The Misalignment of Launchpad Incentives: Can Traders Escape the Vicious Cycle of the "Suicide Squad"?

Analyzing the dilemmas of Launchpad, creators, and traders from the perspective of incentive mechanisms reveals the harsh realities of the current crypto market. This article is derived from a piece written by @0xuberM, organized, compiled, and written by Foresight News. (Previous summary: With $400 + 3 days, I built a Web3 Launchpad) (Background supplement: ai16z's major update! ElizaOS V2, Launchpad “auto.fun” will go live, the founder laughs: Everyone will come to copy) Editor's note: This article examines the survival status of Launchpad, creators, and traders from the perspective of incentive mechanisms and points out that Launchpad focuses on volume, creators lack price support motivation, and traders have become “suicide squads,” forming a vicious cycle. Currently, only VCs and insiders have the motivation to drive up token prices, while ordinary traders are in distress. The article objectively presents the market situation; although it does not provide solutions, it offers an important perspective for understanding the operational logic of the crypto market. The following is the translated content: Incentive Mechanism The incentive mechanism is the core driving force of the world's operation. If you want someone to do something, just create an environment or scenario that allows them to gain rewards upon completing that task - this is a basic human principle. However, currently, on-chain tokens (especially those issued through Launchpad) lack the incentive mechanisms to drive price increases, which is an issue that needs immediate attention. The Operating Logic of Launchpad Yesterday, I tweeted something related in a sarcastic tone, and I would like to emphasize one point seriously: Token issuance platforms (Launchpad) have no motivation to raise the price of any specific token unless under certain special circumstances (which we will discuss later). The operational model of these platforms is essentially similar to that of casinos; for them, the only important indicator is “volume.” This is precisely why “permissionless issuance” and “bonding curves” (a mechanism that adjusts the relationship between asset supply and demand and price through algorithms) have become mainstream today - just like casinos continually launch lottery games, platforms also hope to provide as many speculative opportunities as possible, attracting more participants by allowing a few to “hit the jackpot.” So, how do token issuance platforms profit? It's actually quite simple: they can earn profits just by “existing.” On one hand, they provide ordinary people with permissionless token issuance channels; on the other hand, they offer speculative tools to investors through bonding curves. If they want to further expand their scale, platforms must compete for market share, and there are two common methods: Launching marketing campaigns: either spreading negative news about competitors (FUD) or emphasizing their own “differentiation,” even if their actual business is not fundamentally different from their competitors; Pushing up the prices of certain tokens: this is seen as the “best marketing method,” which can quickly attract user attention. I have observed a pattern: token issuance platforms and their teams will only compete vigorously for market share under two circumstances: first, when market share is taken away by competitors and needs to be reclaimed; second, when they deliberately want to suppress competitors and damage their reputation. Interestingly, whenever these two situations occur, there are always a few tokens on the platform that start to rise in price, even reaching higher valuations. They will first slow down the pace of large-scale token issuance, using “green K-lines” (symbolizing price increases) and marketing strategies to attract users to get on board; once users firmly believe that “money can be made here,” they will restart large-scale token deployment, significantly increasing volume - all of this is not criticism, just objective observation. To be honest, if I were a team member of a token issuance platform, I might adopt the same strategy. After all, the essence of a platform is a commercial entity, and the core goal of business is to profit as much as possible. The Behavioral Tendencies of Creators Similar to token issuance platforms, creators also have no motivation to raise the price of the tokens they issue. Currently, the revenue mechanism for creators is highly similar to the “permissionless issuance” model - the benefits for creators are as direct as they are for “frequent token issuers.” You might often hear creators say: “Look, I can earn this much money just by turning on the camera!” They attract more creators to join in this way, and more creators mean more token issuances, leading to more speculative opportunities. For creators, the profit logic is equally simple: just “exist” - turn on the camera, issue a token for speculation, and you can earn profits. Of course, if you want to make a lot of money, you do need to persist over the long term, but even so, there’s no guarantee of long-term success. After all, in the realm of crypto assets, user attention is fleeting, and long-term success is inherently filled with uncertainty. In such an environment, creators easily develop the mindset of “making a quick buck and leaving,” which is actually an inevitable result of the incentive mechanism. Traders: The “Trenches” and “Suicide Squads” of the Crypto Market So what about us traders? What is our incentive mechanism? What drives us to do what? The answer is harsh: we are incentivized to “fight each other.” After all, the “trenches” of the crypto market were dug by us (never forget this point). The meanings of the terms “trenches” and “suicide squads” are also very clear - ordinary traders like you and me are essentially “sacrificial cannon fodder,” soldiers standing at the front line of the market. Since no party has the motivation to keep the price of any type of asset rising long-term, we can only participate in this “game” in a more brutal way. There is no “player vs. environment (PVE)” here, only competition and mutual harvesting. Because of the limited space for token price increases, we have to adopt some aggressive means to enhance the probability of profit, such as locking in 10% of a certain token's supply in multiple wallets (i.e., “multi-wallet pre-staking”). In this market, the “timing of entry” is crucial - you must be early enough, otherwise, you may become someone else's “exit liquidity” and be ruthlessly harvested. You might ask: How can traders make a profit? The answer is: we have to put in more effort than others. Unlike token issuance platforms and creators who can “profit easily,” we need to constantly improve our skills, accumulate industry influence, cultivate judgment, expand our network, and keep up with information from multiple fields - only by doing these can we have the opportunity to make money in the market. Even when encountering tokens that rise sharply in the short term (like some recent CCM tokens), we won't have the motivation to hold them long-term because new “speculative opportunities” (like new lotteries) will quickly emerge. The “machine” of this market must continuously produce “lotteries” to keep running. And with every new opportunity that arises, it is accompanied by the losses of numerous traders, just like the trenches in reality piled high with the bodies of the sacrificed. For example: for every account that profits through the Axiom platform, there are hundreds of accounts whose investment portfolios are wiped out. It may sound like I'm complaining, but I myself am a participant in this “game,” so to put it positively, I might be considered a “hypocrite.” Currently, I have three thoughts: Should I “adapt” to the current market rules? Should I completely withdraw from this game? (Unfortunately, I am not someone who gives up easily) Or should I explore other areas? (Actually, I have already been doing this) Thoughts on Market Cycles and Solutions Will this “game” continue forever? I don't think so. History has repeatedly proven that this vicious cycle will eventually end in one way: winners continue to profit while losers are constantly eliminated; until at some point, the market has no new “losers,” the former winners will become the new losers. And when everyone is exhausted and chooses to exit, those tokens will…