First create the product, then find 100 people who understand technology to make small investments, using milestone escrow to gradually release funds.

Written by: @hmalviya9

Translated by: AididiaoJP, Foresight News

I believe the way cryptocurrency projects are financed in the early stages needs to be rethought.

No need for extravagant pitch deck PPTs, no need for promises of "changing the world in five years", and no need to issue a fully diluted token worth a billion dollars right from the start. What is needed is a hardcore developer who can solve any part of the social trilemma — identity, reputation, or privacy — while exploring a completely new design space. Wait until they have created the early MVP (Minimum Viable Product) before giving them 10 ETH. It should be done after, not before.

Developers should first spend their own money to create something, release it, and at least prove that the technology works at a fundamental level. Then, find 100 people who truly understand what they are investing in.

First round only for 100 people, 0.1 ETH each

The first round is limited to 100 people, 0.1 ETH each, totaling 10 ETH.

These 100 seats cannot be obtained through whitelist lottery, cannot rely on KOL relationships, and cannot depend on who is quicker. What should matter is whether a person understands the technology, understands the problems the developers are trying to solve, and understands the product they are investing in.

Imagine there are 100 investors who can clearly articulate: why this privacy protocol is important, what problems it solves, and where the technology might fail. This is a completely different investor base. You are not just raising money, but building an early community — these people understand the product enough to help make it successful.

Moreover, during the first milestone period, shares are non-transferable unless preset exit or refund rules are triggered. Because we do not want people who come in the next morning ready to flip their positions.

Investors must contribute too

Once developers receive 10 ETH, they commit to a three-month roadmap and then start delivering. But investors also need to make commitments.

Some can test the product, some can look for security vulnerabilities, some can write documentation, attract users, translate the interface, or help other developers integrate protocols.

Not everyone needs to write code, but everyone should understand why their contribution is important. The core idea is to shift from passive capital to productive capital. It is not about buying tokens and waiting for others to pump it, but about helping to create value for what they hold.

We can introduce commitment-based rewards: investors who complete useful, verifiable tasks earn additional benefits; those who accept specific commitments but do not deliver may lose their separately staked commitment collateral. Note, this does not mean confiscating all investments. The purpose is not to punish token holders, but to give commitments economic weight.

Developers also need to have something to lose

Developers should not receive all funding upfront. The first 10 ETH should go into a milestone escrow contract, released gradually according to progress. Developers commit to delivering specific features by designated deadlines.

For example, the first month requires a functioning public testnet, the second month requires independent testing of privacy or identity features, the third month requires an application available to real users. These milestones must be measurable; vague statements like "we are building the future of decentralized identity" are narratives, not milestones.

Developers should also have a founder's deposit or unvested token shares. In case of objectively verifiable violations, such as misuse of escrow funds or falsification of milestone evidence, this portion may be forfeited. However, if the problems are more challenging than expected, causing missed deadlines, it should not automatically mean losing everything. There should be review, dispute resolution, and clear extension rules.

What we want are hardcore developers willing to take technical risks, not those who will be destroyed by a single failed experiment and thus can only dare to work on safe projects.

Let the market discover valuation through delivery

Suppose developers complete the first milestone. The product is usable, user numbers are increasing, technology is progressing, and the community is growing. Why should the second round raise funds at the same valuation? Of course it shouldn't.

Set up four financing phases: seed round of 10 ETH after MVP release; second round of 20 ETH after completing the first month's milestone; third round of 40 ETH after completing the second month's milestone; public round of 100 ETH after completing the third month's milestone. A total of up to 170 ETH, provided milestones are met and enough investors are found.

Each round should aim for a higher valuation, but the market should determine whether this valuation is reasonable. Developers propose valuations based on progress, investors submit bids, and a transparent auction discovers the clearing price. If the market does not accept this valuation, that round will not close at that price.

Each round must have a deadline. Fundraising cannot go on indefinitely, and it cannot raise more just because the market is bullish. Each new round of financing should be predicated on the commitments made in the previous round being fulfilled.

Allow early investors to exit, but without crashing the market

When the second round opens, early investors should have the opportunity to sell part or all of their shares to new investors. This is not about unrestricted market dumping but about structured secondary distribution.

New investors can choose to buy newly issued tokens to fund development or buy existing shares from early supporters. The distribution ratios for primary and secondary should be fixed and disclosed before each round begins.

This creates liquidity without requiring the project's treasury to cover the investors' exits. No one is forced to sell. Those who want to stay can stay, and those who want to leave can do so when there are real buy orders.

Reward those who stay and contribute

Imagine a person who invested in the seed round, spent three months testing the product, attracting users, reporting bugs, and helping the project grow. Why should they receive the same returns as someone who comes in during the final public round?

We can introduce non-transferable contribution reputations, milestone participation scores, and long-term holding incentives. Additional tokens can be unlocked based on verified contributions. Governance rights can be tied to reputation, while safeguards are set in place to prevent wealthy early investors from permanently controlling the protocol.

Investors should not receive more rewards just for coming in early; they should be rewarded more for staying and helping to create value. All reward rules, dilution, and vesting schedules should be made public before the first investor sends funds.

Make commitments programmable

Ethereum has already provided us with usable building blocks: ERC-20 for transferable tokens, ERC-721 or ERC-1155 for participation certificates, and when applicable, ERC-8004 style proxy reputation infrastructure, with account abstraction for managing commitments.

Along with escrow contracts, milestone proofs, challenge periods, and forfeiture mechanisms. The result will resemble a "market for human commitments" rather than a traditional Launchpad.

On one side, commitments to deliver, and on the other, commitments to contribute. Both sides stake something, and both receive rewards upon measurable completion of commitments. The system should distinguish between malicious behavior and honest failure.

The public round should be the last step, not the first step

For years we have been doing it backwards: issuing tokens first, creating momentum, raising millions, and then slowly doing the work. I want to reverse this order.

First, create something. Find 100 technology-savvy believers. Raise 10 ETH. Deliver for three months. Discover valuation through gradually scaling rounds. Let early investors choose to exit or continue. Reward real contributions. Only when the product is usable, technology has been tested, and real adoption occurs, should the project attempt a public round for 100 ETH.

Create momentum around real progress. Let adoption occur before tokens circulate widely. Let technology speak for itself.

Of course, securities laws and fundraising restrictions still apply. Smart contracts alone cannot make investment issuance legally compliant.

But this mechanism is worth exploring. Because I do not believe the crypto industry needs another thousand Launchpads. What we need is a market where capital makes commitments, developers make commitments, and code executes protocols as reasonably as possible.

If both sides fulfill their commitments, both should share in the upside. If we can build this properly, perhaps the next generation of crypto wealth will come from those who actually helped build something useful, rather than just those who got in early.