The incentive misalignment of the Launchpad: Are traders trapped in the "suicide squad" dilemma?

Author: @0xuberM

Compiled by: Saoirse, Foresight News

Editor's note: This article approaches from the incentive mechanism, analyzing the current survival status of Launchpad, creators, and traders, and points out that Launchpad is centered around trading volume, creators lack pricing support motivation, and traders have become a "suicide squad", forming a vicious cycle. Currently, only VCs and insiders have the motivation to drive up token prices, while ordinary traders are in a predicament. The article objectively presents the market situation, although it does not provide solutions, it offers an important perspective for understanding the operational logic of the cryptocurrency market. The following is the compiled content:

Incentive Mechanism

The incentive mechanism is the core driving force behind the functioning of the world. If you want someone to do something, you just need to create an environment or scenario that allows them to receive a reward for completing it - this is a basic principle of human nature.

However, currently, on-chain tokens (especially those issued through Launchpad) lack incentive mechanisms to drive price increases, which is an issue that needs urgent attention.

The operation logic of ### Launchpad

Yesterday I tweeted something related in a sarcastic tone, and now I want to emphasize one point seriously: Token issuance platforms (Launchpad) have no incentive to raise the price of any specific token, unless in certain special circumstances (which we will discuss later).

The operational model of such platforms is essentially similar to that of a casino; for them, the only important metric is "trading volume."

This is precisely the core reason why "permissionless issuance" and "bonding curves" (a mechanism that adjusts the relationship between asset supply, demand, and price through algorithms) have become mainstream today – just as casinos continuously introduce new lottery games, platforms also hope to provide as many speculative opportunities as possible, attracting more participants by allowing a few to "hit the jackpot."

So, how does the token issuance platform make a profit?

It's actually very simple: they can earn profits just by "existing". On one hand, it provides ordinary people with a permissionless token issuance channel; on the other hand, it offers speculative tools for investors through bonding curves. If they want to further scale, the platform must compete for market share, and there are two common methods to do so:

• Launch marketing campaigns: either spread negative news about competitors (FUD) or emphasize one's own "differentiation", even if the actual business is not fundamentally different from competitors;
• Driving up the price of certain tokens: This is seen as "the best marketing strategy" that can quickly attract user attention.

I have observed a pattern: token issuance platforms and their teams will only strive to seize market share in two situations: first, when market share has been taken by competitors and needs to be reclaimed; second, when they want to deliberately suppress competitors and damage their reputation.

Interestingly, whenever these two situations occur, there are always a few tokens on the platform that start to rise in price, even reaching high valuations. They first slow down the pace of large-scale token issuance, using "green K lines" (symbolizing price increases) and marketing strategies to attract users to enter; once users are convinced that "money can be made here," they then restart large-scale token deployment, significantly increasing trading volume — this is not a critique, just an objective observation.

To be honest, if I were a member of the token issuance platform team, I might adopt the same strategy. After all, the essence of the platform is a commercial institution, and the core goal of business is to maximize profits.

Creator's behavioral tendencies

Similar to token issuance platforms, creators (such as streamers) also have no incentive to raise the price of the tokens they issue. Currently, the revenue mechanism for creators is highly similar to the "permissionless issuance" model — this model benefits creators directly, just as it does for those who "frequently issue tokens."

You may often hear creators say, "Look, I can earn so much money just by turning on my camera!" They attract more creators to join in this way, and more creators mean more token issuance, which in turn creates more speculative opportunities.

For creators, the profit logic is equally simple: just "exist" — open the camera and issue a token for speculation to earn profits. Of course, if you want to make big money, it does require long-term persistence, but even so, there is no guarantee of long-term success.

After all, in the cryptocurrency field, user attention is fleeting, and long-term success is inherently filled with uncertainty. In this environment, creators are easily inclined to think about "making a quick profit and leaving," which is actually an inevitable result of the incentive mechanism.

Traders: The "Trenches" and "Suicide Squad" of the Crypto Market

So what about us traders? What is our incentive mechanism? What drives us to do what?

The answer is cruel: we are incentivized to "undermine each other." After all, the "trenches" of the crypto market were dug by us (never forget this). The meanings of the terms "trenches" and "suicide squad" are also very clear — ordinary traders like you and me are essentially "expendable cannon fodder," the soldiers standing at the forefront of the market.

