Authors: Vincent de Vos & Mathilde Michels Company Chainforce B.V. Created 25 October 2024 Updated 4 November 2024

Approach

We are setting out to create a comprehensive benchmark for the cryptocurrency industry, drawing on data spanning from 2019 to 2024. Our analysis will extend to a comparative evaluation of five similar projects. The focus will be on assessing the success of five projects, examining their token design, and understanding the strategic decisions surrounding supply, allocations, cliffs, and vesting. We will delve into their unique characteristics, including utilities, incentives, and the underlying value mechanics that contribute to the token's value capture.

Industry Trends

Over the past few years, our data collection efforts have provided valuable insights into various tokenized ventures across the industry. With this extensive dataset at our disposal, we are well-equipped to make informed observations about common practices and standards prevalent within the industry. By analyzing trends, patterns, and successful strategies adopted by tokenized ventures, we can identify key elements that have emerged as industry standards. This comprehensive understanding of the industry landscape enables us to offer valuable insights and guidance to stakeholders seeking to navigate the dynamic and evolving world of tokenization.

Market Trends in Cliff, Vesting, and Allocation Practices in Tokenomics

Tokenomics-related trends that we have identified are:

Additionally, we can say something about how tokens are usually allocated. This can be seen in the graph above and can also be summed up as follows:

Please keep in mind these are averages and we must consider this data in the context of Ludus and the comparison benchmark.

Emerging trend: High-Float, Low-FVD Token Sales Shaping the Market

The high-float, low-Fully Diluted Valuation (FVD) model has become a popular structure in the Web3 fundraising landscape, especially in 2024. By offering a substantial portion of the token supply early on at a low initial valuation, projects create an accessible entry point for investors, fostering liquidity and ensuring that the token is distributed across a broad base. This approach contrasts with traditional token sales that often retain a low circulating supply at launch, which can lead to higher price volatility and limited liquidity. High-float, low-FVD structures offer strategic advantages, particularly in a volatile market. Bymaking a significant portion of tokens available upfront, projects can attract a wider array ofinvestors, from retail to institutional, while maintaining a manageable valuation that reflectsearly-stage risk. This model enables early price discovery, and the larger float acts as astabilizing force against market fluctuations, reducing the impact of large trades on token price. Benchmark reveals that projects adopting high-float, low-FVD token sales are often seen asmore transparent and aligned with decentralized principles, as they promote wider tokendistribution and mitigate the risks associated with highly concentrated early holdings. As themarket continues to respond to directional changes rather than absolute levels, this structureproves flexible and resilient, positioning projects to capitalize on favorable market conditionswhile remaining agile in the face of corrections.

Early-Stage Dominance: Trends in Web3 Venture Capital Investment for 2024

In 2024, traditional venture activity in Web3 has been robust, with a notable focus on early-stage deals. A study analyzing 1,919 deals year-to-date (as of August 11, 2024) reveals thatseed-stage investments are dominant, followed closely by pre-seed and accelerator deals. This concentration in early-stage funding aligns with investor confidence in ideation-stage projects, which remain resilient against broader market volatility. The average ticket sizesacross stages provide insight into capital flows, with pre-seed averaging $2.2M, seed at $4.9M, Series A at $19.8M, and Series B at $51M.

Interestingly, the distinction between pre-seed and seed is blurring, as token sales are sometimes replacing traditional pre-seed rounds. Accelerator deals have surged, driven by arise in ecosystem-focused programs offering capital and support to early projects. This trend mirrors the intensified ecosystem-building efforts observed across Web3, indicating a positive cycle and increased entry points for founders. Examining ticket sizes over time, we observe that early-stage funding (pre-seed and seed) has remained more resilient than later stages like Series A, which are more affected by market fluctuations due to their proximity to Token Generation Events (TGEs) and traction requirements. The slight lag in early-stage ticket size adjustments compared to market movement likely reflects the time required for deal closure and reporting. This ongoing trend highlights early-stage ventures' relatively stable appeal and the competitive push among investors toward foundational Web3 projects in a complex market environment.

Benchmark Comparison

During the benchmark analysis, we examined five distinct projects:

These five projects align with the core objectives of the Pixpel project, which seeks to create a gaming-centered environment and platform. They were selected for their similar ambitions and approaches, which closely reflect Pixpel’s goals. Based on these projects similar to Pixpel's environment, this benchmark provides us with similarities and valuable insights into tokenomics.

