A token launch is how a protocol distributes its governance or utility token to the public for the first time. The launch mechanism determines the initial price, who receives tokens and at what cost, and how concentrated insider allocation is. Launch mechanics matter because they set up the distribution of future sell pressure: teams, VCs, and early backers who received tokens cheaply will eventually sell, and the timing and concentration of those future sales is visible in the tokenomics at launch.
How different launch models work
An initial DEX offering (IDO) provides liquidity on a decentralized exchange at a fixed initial price, usually immediately after a public sale round. Buyers can purchase at the listed price and the token begins trading within hours. IDO price discovery is often poor: insider allocations bought at deep discounts can sell immediately at the IDO price, creating launch-day sell pressure. The gap between insider cost basis and IDO price determines how large this initial wave is.
A liquidity bootstrapping pool (LBP) uses a Balancer pool that starts at a high token weight (and thus high price) and gradually shifts to a lower weight over several days. The decreasing price discourages early buyers from sniping and gives retail participants a fairer window to enter at a declining price discovery curve. Gyroscope, Gitcoin, and Paraswap used LBPs for their initial distributions.
Airdrops distribute tokens for free to wallets that meet specific criteria: historical protocol usage, NFT holdings, governance participation, or cross-protocol activity. Uniswap’s UNI airdrop in September 2020 sent 400 UNI (worth $1,200 at launch and briefly $12,000 at peak) to every address that had ever used Uniswap. Airdrop farming, anticipating and preparing wallets for future airdrops, became its own strategy category by 2023 and 2024, with hundreds of millions in value claimed across Arbitrum, Starknet, and Scroll launches.
What this means for traders
The most important signal in any token launch is the ratio of insider allocation to public distribution at launch. A token where 60% of supply goes to VCs and the team, vesting over 4 years, with only 5% circulating at launch, has a long multi-year overhang of supply that holders at launch price will absorb. A fair launch (Bitcoin’s model: no pre-mine, no VC allocation, mining determines distribution) has no insider overhang by design, though most DeFi projects require early development funding that makes a true fair launch economically impractical.
At a token launch, the first thing to check is the vesting schedule: when does the team’s allocation start unlocking, and how large is it relative to the public float? A token trading at $500 million market cap with $2 billion in insider tokens unlocking over the next 18 months is structurally different from one where insiders have a 4-year cliff before any tokens vest. For the metrics to evaluate these dynamics, see FDV explained and token vesting explained.
A concrete example
In 2023, several high-FDV low-float launches were criticized for this structure: a token launches with 5% circulating supply at a high price, giving a $1 billion FDV at launch, but 95% of the supply is held by insiders at cents-on-the-dollar cost basis. Two specific examples from 2024: a DeFi protocol launched at $0.80 with a $2 billion FDV and 5% circulating supply; 8% of VC allocation unlocked at the 6-month mark. The token fell from $0.80 to $0.15 over 90 days as those unlocks hit the market. A competing protocol launched via LBP at declining prices from $0.50 to $0.15 over 72 hours with no pre-mine and 40% circulating at launch. It traded sideways for two months but had a stable base of holders with realistic cost bases rather than entrenched underwater late buyers.
Frequently asked questions
What is airdrop farming and does it still work?
Airdrop farming involves using protocols well before their token launch in anticipation of receiving an airdrop allocation. It worked extremely well through 2024: Arbitrum airdropped ARB tokens worth $1,100 to $13,000 per wallet; Starknet dropped STRK worth $400 to $3,000 per eligible wallet. By 2025, most major protocols had already launched tokens and remaining targets were well-known, increasing competition and decreasing average allocation sizes as protocols implemented Sybil resistance to filter out obvious farmers.
What is a bonding curve launch?
A bonding curve sets token price as a mathematical function of supply: as more tokens are minted, price rises along the curve. Early buyers get a lower price; later buyers pay more. The curve provides an automatic market for the token from day one. Pump.fun on Solana popularized bonding curve launches for meme coins in 2024: tokens began on a bonding curve and graduated to Raydium AMM once they reached $69,000 in market cap. The bonding curve phase prevented the liquidity bootstrapping problem that plagues early-stage token launches.
What is a token generation event (TGE)?
The TGE is the moment when the token is created on-chain and initial distribution begins. It is often used interchangeably with “launch.” Some projects distinguish between the TGE (creation and initial allocation) and the public listing (when trading begins on exchanges). The gap between TGE and listing is when insiders receive their allocations but retail cannot buy or sell, which sometimes creates launch-day price discovery problems when the first public price is far from where insiders received tokens.
