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The widespread belief that the market is speculation-focused remains the biggest obstacle to creating a sustainable ecosystem in the cryptocurrency world. To address this, altcoin projects need to reassess their token distribution strategies and focus on long-term benefits and transparency instead of inflated valuations. Experts believe any change in this direction will be a critical step to attract more users to the ecosystem and increase the adoption of altcoins.
Low Circulation, High FDV Model
This year, we have seen the launch of many new altcoin projects in the cryptocurrency market with the “low circulation, high fully diluted valuation (FDV)” strategy. Although this strategy involves launching at a high price and promoting the project with a billion-dollar valuation to create hype around its potential, it has faced much criticism for creating artificial inflation.
For those unaware, the “low circulation, high FDV” model involves releasing a small percentage of the total token supply and giving each token a high price. Projects create a misleading FDV this way, and many investors overlook the remaining token supply that has not yet entered circulation.
While the model can generate significant interest in the short term, most projects lose the benefits brought by this model in the long term. Overall, it is not a sustainable method and harms the long-term benefits and adoption, which should be the main focus of all altcoin projects.
Altcoin Projects Gradually Adopt Alternative Token Distribution Models
In contrast, some altcoin projects within the industry are starting to experiment with alternative token distribution models, deviating from this model. For example, FRIEND, a Blockchain-based social platform, launched with a 100% circulation rate by distributing all its tokens to the community from day one. Projects like Lava Network have also adopted a similar radical approach. These strategies aim to promote long-term benefits and organic growth by basing the market value of tokens on real-world potential rather than speculation.
This alternative token launch strategy involves determining a market-focused FDV through decentralized exchanges (DEX) and thereby reducing speculation. With a higher initial circulation rate and limited supply, this approach ensures that the focus is on the intrinsic benefits of the token and the real-world potential of the project.
The market-focused FDV approach offers significant advantages such as reducing speculation, promoting organic growth, and increasing transparency. Although some argue that this approach may carry the risk of slower initial growth or lower valuation, the benefits of a long-term sustainable protocol far outweigh these short-term concerns.