Token utility

Means of payment

All five projects analyzed use their tokens as a means of payment within their ecosystems, enhancing user involvement and fostering loyalty. In models like Gala and Enjin, tokens act as the primary currency for in-game transactions and asset ownership, allowing users to trade, own, and monetize assets directly. This model incentivizes active participation by giving users a stake in the in-game economy, aligning with Web3 principles of ownership and economic autonomy. For Pixpel, adopting a similar approach with $PIXP as the core currency for transactions could significantly boost user engagement and community value.

Governance

Governance is a central utility in four of the five benchmarked projects. Enjin, Echelon Prime, and Portal, each closely aligned with Pixpel’s structure and mission to support gaming ecosystems, have implemented governance through their tokens. Although DAO Maker is less directly comparable to Pixpel, as it primarily functions as a launchpad, it also plans to implement governance in the future. For Pixpel, governance warrants careful consideration, as it is an essential component for this type of project. Incorporating governance within the $PIXP token could strengthen the community’s connection to the platform, fostering long-term commitment and engagement by giving users a say in key decisions. This added layer of community-driven input could become a valuable asset as the platform evolves. It is also noteworthy that projects use their tokens not only as voting tools but also as accesskeys to governance features. Various participation mechanisms can be implemented, as demonstrated by Enjin, which requires not just token ownership but also staking ENJ to participate in governance. This approach reinforces both token utility and network security.

Incentives and user rewards

Incentives for active participation are prevalent across these projects. For example, Echelon Prime rewards users for in-game achievements, Enjin incentivizes ongoing participation, and Portal offers rewards for Portal Node operators. By adopting similar rewards for achievements and engagement milestones, Pixpel can foster a dynamic and dedicated user base, encouraging sustained interaction within the platform.

Access to functionality & services?

Access to exclusive features and services is a also a common utility in the projects analyzed, offering token holders unique benefits within the ecosystem. Echelon Prime, for example, provides PRIME holders with access to various platform features and priority access to NFT sales, allowing dedicated users to benefit from early or exclusive opportunities. Similarly, Portal grants holders access to exclusive NFTs from its network of partners, adding a layer of privilege and rarity for active community members. For Pixpel, integrating similar access-driven benefits for $PIXP holders—such as early access to NFT drops, exclusive in-game items, or premium platform features—could increase token appeal and strengthen community loyalty, encouraging users to actively hold and engage with $PIXP.

Staking

Four out of the five benchmarked projects—Enjin, Echelon Prime, Portal, and DAO Maker—include staking as a core utility. Staking serves a dual purpose, allowing holders to earn passive income while bolstering network security and liquidity. By incorporating a staking mechanism, Pixpel can provide financial incentives that encourage users to retain $PIXP, adding stability to the platform's token economy and rewarding loyal participants.

Transaction Fees

Incorporating transaction fees as a utility is a common strategy in projects like Enjin and Portal, where tokens serve as the primary currency for covering transaction costs within the platform. Enjin uses its native token, ENJ, to pay for fees associated with in-platform transactions, while Portal similarly requires the PORTAL token for transaction costs across its ecosystem. For Pixpel, utilizing $PIXP for transaction fees could provide a consistent demand for the token, streamline in-platform transactions, and enhance the token's functional value within the ecosystem.

Access to the launchpad

Access to the launchpad is a key utility in DAO Maker's ecosystem, allowing token holders toparticipate directly in token sales on the DAO Pad platform. This feature provides users with unique investment opportunities in emerging projects, fostering an active and engaged community. By giving users early access to project launches, DAO Maker's model builds a sense of exclusivity and adds tangible value for token holders. Pixpel could consider a similar approach, allowing $PIXP holders privileged access to its own launchpad events, further enhancing the appeal and utility of the token within the platform's ecosystem.

