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Token Launch FAQ: Market Makers & Exchanges
Recorded: June 20, 2025 Duration: 0:55:49Space Recording
Short Summary
In a recent discussion, experts delved into the critical role of market makers and exchanges in the success of token launches, highlighting the importance of strategic partnerships and well-structured deals. They emphasized that without proper market-making strategies, tokens face significant volatility and potential failure, underscoring the need for founders to prioritize liquidity and investor trust during their launches.
Full Transcription
Thank you. Thank you. Eric, how we doing man?
Octopus, good to see you.
What do you say we start in another two minutes or so?
I'm just going to bring my other account into this
you if you're talking I have not heard you weird okay let me see if I can fix
audio better now
I can mop off and help again.
Any better?
Emojis?
Yes or no?
Can you hear me? Okay, weird.
Yeah, it's a little bit of a lag on my end, but otherwise I think it should be good.
Well, we'll see if we can get through without it rugging. Thank you. Thank you. All right. Eric is a speaker now. Should be good. Eric, if you can hear me all right, let me know and then we can start it off. Yes, sir. Loud and clear.
Awesome, man. Well, thank you for getting up early in central daylight time and making this happen.
I'm really excited about this one. I think in our last space of all of the things we talked about,
the bits that you had to say on market makers and
exchanges were just so dense. And I was like, we have to do an entire space on this because
I feel like market makers and exchanges are the wild west that still resides in crypto where
people don't really know what goes on. And it's such a murky area because
it's centralized, it's off-chain. And at the same time, it's so impactful for token launches,
like getting the right deals with market makers or the right exchange listings are and should be
at the top of the priority list for founders as they're going into
these. So super excited to talk to you today about this and, um, yeah, really, really glad
that we can make this happen. Um, so maybe we could, uh, yeah, maybe we could start it off
like with a quick introduction. I know you introduced yourself last time, but that might
be helpful for our audience this time as well.
Hey guys, my name is Eric Weissenden. I have a background in economic philosophy. I've worked in casinos for a long time, work now with Alpha Growth, heading up DeFi operations,
doing some tokenomics stuff, worked on tokenomics consulting for about four years.
Here's a joint crypto after getting banned from Card County and just trying to play a
fun game theory game and turn the ethos that most of us love, which more of us love, into
a business-minded reality so that things can truly be built sustainably, not just as a
science for projects.
For sure.
Build for the next century, not just the next cycle.
It's absolutely in line with our ethos at Token Dynamics. And it's one of the reasons that I've enjoyed working with you so much on the various projects that we've been a part of.
little bit more about the supply side of tokenomics, where mostly token dynamics were focused on the
generating demand for a token to be used in the protocol, there are still a lot of ways that
tokens can fail that have to do with botching supply side factors at launch. And so I wanted
to go into this today with that framing and first start off with one of the most precarious and unknown entities in
crypto, which are market makers. So I'll pass it over to you, Eric. What are market makers
and how do they do what they do? Yeah, it's a great question. A lot of people
get scared to ask it because at the baseline,
it seems so simple. But because of that, we have so many people with a really bad understanding
of market makers, just thinking that they're rogue investors that fully control the price.
Fundamentally, market makers are people who make the markets, meaning that they fill up order books
with both buy side orders and sell side orders.
If you want to go trade a token, you have to have a counterparty to trade against.
Every project, every team, every asset wants you to be able to buy their asset,
needs you to be able to sell their asset,
rather than setting the price all the way to zero without getting anything back from it.
And so they need these markets to be made.
And it does not happen at scale organically.
Therefore, you hire one of these parties, one of these market makers,
to go and facilitate trade volume.
Think of a DEX being an AMM.
That means automated market maker.
What's it doing?
It is just facilitating buy side pressure and sell side pressure.
It's being a counterparty.
A lot there. And I love that you mentioned also automated market makers as like the evolution of this.
And I'll call it out for you that you've created an automated market maker that lives in the Cosmos ecosystem.
And it's a novel one, Astro Vault. And so I think that's a cool, like, it's kind of a cool,
I don't know, like, fun fact that you've got experience not just brokering deals with
market makers, like centralized entities, but like actually creating a better version of what
they do on chain. So for anyone in the audience listening, like Eric has this depth of knowledge
around the subject. So I wanted to call that out. But you mentioned that people are not going to
market make organically. What happens if there is no market making deal or like someone doesn't
have a, you know, a deep liquidity strategy on an exchange? Yeah. Well, one, if you don't have a, you know, a deep liquidity strategy on an exchange?