Since no party has the incentive to drive the price of a certain type of asset up for the long term, we can only participate in this "game" in a more brutal way. There is no "Player vs. Environment (PVE)" here, only competition and mutual harvesting.

Due to the limited upward potential of token prices, we have to adopt some aggressive measures to enhance the probability of profit, such as locking in 10% of the supply of a certain token in multiple wallets in advance (i.e., "multi-wallet pre-staking"). In this market, the "timing of entry" is crucial — you must be early enough, otherwise, you are likely to become someone else's "exit liquidity" and be ruthlessly harvested.

You might ask: how can traders make a profit? The answer is: we must put in more effort than others. Unlike token issuance platforms and creators who can "profit easily," we need to continuously improve our skills, accumulate industry influence, cultivate judgment, expand our network, and keep up with real-time information across multiple fields—only by doing these can we have a chance to make money in the market.

Even when encountering tokens that experience a significant short-term rise (like some recent CCM tokens), we still lack the motivation to hold them long-term, as new "speculative opportunities" (just like new lottery tickets) will soon emerge. The "machine" of this market must continuously produce "lottery tickets" to keep running.

Every time a new opportunity arises, it is accompanied by a large number of traders' losses, just like the trenches in reality are filled with the bodies of the sacrificed. For example, for every account that profits through the Axiom platform, there are hundreds of accounts whose investment portfolios have been wiped out.

It sounds like I'm complaining, but I am also a participant in this "game", so to put it positively, I might be considered a "hypocrite".

Currently, I have three thoughts: perhaps I should "adapt" to the current market rules? Or perhaps I should completely withdraw from this game? (Unfortunately, I am not someone who gives up easily) Or perhaps I should explore other fields? (In fact, I am already doing so)

Thoughts on Market Cycles and Solutions

Will this "game" go on forever? I don't think so. History has repeatedly shown that this vicious cycle will eventually end in one way: the winners continue to profit, while the losers are constantly eliminated; until a certain point, where there are no new "losers" in the market, the former winners will become the new losers.

And when everyone is exhausted and chooses to withdraw, those token issuance platforms will reappear, launching a few "high-level new lottery tickets" to attract everyone back in again — this is like the "serpent swallowing its tail," forming an unbreakable closed loop.

Speaking of this, there's an interesting phenomenon: the tokens that have performed well recently are almost all not issued through bonding curves, but rather those projects where "a large number of tokens are locked by insiders" — we even jokingly refer to this situation as "irregular operations."

Why is this happening? The core issue lies in the incentive mechanism. Currently, in the cryptocurrency space, the only entities motivated to ensure the long-term price increase of tokens are venture capital (VC) teams and internal project members—because only with a long-term rise in token prices can they sell at a higher valuation when the tokens are unlocked, thus obtaining substantial profits.

Ironically, the traders who are currently "winning big" in the market are precisely those who purchased "venture-capital packaged inferior assets" — which is exactly the problem that the bonding curve model aimed to solve.

So, what is the solution? To be honest, I'm not sure either. But one thing is clear: if a project team wants their token to succeed, they cannot risk issuing it through a bonding curve – otherwise, it is very likely that "some 17-year-old will use Axiom multi-wallets to seize 10% of the token supply."

As an on-chain trader, I am more aware: the "expected value (EV)" of participating in this "game" is becoming lower and lower. In any case, the market must make changes, and the incentive mechanism must be adjusted - otherwise this cycle will just keep repeating.

I don't have ready-made solutions, only some initial ideas, and I'm not sure if these ideas are feasible in practice. I don't blame anyone for the current situation; it's just an inevitable result under the existing incentive mechanism. Unless there is some institution or model that can completely break the current pattern, it's difficult for the incentive mechanism to undergo substantial changes.

I am just an active trader and a user of the token issuance platform. I write down these thoughts in hopes that the platform team can see them (although with each experience of this cycle, my hope diminishes a little, and I think others might feel the same way).

As the saying goes: everyone is for themselves. Before the market truly changes (if it ever does), I wish all the "suicide squads" good luck — may the more experienced and professional "soldiers" win in this game.