Retail Investors and Venture Capital: Finding Balance in Web3
What are the limitations of Fair Launch and what new alternatives are available?Key Points Summary
The imbalance of investment opportunities between retail investors and venture capital in the cryptocurrency market is a topic of ongoing discussion.
Fair Launch platforms are committed to providing equitable investment opportunities to address this imbalance, but they still face structural limitations.
Innovative approaches such as offering investment opportunities based on on-chain and off-chain data, and using transparent fair launch mechanisms under AI agents are gaining attention.
1. Introduction
Source: rsuthar94, Dune Analytics
Launchpad platforms like Pump.fun and DAOS.Fun are experiencing strong momentum in the cryptocurrency market. They have garnered attention due to high trading volumes and active user participation. Unlike traditional ICOs and IEOs, these platforms adopt a fair issuance mechanism—allowing all users to freely participate in investment from the very beginning of token issuance without pre-selling to capital parties. This model has attracted widespread attention by enabling retail investors to participate from the start, share value, and benefit from the fair distribution of tokens. This trend highlights the long-standing exclusion of retail investors from quality investment opportunities while raising market expectations for more inclusive investment models.
This report will analyze whether Fair Launch platforms can effectively address the inequality of investment opportunities for retail investors and support the sustainable development of the cryptocurrency market.
2. Retail Investors vs. Venture Capital: The Origin of the Conflict
The inequality of investment opportunities between retail investors and venture capital firms has long been a persistent issue in traditional financial markets, and this problem also exists in the cryptocurrency market. Venture capital firms buy tokens in large quantities at low prices during private placements and then sell them at higher prices in the public market. This process puts retail investors at a disadvantage, forcing them to enter the market only after prices have already risen, deepening their dissatisfaction with the lack of fair investment opportunities.
This issue is supported by data. According to statistics from Binance Research, the market capitalization (MC)/fully diluted valuation (FDV) ratio in the cryptocurrency market has continued to decline from 41.2% in 2022 to 12.3% in 2024. This indicates that the proportion of tokens circulating in the market is decreasing, while the proportion of locked supply is increasing. Limited supply artificially inflates token prices, benefiting early investors such as venture capitalists. However, when a large amount of locked supply floods the market during the unlocking period, oversupply often leads to price crashes, with retail investors bearing the brunt of the losses. Ultimately, the inflated pricing at issuance often results in financial losses for retail investors.
In this context, retail investors are naturally attracted to fair issuance platforms. These platforms eliminate the risks associated with token unlocking by distributing all tokens from the outset, providing all participants with an equal starting point. This model promotes balanced token distribution and healthier ecosystem development, meeting the demand for early participation from retail investors.
3. Fair Launch Platforms: A True Fair Alternative or Another Form of Imbalance? Fair launch platforms open up new opportunities for retail investors and position themselves as an alternative to traditional investment models. However, whether these platforms truly address the issue of unequal investment opportunities remains a topic of debate. On the surface, they create a fair environment where all participants start on the same line. Yet, in practice, new forms of inequality and challenges have emerged.
$DRUGS VIP participant list, Source: DAOS.fun
Taking Pump.fun as an example, the platform faces challenges from automated tools such as token generation event (TGE) sniper bots and trend bots, which often seize trading opportunities, pushing retail investors to the back. Additionally, some projects undermine fairness through mechanisms like whitelists, favoring specific groups or forming interest groups that provide preferential conditions for insiders. These issues erode the original intent of fair launch platforms. The reality shows that inequality has not been eliminated; it has merely taken on a different form, making it still difficult for retail investors to gain fair participation opportunities. More worryingly, this model is now repeating at a faster pace. Since fair issuance platforms often skip the due diligence process of traditional venture capital, they inadvertently expose retail investors to greater risks, further exacerbating the inequality of investment opportunities.
4. The Deep-rooted Causes of Unequal Investment Opportunities
Fair launch platforms have not fundamentally resolved the issue of unequal investment opportunities. To understand this problem deeply, we need to examine it from a more essential perspective. This inequality is not limited to the opportunity differences between retail investors and venture capital; it is not just about the fairness of opportunities, but more importantly, it threatens the long-term sustainable development of the entire ecosystem.
