Update on Launchpools
A consensus protocol for startup, VC, and SPAC investment
Blockchains can be open and global because they use consensus protocols to bring strangers into agreement, at huge scale. It’s time for finance to catch up. Launchpools is a consensus protocol for fundraising. Investors can indicate interest in a deal by submitting refundable stakes. Fundraisers (sponsors) can engage quickly with potential investors, and then build consensus around final terms.
Updates since we posted our First Look at Launchpools
Workflow and React UI are nearly feature complete.
We’re still changing the smart contract structure. We should have stabilized this earlier. Our goals include consolidating the stakes into a secure and immutable StakeVault, handling coins that have variable value, and guaranteeing delivery of investments.
Tokens will be available — earned but not sold.
Our partner Otoco will skip this product cycle. They are planning to sell their deal with a known price and bonding curve.
Instead, we’re planning on a beta offering of $20M of MaxUSD. MaxUSD is our flagship interest-earning stablecoin. Early stakers will get extra governance tokens, while not committing to take any risk.
Users should be able to try Launchpools in early July
Most people assume that a launchpool is like a standard launchpad — a portal for selling a specific deal. In this article, I’ll review some of the differences between a launchpad sale model and the Launchpools escrow model.
Reduce startup costs. Sponsors can test investor interest before committing to the legal and administrative costs of forming a fund or company.
Improve compliance. The escrow period gives sponsors time to design a deal that is compliant for the investors they are attracting, and provide time and incentives for investors to go through a qualification process.
Reduce costs to investors by allowing them to hold interest-earning and appreciating assets as stakes. Reduce taxes by allowing them to stake assets without selling and creating a taxable event. Most importantly, reduce risk by allowing them to un-stake at any time.
Globalize by giving remote sponsors and investors a way to build trust
Add incentives for filling up a deal quickly. The stakes reserve a place in line. As deals gain momentum, the early places in line gain value. We can enhance that value by rewarding early stakers.
This process adds some DeFi magic to the features of a SPAC. Two features stand out as improvements over a SPAC.
The assets remain under control of the investor, in an escrow contract. They don’t become an investment until after commitment. This postpones organizing and compliance costs.
Investors earn their own interest and returns. If they want to earn returns from a liquidity pool or a loan pool, they can buy those pools and stake the interest-earning token.
We’re proposing to show deals at an early stage. Most deals at this stage will end up fading away, which is good and normal. We can remove the cost from that discovery process. Successful deals will get investor validation, and become stronger and stronger.
New use cases
We are exploring some variations on the Launchpools workflow.
Easy. Investors do not need to commit during the commit period. They have time to analyze the offer and unstake. At the end of the commit period, remaining stakes are automatically committed.
Launchpad. If investors stake and commit to buy the deal at the same time, we have a traditional launchpad.
SPAC. If investors support sponsors in a search for investment opportunities, we have a low-overhead SPAC. Launchpool incentives were inspired by SPACs. Note on current events: Launchpools are actually somewhere between a SPAC and Bill Ackman’s newly invented SPARC, described as “a better product, for investors, than a SPAC.” A SPAR gives you an option to be first in line for Ackman’s next deal, just as a launchpool gives you a position in line for a deal.
Venture capital. Launchpools can support VCs with a trustless capital call system. We are pulling to together a VC group to figure out where we can use this, and other DeFi innovations. Some ideas: We can give early stakers participation in GP shares (coop fund). We can make commitments be automatic for a selected VC (rolling fund). Investors often have narrowly targeted interests, and they might post to a sort of private SPAC that takes proposals from VCs that want to lead a deal in that category (like a search fund). Investors could use their stakes as pooled collateral to get a place in several categories.
We are ready to get tokens out to the community, under a compliant model where we never sell the tokens.
Get them by participating. We can offer tokens to project contributors. Launchpools will give tokens to investors that buy deals, and we’ll program it to give more tokens to early stakers.
Burn them to get into hot deals. We propose to reserve the right for tokenholders to jump into the line for 7% of an oversubscribed deal.
Security versus continuous improvement
We are big supporters of continuous improvement. In the early stages of product development, we should fix and modify our product, every day. This will result in a better product. It will also result in fewer outstanding bugs, because bugs are fixed quickly.
However, continuous improvement is dangerous. A rapidly changing product will have new bugs, and introduce opportunities to steal or lose stakes. Ideally, the stakes will be protected from that. The money should be held by a smart contract that is audited, immutable, and trustworthy.
That is why we decided to keep the money in an immutable, audited contract that we call the StakeVault. StakeVault makes sure that we do not send stakes to the wrong person, or lose stakes. We gave the StakeVault the minimum logic required to accept stakes, send back stakes to the original staker, and only deliver them to the sponsor after specific approvals.
If something goes wrong with a pool, we can shut it down and send stakes back to their owners. And, pools will always have a date when they expire and send back stakes.
The remaining Launchpools logic does not hold money. We can change it and improve it.
Contact us on the Launchpools discord channel to get involved as a project contributor, investor, or deal sponsor.
Maxos builds DeFi for the real world. We bring together experts to figure out how to rebuild specific real-world financial services. Then we create, validate, and launch.