Yeah. Well, one, if you don't have a deep liquidity strategy on an exchange, you can't
even get on the exchange. The very first question you're asked on a Coinbase application is who's
your market maker? But if you were for some reason to be on an exchange and not just immediately
delisted for not having good market making, what the experience would look like is as you go and try to, you know, hey, I want to, you know, enter into this token for $10,000. And you
just move the price by 3x. And so now they're, you know, $50 million token is now worth $150
million. And did your $10,000 really create $100 million worth of value?
Well, it sure looks like it until somebody goes in and they sell it.
And as they sell it, they move the price way too far.
So you end up with massive, massive price impact and slippage,
which just tells everybody that the price can't be trusted.
In general, we should all trust prices less.
But the reason we've come to trust prices at all
is because there's decent market making going on in centralized exchanges. Furthermore, if you make that one buy order, now there's nothing left on
the sell order book. So now if somebody else wants to come in with $10,000 and buy the token,
there's literally nothing available. There's nothing to buy. And so that's going to be the
case until somebody comes back in and fills it up with sell orders.
And that process of filling up the order book is called market making.
So, I mean, with that some level of volatility, somebody is going to do it.
But are they going to do it consistently?
Are they going to do it constantly?
Are they going to do it within spreads that are somewhat reasonable to make people feel comfortable buying and selling an asset?
Most likely not.
And so to get that industrial grade service,
you usually need to hire an industry. Wow. And so you'd have a ton of volatility without a market maker. And then with the market maker, you have these, you know,
synthetic, synthetic buy orders or like it's, I don't know what to call it exactly.
Buy and sell orders that are, I've always called it padding the order book.
But how do they actually do that?
What are they doing there when they're making a market?
They're just creating plus or minus 2% depth or how do they usually structure it?
or minus 2% depth, or how do they usually structure it?
Yes.
Yes.
So they are running high-frequency trading algorithms,
usually more than one, where they are automatically,
so like they have a whole bunch of scripts and a whole bunch of bots
and wallets that just hold a bunch of supply on either side of a liquidity pool.
And they have a whole bunch of bots that's saying where their order should be filled up
so that they've got, you know, 8, 9 nine ten different orders up to a two percent slippage mark um
saying eight nine ten percent uh orders up to two percent on the other side and then they've got
more beyond two percent slippage and that slippage tolerance is actually something part of the
contract that you sign with them uh as like how tight to make the spread. But then they're also
factoring in, you know, trading like technical analysis, Q analysis, and other order books. So
you'll notice if you like go to Binance or you go to especially even like one of the smaller
centralized exchanges, and you go and you put a trade like a buy order, like say three from the
top and buy orders, a lot of times a buy order under you
is just going to move in front of you. And like, if you're a new trader, that might scare you be
like, Oh crap. Now he's in front of me. Like I just wanted to buy 5,000 tokens. Now that person's
trying to buy a hundred thousand tokens before me that this price is never going to get to my order.
So then you move your price ahead of them. And then that, that order disappears and it moves
right in front of you again. Like right now you're competing against their algorithm. They want you to jump in front of
them, but also whatever their algorithm set to do, you placing your buy order is affecting their
trading algorithm. And so it gets rid of a buy order and replaces it. They're constantly moving
their buy orders. Just, hey, look at, you know, DYDX, look at any of these purpose markets and
you'll see the orders constantly disappearing and reappearing.
And these are the market maker bots, basically.
And, I mean, anybody can run them, but you're going to want a fee-free account.
Usually it pays to be part of one of these industries.
But, yeah.
Yeah, I've always wondered what exactly is going on when I'm placing orders on centralized exchanges like that.
And there was a time many years ago where that was my job to manipulate the order books to get exit liquidity and create dampened sell pressure, basically.
That was one of my earliest roles in crypto.
But I didn't get the level of experience and depth seeing what you've seen in negotiating these deals with market makers.
And so I'm curious, like, what makes them profitable?
Like, why do they do this?