If a project merely seeks financing, then opening investment opportunities to everyone makes sense. However, a token-based ecosystem should not only focus on raising funds; it needs to grow together with investors and ecosystem participants, continuously creating and developing value. This requires genuine participants who are not only concerned about short-term gains but are also willing to contribute to the long-term development of the ecosystem.
In this context, the role of venture capital is particularly important. Venture capital not only provides financial support but also brings a wide network of contacts, human and material resources, and verifies the stability and reliability of projects through preliminary research and due diligence. This also explains why some fair launch platforms incentivize vetted participants through early access.
To solve the problem of unequal investment opportunities, it is not enough to simply achieve equal access. The long-term growth and sustainable development of the ecosystem require a structured solution that can identify and incentivize those participants who can make substantial contributions. This is a fundamental challenge that the Web3 ecosystem urgently needs to address.
5. Finding a New Balance: Value-Driven Ecosystem
The current cryptocurrency market is caught between two extremes: one side is the fair launch model pursuing absolute equality, while the other side is the traditional model centered around a few seasoned investors. Neither of these models fully reflects the intrinsic value of the Web3 industry. Therefore, we need to shift towards a "value-driven participant selection" strategy, which identifies and attracts participants who can make significant contributions to the ecosystem, focusing on their value creation capabilities rather than simply considering capital size or investor type. Two recent cases demonstrate the potential of this new approach.
5.1. Legion: Community Investment Round Platform
Source: Legion
Legion, as a community-driven investment platform, is dedicated to screening investors who can create substantial value for the ecosystem. The platform's goal is not only to raise funds but also to build sustainable cooperative relationships between project parties and investors.
Source: Tiger Research, Legion
The core Legion Score system of the platform comprehensively evaluates investors based on multi-dimensional data such as on-chain activities, social influence, GitHub contributions, and project recognition. The scoring system is based on the actual contribution capability of investors to the ecosystem, rather than merely considering their financial resources. Investors are required to submit a cover letter and Legion score, detailing their potential contributions and participation plans, which helps establish a trust bond with project parties. This approach not only enhances the fairness of investment opportunities but also promotes deep interaction between project parties and investors. Legion is pioneering a new investment model that enhances the credibility of the crypto market while building a community ecosystem focused on contributions.
5.2. AI-Pool: AI-Agent-Based Fair Launch Platform
AI-Pool is an experimental fair launch platform based on AI agents, proposed by user Skely on December 24, 2024. This idea quickly gained attention and spread within hours. Many investors injected funds into the project, raising over $5 million. Note: Skely's account was suspended due to false account reports. The specific reason is unclear as it was reported by a third party. Additionally, the platform is an early, untested experimental project and is not yet stable or reliable. However, the users' ideas remain promising.
Source: Skely
AI-Pool aims to address the pain points of existing fair launch platforms through AI agents. Compared to the centralized operations and insider trading issues common in traditional platforms, AI-Pool employs a Trusted Execution Environment (TEE) to achieve process transparency. TEE protects the private keys of AI wallets and ensures the autonomous operation of AI agents, effectively reducing the unfairness brought about by centralized control and insider trading.
Although AI-Pool still faces challenges such as bot interference and insufficient liquidity, it demonstrates unique advantages in ensuring the fairness of token issuance and initial distribution, providing new ideas for solving the distribution inequities of centralized platforms. With further technological improvements, AI-Pool is expected to become a model for enhancing trust and transparency in the cryptocurrency market.
6. Conclusion
The issue of unequal investment opportunities in the crypto market is often simplified to the opposition between retail investors and venture capital, but in reality, this is just a surface phenomenon. Whether it is the KOL rounds that favor specific groups or the fair launch platforms that fail to fully achieve fairness, both reveal the deep-seated inequalities present in the market. The innovative practices of Legion and AI-Pool provide new ideas for addressing these issues: Legion screens valuable participants through a comprehensive data evaluation system; AI-Pool enhances process transparency through AI agents. Both projects go beyond simple capital investment, showcasing a new direction for enhancing the trustworthiness and sustainability of the ecosystem.
The core value of the Web3 industry lies in creating equal opportunities and a fair environment for all participants through decentralization. To achieve this goal, we need to build a balanced ecosystem that eliminates biases while establishing collaborative mechanisms that promote positive interactions between investors and project parties. These efforts will lay the foundation for realizing a truly decentralized system.