Blockchain choice

Most projects, including Gala, Echelon Prime, and DAO Maker, are built on Ethereum, benefiting from its established security, decentralized infrastructure, and active developer community. Enjin also began on Ethereum before creating its own blockchain to meet the specific needs of its gaming ecosystem, signaling that transitioning to a dedicated chain can provide greater control and scalability as projects grow. Portal takes a different approach by integrating over 40 blockchains, including Ethereum, Polygon, Solana, Avalanche, and Arbitrum. This multi-chain strategy allows Portal to offer users flexibility across different ecosystems and enhances compatibility with a broader array of gaming and DeFi applications. For Pixpel, Ethereum offers a strong foundation due to its robust network effects and security features. However, considering a flexible, multi-chain integration approach—like that of Portal—could expand Pixpel’s reach across different ecosystems and support greater user access, liquidity, and cross-platform compatibility. It's interesting to note that Enjin started on the Ethereum blockchain and then, once they hada mature environment and implemented their project, migrated to their own blockchain. This could be a strategic approach for Pixpel as they aim to build a large and complete ecosystem, allowing them to leverage Ethereum’s security initially while planning for a dedicated blockchain as their platform grows. Additionally, as Ethereum can sometimes be costly and have slower transactions due to network activity, a system with faster transactions and lower costs for users should also be considered. Therefore, a Layer 1 with these characteristics, like Solana, could be a good option, as well as a Layer 2 solution such as Polygon or Arbitrum. It’s also important to consider the type of audience active on each corresponding blockchain.

Solana stands as an indispensable choice for pioneering Web3 gaming experiences. It is a blockchain of choice for games that demand high performance, hosting a wide array of games across various genres. Its advantages include:

Polygon has risen to prominence as a favored platform for Web3 games seeking stands as an indispensable choice for pioneering Web3 gaming experiences. It is a blockchain of choice for games that demand high performance, hosting a wide array of games across various genres. Its advantages include:

Arbitrum is revolutionizing Ethereum's future with its advanced Layer 2 scaling solutions. Byutilizing Arbitrum's technology, projects can harness the security of Ethereum to develop cutting-edge applications.

Incentives

Staking incentives are a common feature across these projects, each employing unique approaches to boost user engagement. In Echelon Prime, for example, stakers receive PRIMEd, a secondary token equal to their staked amount, specifically for governance voting. PRIMEd is non-tradable, allowing users to participate in governance while keeping their original tokens locked. This approach enables stakers to engage in platform decisions without losing liquidity. DAO Maker, on the other hand, offers a flexible staking model where stakers gain access to public and private launchpad offerings, with an early unstaking option that incurs a fee. These varied staking mechanisms not only reward loyalty but also grant users added benefits, such as governance rights and exclusive access. For Pixpel, adopting a similar model could reward active users while also granting them greater control over platform decisions, aligning user interests with long-term growth.

Value mechanisms

Most benchmarked projects—Gala, Echelon Prime, Portal, and DAO Maker—use deflationary models to create token scarcity and enhance long-term value. Mechanisms like token burns, halving schedules, and supply adjustments based on usage help manage the circulating supply, supporting steady value appreciation by limiting token availability. For Pixpel, adopting a deflationary model aligns well with industry practices and meets user preferences for assets that increase in value over time. For Pixpel, adopting a similar model could reward active users while also granting them greater control over platform decisions, aligning user interests with long-term growth. Each project examined has a unique governance mechanism, tailored to its structure yet emphasizing community engagement through decentralized decision-making. Enjin, for instance, enables stakers to earns ENJ, granting governance power over network decisions. Echelon Prime’s advanced staking and voting model allows community members to submit governance proposals and vote with staked PRIME tokens, giving holders a tangible influence over platform direction. By considering a similar governance model, Pixpel could empower its users to shape the platform’s future, fostering loyalty and participation through an engaged community. Enjin’s approach, which distributed 80% of its token supply to the community at launch, demonstrates a strong commitment to early community ownership. This strategy allowed Enjin to build immediate liquidity and a user-driven ecosystem, quickly establishing an engaged user base. For Pixpel, fostering early liquidity and accessibility could accelerate adoption and help build a loyal, active community. DAO Maker’s launchpad model provides a balanced approach to accessibility and exclusivity. The Public SHO (Strong Holder Offering) allows broad access to new token sales, while the Private SHO is reserved for stakers of DAO tokens, granting exclusive access to specific projects. This two-tiered system encourages token staking and rewards committed participants with exclusive opportunities. Pixpel could adopt a similar launchpad model to drive engagement, offering general access alongside exclusive privileges for $PIXPstakers, which would support a vibrant ecosystem around new project launches. Echelon Prime introduced an interesting phased approach with its PRIME token, starting as a non-transferable token in July 2022 and unlocking it through a community vote in March 2023. This controlled rollout allowed Echelon Prime to establish a structured environment and ready its infrastructure before enabling full transferability. For Pixpel, a similar phased approach could have been beneficial for building a strong network and establishing key token use cases before full functionality. However, since $PIXP is the primary medium of exchange on the platform, delaying its rollout may risk users adopting alternative cryptocurrencies. This mechanism, however, could still be selectively applied for certain categories, such as investors or controlled airdrop distributions, enabling gradual integration without impacting the user experience.