If there's not an organic, you know, reason to market make, like, What makes a market maker market make? And maybe
we can talk about some of the different models that they use that you've brokered deals with.
I'm sorry, you cut out a little bit there?
Just asking, what are market makers incentives? And how do they typically structure deals? Like, what have you
seen? That is an awesome question. So to get to their incentives, let's go back to what it looks
like if there are no market makers, you get this crazy volatility through price action, right?
Well, the tighter the spread gets, the less crazy volatility, but there still is volatility.
the less crazy volatility, but there still is volatility. And whoever's making the markets,
for the most part, aside from crazy single directional volatility, is profiting from
the volatility. If you go when you buy a token, you move the price up one and a half percent.
If somebody then sells a token, they move the price down one and a half percent.
That price difference is going to the market maker because you're buying it separate from where
the spread previously had been. So it is already a profitable business for them in normal market
conditions on tokens that don't go to zero, which is not all tokens. But that is why to be interested
in market making in the first place from their perspective.
However, why should they prioritize market making your liquidity pool and your token that they don't care about compared to Bitcoin and ETH and things with high organic volume where they can make definitively high returns?
That is what they have to be paid for.
So reason that they will focus on your new project, your crappy token that you're just launching with no support for is you have to pay them and ways that they can structure payments. One simply would be a retainer.
You pay them $5,000 for the first three pools and then an extra, you know, $2,000 per pool on top of
that, something like that. And you pay them that per month. Plus, they also get a percentage of
all the fees that are made
from actually performing the market making. So basically, you're renting their maintenance
and their infrastructure. They get the monthly check. They also get the monthly check. They also
get part of the fees from their success. By the way, you also have to provide all of the liquidity
for them to provide their services.
So in this model, you're literally paying them and you're giving them a giant supply of both your tokens and usually like USDT to help make this market. And then they're just using their
bots and their infrastructure. That's the most straightforward. It's the least option chosen
out of the primary two. The other one is call option. So
market makers realize that this is profitable enough that they really want to get the deal.
One of the blockers was like, nobody really wants to pay them thousands of dollars a month so that
they can make thousands more per month operating their business, if not more. And so they're like,
you know what, like, it's profitable enough if we just get the clients. So we're fine to take nothing in retainer, just give us more upside.
Like you guys want us to invest anyways, let us invest with our services.
Or even sometimes let us cut an initial check just to make sure we get this deal.
But now we want upside, we want to share in your success.
They took part in so many, you know, making markets for Ethereum and Litecoin and so many of these tokens that ended up doing
like 1,000Xs. And they didn't really earn a ton of the upside of those successes,
just the kind of stable fees. And so they want success share, so they figure out strike prices
and call options where they say, how about this? We're actually already pretty rich.
You don't even need to give us supply. You don't even need to pay us monthly.
You just run your project. We'll sell you a vacation. We'll handle all of this.
We get to keep almost all the fees, but we'll even cut you in on some of the fees that we make.
However, in a year's time, when we're done with this, we want to be able to have a collapse on your token.
We want to make sure we can get a cut to.
And what that looks like is if your token does do 100x, they get to buy it at basically the initial price and do whatever they want with it, which is oftentimes dumping it very heavily.
It seems like a total minefield.
There are so many ways that founders can get taken advantage of in this process.
What are the ways that you typically see market making deals going wrong or being structured predatorily by the market makers?
Or just founders not knowing exactly what to negotiate on their own behalf or their token's behalf.
What ways do you see this go wrong frequently?
Yeah, frequently, way too low strike prices on call options.
People oftentimes don't know what industry standard is.
With the call option model, which most people choose,
I'm very, very cognizant of
worrying about the bottom 10% and the top 10% of token success.
This is where things go wrong.
If you launch your token and for whatever reason, somebody dumps the token very early
on, which by the way, the market makers are incentivized to nuke your token in the first
week if they have a call option.
Something else we could get into, but scary.
Something that I don't like.
If the token goes really bad and their primary success is based on reaching this call option that the token price does really well.
If their strike price is at $0.40 and your token is trading at $0.10, then it's very unlikely for your token to go to
80 plus cents, which is what they want to make a bunch of money on it. And so why should they
focus a bunch of time, effort, and most importantly, their own liquidity to make your market as a
client? Because you're not paying them. They're not getting a whole bunch in fees. There is high
opportunity costs. And so even though you signed them as a client, you signed up to,
yeah, to be their client and are supposed to be working with their business, they don't care about
you. And so they completely stop your services and you might even get delisted from exchanges.
