Fair Release: a new tokenomic paradigm

As unveiled in @dr.daoist/time-scheduled-token-unlocks-an-elephant-in-the-room-741e1ee0e781">Time-Scheduled Token Unlocks: An Elephant in the Room, time-scheduled unlocks are the real culprit behind the surface issue of the ‘low float high FDV’. The economically sensible way is to abandon token-printing by scheduled time and instead do it as the market demands.

Not only do time-scheduled unlocks violate basic economic principles, but they’re also unfair. They appear to prioritise unlocking tokens for the community (e.g., in the form of airdrops), but in reality, they ensure the team/VCs can exit regardless of actual token demand at the time of unlocks — almost certainly crashing the token price. Worse still, under the guise of ‘priority community unlocks’ typically lie team/VC interests (e.g., through airdrops, treasury or ecosystem tokens), allowing them to expedite their exit — swiftly and discreetly at token listing — much earlier than the first scheduled unlock. By then, the vesting schedule becomes mere window dressing, and the token price has likely plummeted anyway.

This manoeuvre has already become an open secret, with the community and market expressing their clear discontent through lacklustre performance of VC-backed token debuts at CEX listings and the overwhelming shift of attention towards meme coins. Why memes? Because they’re fairly launched — or at least perceived to be fairer at inception — compared to the clumsy schemes played by the team/VC/CEX coalition. But we all know: for any VC-backed token, fair launch isn’t possible since VCs have already bought in at a lower price before the TGE.

So what’s the solution here?

The answer lies in ‘Fair Release’: a new tokenomic paradigm where new tokens are only released in response to increased demand, with fair distribution to all stakeholders at each release. Oh, it’s also inflation-proof. Depending on whether the project generates externality (i.e., revenue), Fair Release comes in three versions:

1. Ponzi Version (without revenue): whenever circulating tokens are consumed and burned, an equivalent amount of new tokens are released (proportionally distributed to team/VCs/community/treasury, etc.), holding the circulating supply constant;
2. HODL Version (with revenue): Like the Ponzi Version, but an inflationary amount of new tokens are released and distributed, with the inflated portion immediately offset by buybacks and burns using revenue, holding the circulating supply stable; and
3. Moonshot Version (with revenue): similar to the HODL Version, but part of the revenue is used to lift the token price instead of just buying back inflationary releases, creating a potential ‘up-only’ effect.

Below is the detailed walkthrough for all three models.

Fair Release 1.0: the Ponzi Version, for projects without revenue

One crude fact about Web3 projects — even two years after the demise of the X-to-Earn narrative — is the majority of them still lack externality; i.e. these projects still don’t generate revenue denominated in foreign currencies/tokens. Tokenomics for these projects inevitably leans towards Ponzinomics — very much akin to how the U.S. Treasury and the Fed print and shuffle money around to prop up the economy — until the bubble bursts when the token loses its credit and the issuer loses their seigniorage (i.e., money made from the right of printing such money).

Nonetheless, Fair Release still works — at least for the purpose of achieving fair and inflation-proof token unlocks — for these projects with its Ponzi Version: the key is to have no inflationary releases. Here’s how it works:

• at T₀: assuming the initial liquidity pool contains $TOKEN and $USDT, pricing $TOKEN at its initial level;
• between T₀ and T₁: a certain amount of $TOKEN is consumed (e.g., through community engagement) and burned, reducing its circulating supply and lifting its price; and
• at T₂: an equivalent amount of $TOKEN is released to restore the burned supply, dropping the $TOKEN price to its initial level, meanwhile distributing tokens proportionally to stakeholders.

The net impact is unchanged circulating supply of tokens in the liquidity pool as well as $TOKEN price, while a round of token unlock has been done in a fair manner to all stakeholders.

Fair Release 1.0: the Ponzi Version (without Revenue)

However, due to the Ponzinomic nature, this is in fact a crippled version of Fair Release because every round of release effectively dilutes the community stake in the circulating supply. The burn-driven consumption primarily comes from the community, but only a portion of the newly unlocked tokens to restore these burned supply is distributed to the community. While mechanically more sensible than time-based unlocks, this version still benefits insiders at the community’s expense.

This is why we need Fair Release 2.0.

Fair Release 2.0: the HODL Version, for projects with revenue

A more legitimate version of Fair Release that achieves true fairness is one that unlocks through inflationary releases which can subsequently be offset by buybacks and burns. This requires the project to generate revenue denominated in foreign currencies/tokens.

