development funds, airdrops, launchpools, and so on.
Indeed, but the difference with Fair Mode lies in the token distribution ratio. The token distribution ratio is very important, even crucial. For example, if you and two friends work hard together to start a business. After a year of good performance, if your share is only 5%, will you still have the motivation to work hard the next year? But if you have 30%, then you will definitely want to strive for more brilliance next year. So, as you can see, with different distribution ratios, your attitude will be completely different.
So, what is different about Fair Mode? Let me explain.
- Long-term Development Fund
In this Fair Mode, NFPrompt has introduced a long-term development fund, accounting for 27% of the distribution. It is explained as follows: the tokens allocated to the "long-term development fund" cannot be spent or sold, and they will not enter circulation. After being allocated, they can participate in the ecosystem through staking and share rewards and benefits from the project, but they have no governance rights. The rewards obtained from staking can be used for the project's long-term operation and sustainable growth.
This long-term development fund is a major innovation not seen in other projects. Its characteristics are: 1) the tokens will not circulate in the future, and 2) they can only be used for staking to participate in the system's income distribution, used for the project's long-term operation. This means that 1) the actual circulation of the project's tokens is only 73%, and 2) it incentivizes the project team to work hard to increase the project's income.
- Fair Distribution of a Large Proportion of Chips, Strengthening Community Influence
Out of the initial circulation of 25%, 21% is fairly distributed to retail investors, including Binance's 11% launchpool and a 10% airdrop. In comparison, most projects have an initial circulation of around 15%, with fair distribution being only around 5% or less, and the rest of the circulation being controlled by the team, such as marketing and liquidity chips. In FairMode, the community's chips account for a high 21%, while the team's chips are only 15%. This not only gives the community more influence in future DAO voting, but also gives the community more motivation to build together with the project team.
Additionally, the token ratio in Binance's launchpool has significantly increased this time, with previous projects like hook and edu being around 5%, but this time it's as high as 11%. This not only increases the benefits for Binance users, but also enhances fair chip distribution.
- Increased Initial Circulation Implies Increased FDV, Lower Future Unlocking
With the same market value of initial circulation, an increased initial circulation represents a decrease in FDV, and a significant reduction in future unlocking. NFPrompt's initial circulation is 25%, excluding the long-term development fund that will never circulate, there will still be 43% of chips in circulation in the future. This means that in the next 6 years, there will be less than double the chips in circulation. In comparison, most projects have an initial circulation of around 10%, with 90% of chips in circulation in the future. This means that in the next 6 years (possibly 3-5 years), there will be nine times the chips in circulation.
It is often the case that a project holder for a year sees no change in the market value of circulation, but the token price is halved. This is because the circulation has doubled within a year. Under FairMode, this situation will no longer occur.
Many projects' routine is to control most of the circulating chips in their hands, allowing them to set a high opening price and slowly unload, leaving the secondary market retail investors to pick up the pieces. With FairMode's 25% initial circulation, 4% controlled by the project team, and 21% fairly distributed, a large number of chips are in circulation outside, making it impossible for the project team to control the market and achieve a high opening price. As a result, the opening price is naturally lower, leaving a lot of room for future token price growth.
- Significant Reduction in Team + Investor Ratio, Implies Lower Future Selling Pressure, Beneficial for Long-term Development
In this Fair Mode project, NFPrompt, the team + investor ratio is only 25%, compared to cyber 47.2%, arkham 40.5%, arb 44%, and Op 44% in other projects. Therefore, compared to the general projects, Fair Mode has a much lower ratio of tokens held by the team + investors and institutions, and it is significantly lower.
It should also be noted that although the ratio of tokens held by the team and institutions has been reduced, the lock-up period has not been reduced, with a 1-year lock-up + 5-year unlocking period, which is not shorter than other projects. The team's chips cannot be too many, otherwise the token price will have a hard time rising and will be sold off, and who would still work hard then?
Although many people advocate for the 100% fair launch of NFT minting, I personally think that it is only suitable for a small number of projects. Most projects need a distribution plan like FairMode's, which incentivizes all parties through a well-designed token distribution plan and lays a good foundation for future token price growth.
1) Increased initial circulation, decreased FDV, significantly reduced future circulation in the next few years.
2) A significant reduction in the ratio of institutional and team chips, with long-term lock-up. Incentivizing the team to work hard, rather than holding a large number of zero-cost tokens and cashing out as soon as the price goes up.
3) A large number of chips initially distributed fairly to the community and relevant personnel. On the one hand, it gives the community more influence, incentivizing the community and the project team to build together. On the other hand, it eliminates the possibility of the project team controlling the chips to achieve a high opening price, leaving a lot of room for future growth in the secondary market.
The first project under FairMode is NFPrompt. Although the market's opinions on it are mixed, as an interesting experiment in this new token economic system, it is worth paying attention to. More importantly, Binance, as an industry leader, has sent a significant signal with FairMode, using its influence to allow projects to enter a long-term trajectory of healthy development, nurturing some great companies.
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