And when you call them out on it, your token's performing so poorly that you have no position
to argue from. You anchored them, you told them all the reasons why your project's so valuable and why you're going to be the next Ethereum or whatever it is. And you flopped, your valuation
is trash. And they're going to say, well, if enough people cared, we wouldn't be in this
position. Come back to me when I can care, or we can renegotiate and you can pay us a whole bunch
of money right now. So now you're up Schitt's Creek where your tokens are performing worse,
your investors are calling you pissed off, and you have no basic market making, so people can't buy in.
And that leads to even further and further sell-offs because you negotiated market making deals for two months and you didn't cover this downward 10%.
Upward 10%, the good problem to have is still a massive, massive problem.
And that is where your token does do 100x, 1000x, and they get to get in at the initial price one year later at a very significant tranche of tokens.
And that is, you know, from an emissions perspective, everything you're trying to avoid.
Massive unlocks for cheap cost basis tokens.
And they get all the flexibility in that. And so there are countless examples of primary prominent market makers just collecting those tokens and market dumping the price down 50, 60%.
I'm sure you guys have seen a couple of things like that here in the last week or two.
Most of them tied to market makers.
Yeah, and I mean, there's so many identifiable patterns in charts that you can attribute to market makers. Like you were describing, it's in their interest to nuke the price the first week.
That, I believe, is called the winter mute pattern.
And the first time I saw that articulated, I thought it was hilarious because I was like, yeah, of course, that's what market makers are incentivized to do.
do um i think in the future it'd be really fun to uh play like like have flash cards of charts come
up on the screen and have you and octopus and paki and some of the other uh people that are in this
in the audience here just like identifying like oh that was an investor unlock like that was the
20 of the supply just got unlocked to the v, you know, um, because you can see these things
and they're, they're like not only predictable, but like repeatedly identifiable. Um, and, uh,
so you end up with the incentives dictating the outcomes who would have figured. Um, and, uh,
but yeah, that's what, you know, that's the kind of thing that you help people identify or have helped people identify in negotiating on their behalf.
So there are these few models that you identified that you mentioned.
There's the retainer model, which is really capitally intense, kind of died off earlier.
And now there is the call option model.
I think you mentioned a couple of other models when we've talked about this in
the past. There's the hybrid approach of those two and then maybe some others.
Yeah, hybrid approach is a lot more common these days where it's a really low retainer, but
there's still some strike prices. So they get guaranteed revenue, but still some upside.
strike prices. So they get guaranteed revenue, but still have some upside. Honestly, it's probably
a little bit more fair, a little bit more safe. I really like European auctions. I need to
understand how the contracts work to make sure you don't get a little bit gouged. But in essence,
if you think of a service contract, a lot of times people are going to want to see KPIs get met before they give you additional funds to do your work.
Like, hey, can we structure this? I want to make sure that you're succeeding.
So if you're marketing, let's get these certain KPIs.
And once you do, then we'll have this budget for you, and then you can do this, that, and the other.
European Options is basically that for token price.
basically that for token price. It's honestly kind of like a LBP, like a liquidity bonding pool
for only like single side market making. You start out with only sell side orders.
So you would just give tokens to this market maker and they would fill up sell side orders.
And then as the price goes up through those sell side orders, you replace the sell orders with buy
orders. And once it gets up so high, you sell-side orders, you replace the sell orders with buy orders.
And once it gets up so high, you unlock another giant tranche of tokens for sell-side orders that otherwise they don't have access to.
And then, you know, it fills up the market.
So it's honestly very similar to an automated market maker.
But now there's no strike price.
There's no, there's no strike price.
There's no monthly retainer.
And it's also super easy for them to run and operate. So all they get is part of the trading fees and a little bit of the slippage
based on returns. But also if the token just flops at launch, then absolutely nothing happens
with them. If the token is massively successful, then you are basically able to DCA out along the
way while supporting the market. It is not nearly good enough, not high frequency trader enough to have this be like a primary route. But having this be something that like, helps back the upside
of things like call options. So you can negotiate aggressively against against some of those sides
with a call option market maker. I've seen go really well. I'm hoping that more high frequency
trading strategies come out. Right now there are more, but they're tailored towards ecosystems that are Lindy.
