Tokemak Incubator: Reactor Raises & Token Launches

Sparkle Crimes

There’s something I believe Tokemak is secretly working on which will allow the protocol to accumulate protocol controlled assets at an even faster pace and materially increase the price of $TOKE. Let's get started.

Moving Upstream To Increase TAM

Many of you already know Tokemak will eventually support permissionless reactors that existing projects in crypto will spin up to help reduce their inflationary liquidity mining reward emissions by a factor of 10x (yes, 10x) while also significantly improving their token’s liquidity depth across trading venues.

The Evolution of DAOs
by Tokemak Founder, Liquidity Wizard
Liquidity Wizard details how Tokemak can cut emissions for Alchemix (or any DAO) by 10x

Well, what’s flying under the radar is that after permissionless goes live for existing projects, I believe Tokemak will move upstream using their Reactor framework to help new crypto project teams bootstrap funding at (or prior to) token launch.

Several months ago when Tokemak was just getting started, @LiquidityWizard very briefly mentioned offhand potentially collaborating on something like this during a Community Call with Rari Co-Founder @JackLipstone (~43m30s). Fast forward to late December, where we learned that they’re collaborating nearly every day on tAsset composability for Fuse Pools and additional projects.

Recall that Tokemak’s primary goals are to become the liquidity layer for all of the decentralized economy and to grow protocol controlled assets. If Tokemak has already positioned itself to be the most capital efficient liquidity solution for existing token projects, it makes sense for the Tokemak DAO to move further upstream to onboard new entrants as well.

While it would be hard to know what the exact mechanisms a service like this would require, a helpful starting point would be to identify the early stage pain points new project teams currently face, and then postulate how Tokemak may be uniquely positioned to remove many of these headaches with structural innovations to simplify and streamline the fundraising and token launch processes into one.

The Pain Points

For new project teams looking to raise, let me start by saying that VCs aren’t the problem. The best VC firms provide valuable domain specific expertise, strategic direction, regulatory guidance, and institutional connections to help founders and their teams increase the odds of success for their projects.

The problem is that today’s legacy VC models - even with carefully designed tokenomics and gradual vesting schedules - are structurally flawed, leaving both parties stuck with misaligned incentives despite the best of intentions.

In 2022, project teams in need of funding shouldn’t have to worry about excessive equity dilution, concentrated voting power risk, and sticky narratives forming around the concerns of future negative price action from VCs selling when their tokens vest.

And founders, already stretched thin for time, shouldn’t have to find themselves wasting time pitching their new project to some of those VC firms that are at best unfamiliar with and at worst totally clueless to their specific project subdomain.

Tokemak As A Solution

We’re already seeing that a steady shift from capital allocators to capital networks is underway to democratize early stage project fundraising with the emergence of Fair Token Launches and informal Discord/Telegram investing networks.

This is speculative territory but I believe Tokemak, with Rari’s help, could announce some sort of Fundraising Pool mechanism based loosely on the Reactor and Fuse frameworks which would allow new project teams the option to bypass early stage VC rounds if preferred and pitch directly to massive audiences of DeFi users already LPing and LDing within the Tokemak ecosystem.

In whatever shape or form this Fundraising Pool mechanism takes, expect tAsset composability to play an innovative role in abstracting away some of the common misalignments mentioned above which still linger in today’s fundraising space. Another particular area to focus on will be what specific roles reactor voting and yield incentives may play in an open, democratized fundraising environment.

Looking Ahead

With further innovations in these areas and more standing just behind the curtain, Pilots can rest assured Tokemak has set the stage for quite an exciting project roadmap ahead in 2022.

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