Token Design

Token Supply

The total supply of a token in cryptocurrency refers to the total number of tokens that havebeen created and are in circulation. This number is typically set when the token is first created, and it cannot be changed later on in a deflationary economy. Among the projects analyzed, four out of five have a fixed total supply, with Enjin being the exception due to its infinite supply model. The total supplies vary significantly:

Most projects choose supplies between 100 million to 100 billion. However, it's still relatively arbitrary as all the allocations and distributions are chosen proportionally. Total supply will however impact your Market Cap and Fully Diluted Valuation because these are calculated by a combination of Circulating Supply or Total Supply and the Token Price.

Token Allocations

Portal and DAO Maker align closely with current market trends in token allocations, as outlined in the industry trend section. Their allocation strategies reflect a balanced approach among team incentives, community engagement, and ecosystem growth, consistent with prevailing standards. From DAO Maker, an interesting category to consider is their 5% allocation to Binance Launchpool, which could be beneficial for Pixpel if they plan to conduct an IEO. In contrast, Gala and Echelon Prime adopt more distinct allocation models. Gala, for instance, channels 100% of its token supply to Founder’s Nodes, a model less relevant for Pixpel, as Gala operates as its own blockchain with a structure different from Pixpel’s, which functions on an existing blockchain. Echelon Prime, however, is valuable to analyze, as it prioritizes gameplay incentives with 31.7% of tokens allocated to a Gameplay Pool, reflecting its gaming-centric focus. Additionalallocations include 19.7% for Parallel Studios, 16.2% for investors, and smaller portions for the Echelon Foundation and Prime Events. This variation underscores the flexibility projects have in structuring token distributions to support unique ecosystem goals and foster community engagement.

Token Distribution (Vesting & Cliffs)

Echelon Prime and MakerDAO offer valuable insights into vesting and cliff structures. Echelon Prime, for example, applies a 1-month vesting period for rewards, which helps maintain a controlled token supply while allowing gradual access to incentives. This approach of shorter, event-based vesting can be beneficial for categories that benefit from periodic engagement rather than a fixed schedule. For longer-term distributions, MakerDAO uses a 24-month non-linear vesting schedule divided into five batches for its Merger & Acquisition allocation. This segmented release schedule allows for sustained project support over time while reducing immediate selling pressure. Community rewards typically have extended vesting periods to maintain engagement and project sustainability, as demonstrated by Portal, which has implemented a 75-month linear vesting schedule. This extended period ensures that rewards are available throughout the project's growth. Additionally, Portal opted for no cliff, which can be interesting to implement in a high-float, low-FDV structure, but it must be carefully considered, as it is not the most efficient approach for managing selling pressure. This aspect should be clearly defined in the tokenomics design model.

Additional tokenomics considerations

Learning from Enjin's migration (Tokenomics V2)

The experience of Enjin highlights that while it is feasible to update tokenomics or migrate to a V2 model after launch, this approach can introduce significant challenges. Enjin’s transitionto a V2 model, which involved a token migration, resulted in confusion among investors and users due to the coexistence of V1 and V2 materials and numerous announcements. To prevent such issues, it’s essential to establish a clear, well-structured tokenomics model from the start, minimizing complexity and ensuring user clarity.

Launchpad Strategy Insights from MakerDAO

MakerDAO successfully launched their token (DAO) on their own DAO Maker Launchpad through an IDO, raising $100K—a model similar to what Pixpel aims to achieve. Additionally, MakerDAO conducted an IEO on Gate.io’s Launchpad, raising a further $0.3M. This dual approach illustrates that while launching on a proprietary platform is effective, expanding to other launchpads can further broaden reach and increase capital raised.

Key Takeaway for Pixpel

Pixpel: Token Utility

Pixpel: Blockchain Choice

Pixpel: Incentives

Pixpel: Value Mechanisms

Pixpel: Vesting and Cliffs

Pixpel: Additional Tokenomics Considerations

Pixpel: Industry Trends