Things like sex decks, market making strategies,
where you're doing delta neutral on-chain strategies,
tying into on-chain perps.
The smarter market makers are getting into this.
It's scary for a lot of them.
So many just don't touch it.
This usually is not available for fully new ecosystems though,
or tokens.
Man, there's so much here.
It's an entire new world, I think, for a lot of founders and crypto participants.
And the complexity makes me wonder,
to what degree are these agreements with market makers standardizable?
Is there a template that you would use?
Or is it more like this needs to be configured
and there are many different factors based on the token, the price,
and the vesting schedules and things like that?
How boilerplate are these agreements usually?
They have boilerplate agreements.
Like every market maker you go to will have like a standardized pitch deck
that's updated to the year, sometimes to the quarter.
They stay pretty on top of that because they're sending it out 100 times a day.
Then they will come to you with like a stock agreement.
A lot of people do sign this.
It's a little bit like car sales.
There's a lot of wiggle room built into what stock.
However, you kind of have to pick and choose
where you wanna wiggle.
And that's where I say that things
are a little bit less stock.
Founders should know their project a little bit better.
Unfortunately, founders don't understand market makers.
So working with somebody like you and Token Dynamics
to figure out like what flexibility as a founder you need, where you should push back on their deals.
Maybe you're okay with how the strike price is configured, but you're not okay with deep spread
because you're launching something with high NAV. And so you don't need a very wide range of spread.
You need really tight liquidity. Or maybe you're like, hey, I'm fine with a bit more volatility.
I don't want a three-day T-WOP of you nuking my price to establish the price.
Let's make a different formula for factoring your guys' strike prices.
There are different ways that we could push back.
It's just kind of knowing where or why.
And that's where people like you and I come in.
Yeah, man.
I appreciate that shout. And that's one of the things and I come in. Yeah, man. I appreciate that shout.
And that's one of the things that we like to do for founders.
It's all in the realm of aligning incentives.
You have to align the incentives of your users with each other and design the protocol well.
You've got to align incentives of investors by accruing value to the token.
You've got to align incentives of the market makers and the exchanges,
which we'll talk about, so that you don't have three-day pumps right on Token Genesis and down
only after that. It's interesting you said the three-day TWOP. I didn't realize that that was
exactly... I knew, I intuited that was a function of market makers, but I had been trading all of the Mlady airdrops.
I was like, you know, I notice every time there's a new token that gets listed on exchanges, it's three days is the optimal point to sell it.
And so I guess that's another one of those things that's just like built into the contracts.
one of those things that's just like built into the contracts. And of course, like that,
that makes sense that those would be responsible for that price action.
So what, so we've talked about like ways market makers are incentivized and how they can,
how these deals can go wrong.
How do you think about picking a market maker?
And without going too far into the weeds, how do you identify a good market maker or a good market making deal?
Before we move on to maybe exchanges?
It's a great question. So a good deal, I think having a pretty robust knowledge about how deals are struck in general, what the going rate is for strike prices, for two-up configuration,
for spreads and uptime. Most primary market makers
have very similar performance fundamentally.
So if the performance is nearly equal,
then understanding the differences in the contracts
and the flexibility around what you want.
Now, the caveat of like,
how do you find a different one?
For me is primarily a good one.
It has to do with what type of project you're working with and
what their needs are um like there's honestly only one that i really like for sex deck strategies
even though there are four that try it um and that's from you know working with all four of
them and seeing where they fail seeing where they mess up, seeing what accidental rugs, they might say,
they allow to happen.
That really was entirely their fault for misunderstanding stuff.
Watching them lose money and get mad
because they don't understand things in DeFi,
that's always a weird one.
So if it's SextX, I would go with the only one
that's good at it currently.
If it's a new big platform,
then depending on if you're a new stage,
then it might be whoever will cut the biggest venture check.
If you're trying to get 100K instead of 50K from them,
knowing that the market-making deal
is pretty stock behind it.
Another thing is if you're already past a single round or so,
working with your current investors
to figure out what other primary assets
they hold and who are the market makers of those tokens. If you can get the market makers aligned
on multiple deals for similar parties, don't think of it as much as you can get a discount.