I call this the “HODL Version” of Fair Release, because the revenue generation ability adds a significant protection to sustainable token price. It works as below:

• at T₀: assuming the initial liquidity pool contains $TOKEN and $USDT, pricing $TOKEN at its initial level (same as the Ponzi Version);
• between T₀ and T₁: certain amount of $TOKEN is consumed and burned, reducing its circulating supply and lifting its price, while the project generates revenue in $USDT;
• at T₂: an inflationary amount of $TOKEN is released to more than restore the previously burned supply — with the inflationary part serving as the unlocks for all stakeholders — dropping the $TOKEN price to below its initial level; and
• at T₃: all the revenue is used to buy back and burn the excess $TOKEN unlocked, restoring the circulating supply and token price to their respective initial levels.

Under this version, after a round of fair token unlock and distribution, the net impact on both token supply and price remains nil.

Fair Release 2.0: the HODL Version (with Revenue)

Fair Release 2.0 fixes the prior issue in the Ponzi Version, as token unlocks only occur within the inflationary portion of each release. The community essentially gets to retain its stake throughout every token consumption-release process, incentivising continued engagement without dilution concerns. This also preserves a stable ratio of tokens among stakeholders stable throughout the token’s lifespan.

But the story doesn’t just end here… If a project generates revenue, can’t it use just a portion of the revenue for release-buybacks, and the rest to pump up the token price? It absolutely can — and that’s why we have Fair Release 3.0: a magical ‘up-only’ model.

Fair Release 3.0: the Moonshot Version, for projects with revenue and ambitions for ‘up-only’ token price

While the HODL Version accomplishes our primary goal of demand-driven token unlocks with fair distributions, its impact on the token price remains neutral. The advanced version of Fair Release introduces a positive feedback loop that drives a continuous token price growth: in each round of Fair Release, a portion of the revenue is injected into the liquidity pool to boost the token price, further incentivising the community to hold and engage. I call it the “Moonshot Version” of Fair Release, because once the flywheel starts spinning, it’s like a snowball rolling!

Here’re the detailed steps:

• at T₀: assuming the initial liquidity pool contains $TOKEN and $USDT, pricing $TOKEN at its initial level (same as the Ponzi & HODL Versions);
• between T₀ and T₁: certain amount of $TOKEN is consumed and burned, reducing its circulating supply and lifting its price, while the project generates revenue in $USDT (same as the HODL Version);
• at T₂: an inflationary amount of $TOKEN is released to more than restore the previously burned supply — with the inflationary part serving as the unlocks for all stakeholders — dropping the $TOKEN price to below its initial level (same as the HODL Version); and
• at T₃: a portion of the revenue is used to buy back and burn the extra $TOKEN unlocked, restoring the circulating supply and token price to its initial level, while the remaining revenue is injected into the liquidity pool, lifting the $TOKEN price.

With this model, each round of Fair Release now results in a net positive impact on the token price. It sounds like a magic — more unlocks, yet a higher token price, doesn’t it?

Fair Release 3.0: the Moonshot Version (with Revenue)

Compared to the HODL Version, the Moonshot Version only requires more precise maths: setting the optimal inflation rate for the releases and determining an ideal split of the revenue — ensuring part of it covers the inflation buybacks while the remainder meaningfully lifts the token price. Beyond these calculations, all that remains is careful execution.

Final thoughts

While many attribute crypto market underperformance to liquidity shortages, innovation stagnation or narrative fatigue, few have realised that the real issue lies in unfair wealth redistribution, fuelling a growing dichotomy between the grassroots participants (community/retail) and institutional players (projects/VCs).

Decentralisation is an ideology for fairer power and wealth redistribution. Without improving productive relations beyond TradFi models, Web3 cannot thrive — even with ample liquidity, technical breakthroughs, or narrative hypes.

The simplest step towards fairer wealth redistribution is fixing tokenomics.

Fair Release serves as the simplest fix to the prevailing time-scheduled token unlocks. It follows basic economic principles and solves the root cause of ‘low float high FDV’ problem. It’s not rocket science and is readily implementable. It also offers — through the liquidity pool — a leverage point for projects with externality to create a flywheel effect.

It could be the fairest and most sustainable tokenomic model for any VC-backed token.

Join the paradigm shift. Be part of the revolution.

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