Think of it more as you can get better services by having somewhat shared liquidity and comms
and just overall establishing relationships.
You want to work with people that you wouldn't mind hugging, you know?
So yeah, those are some of the factors.
Yeah, you're hitting on this point that I've noticed that makes crypto kind of a unique industry,
which is that this are, and this actually
plays into protocol design a lot and economic security, there are people who will hold different
roles that are naturally sometimes complimentary, sometimes adversarial, you know, ranging between
those two.
But oftentimes, like market makers will be making money on the market making deal.
They'll be making money on the trading fees, on the exchange.
Sometimes an exchange will market make.
There are lots of weird nested relationships there.
And so sometimes if you can strike deals for multiple market making, multiple tokens, that can be a way to push down costs and get better deals in general. So I think that makes
a good segue into exchanges. I wanted to cover this because market makers and exchanges have
one of those kind of maybe symbiotic relationships from their perspective, maybe parasitic from
users' perspectives or extractive.
But we've talked about how market makers make money.
How do exchanges make money?
And maybe we can start from there.
Great question.
Exchanges usually make a small fee on every trade
minus fee-free accounts from market makers. Many now don't actually add
full fee-free. They'll have just super, super tiny fee where you have to kind of like pay a
subscription for it. But fundamentally, they want volume even with the volumes fee list just because
it makes them look better. All their metrics are based on volume. So as much retail or small
market maker volume as possible, they get tons and tons of micro fees. If you think
of the guy that hacked into debit cards and had all of the fractions of a penny round to him,
and he made tens of millions of dollars in a week and got arrested,
little amounts add up a lot over time. Then they charge just crazy fees to retail directly.
If you think of Coinbase, if you're not using Coinbase Pro,
charging like a 1.5% spread,
whether you're buying or selling Bitcoin at whatever the price is,
or even adding a flat fee on top.
So you can charge the highest fee of the dumbest money,
and that goes directly to whatever is retail facing.
And then they also charge decently high fees for integrations.
It costs them usually about nothing to integrate.
They charge whatever they can because they can.
Binance charges, honestly, they usually just say no.
I mean, sometimes they charge like massive percents of a TGE if they're willing to.
If they do charge, it's oftentimes like several million dollars.
I think OKEx pre-hack was two
million um kucoin was a million or like it these prices are high i think gate got up to like 140
000 and they suck um maxe like 90 or 120k and these are like the bottom of tier exchanges
so in general it's uh it's not good the the prices suck they're very expensive um one thing to note
if you're a project looking to get like hey for the best exchange you possibly can and all of the
ones lower it will follow if you just get binance you will also get everything else because it'll
be so profitable to run arbitrage strategies from binance that the market makers will just show up
that the the venues will just show up,
that the venues will just show up. I've talked to several teams. I've worked with teams that have like, oh, hey, we just got Binance. We didn't know how we got on everything else. It's like,
yeah, there you go. Meanwhile, if you buy the bottom one, you're like, oh, we'll save up to
then get the next one. You're going to have to pay the full listing fee every step up the ladder.
So it's worth noting but um yeah tons
and tons of fees yeah that's awesome um and yeah so yeah keep going go for it i don't want to cut
you off uh yeah sorry made uh tons and tons of fees working closely with these market makers
and then on top of that um they are custodying all of these tokens.
So if there are ways to earn money with tokens that they are holding, they can.
Coinbase enabled Coinbase staking, it's like, hey, I can stake my, you know,
Atom to get 8% while they're earning 15%.
And so it's like, oh, well, they get like half the staking rewards.
That's one way to look at it.
The other way is they were already getting the 15%. And then you opted in then they cut you 8 cut so uh once they figured out how to earn
money based on um hypothecating their allocations uh they started making way more money especially
on proof of stake chains and on centralized exchanges are some of the largest stakers
as we get into things like restaking they're cutting out decently similar deals. But fundamentally, yes, there is cold storage
components, but centralized exchanges are banks, they are fractional reserves,
and they are trying to earn money off of the money that's being held.
Yeah, and that's another interesting point there that they're using these tokens that are deposited.
So there's a few ways they're getting paid, right?
They're getting paid for listing fees.
Then they're making the lion's share their money on the fees, the trading fees.
And they're also earning whatever, you know, the spread between users' yield and their own that they're getting with these tokens.
and their own that they're getting with these tokens.
And if they're not doing that, they're just purely diluting users
by not paying them out these yields.
And so this is an interesting case where you have to consider
the supply-side factors of your tokenomics
and how those might impact the protocol's actual operations.
If you're giving away 15% inflation through participation incentives
or something in your protocol, and you have some scheduled emission curve, you have to
think about who's actually getting those tokens and whether they're incentivized to hold or
just dump in one fell swoop. So maybe interesting side note there. But so what is, you mentioned earlier that you need a market maker to get listed on an exchange.
That's the first question they ask you.
What else are they going to ask?
Yeah, they're going to ask for full tokenomics for who your investors are um they're gonna do
basic type of vetting um it's embarrassing like they want their users to make money to keep coming
back same with like a launchpad um especially if you try to use a centralized exchange launchpad
their terms are absolutely wild like you'll probably never see a dollar from what's raised
they use basically all the money to make sure that their users make money and it's just you just get the marketing out of it which is uh interesting um yeah another thing to note um
they want to make sure that you're legit that you have money behind you that you're going to lead to
high amounts of volume which give which is where they make their money and that you're not going
to hurt their reputation centralized exchanges run everything based on reputation. Why does Binance cost more
than Gate? Because you hear Gate and you're like, oh, well, that's a sketchy exchange. I'm not sure
if I want to work with them. When you're Binance, it's like, oh man, I'll do anything to get listed
there. And the reason is they get high volume. The tokens that launch there have a good price.
The reason they have a good price is market makers buy in out of their own pocket so that they can
trade current cash for cash flow, which they're able to make from their services. And it's all prices market makers buy in out of their own pocket so that they can you know trade uh current
cash for cash flow which they're able to make from their services and it's all based on their
reputation so um the the vetting process is decently detailed but they don't actually care
about you or your project and they'll honestly make that pretty well known um it's much more
like hey we're the golden goose you're the ones begging for the right
to use us and it's a shame that that's where we're at in crypto but it 100 is um so and um so you've
you kind of described like i had a couple questions for you around the cost and the general deal
structure of uh exchanges based based on their incentives.
I think the only thing that I'm still wondering about is like,
what is the, for the audience,
like what is the typical timeline around getting listed on an exchange?
If you have your ducks in a row,
which most people don't when they first attempt,
if your ducks in a row, you've got
your market maker lined up. You already have your investors. If there's a listing fee, which
usually is, you've got that lined up usually about two months. So it'll be two, three weeks
of back and forth trying to make things work. They'll ask for more and more documentations,
fill out more and more forms, just a whole bunch of Google Docs really, plus sending over materials that you guys have. They'll pass it on to one of their little agents
who will go through things like, eh, this looks industry standard enough. I might push back on
two random things just so it looks like I'm doing my job. Once you've answered all their questions,
they'll get a listing account manager on board. They're like, hey, yeah, we do think you're a
good fit. This is what your price is. You guys are comfortable paying with it okay we have our own like road map kind of like we don't want to
list too many tokens at one time so we're already doing i mean you know four tokens per week for
the next four weeks we've got a slot open in week like in the fifth week from now um i think that
would be a good fit and then they're gonna try to upsell you on some extra marketing type stuff uh take it don't take it um whatever works for you but you basically add to
their your itinerary and then you sit around on your thumbs and you wait because they do not let
you co-market until the launch goes live but anyone who pretends that they didn't know that
this exchange listing was coming if it's their best exchange listing um is almost always lying
to you,
with the exception that there are very, very few exceptions specifically for things like Binance or Coinbase,
where they've done things without Teams notice.
I know via CrossBridge got listed on Binance without knowing.
But usually that's not the case.
And that was one of my other questions, was like, you see Coinbase listing meme coins sometimes.
Like, what do you think the process is there?
Just out of curiosity, like this is something that came to mind during our space here.
Coinbase is very close to retail.
Retail is the dumbest money.
You could charge the greatest fees to the dumbest money.
Everybody wanted to buy Trump coin. Peep and
stuff was going incredibly popular. But if they ignored their responsibilities to projects and
market makers, their primary way of making money is charging fees to give people what they want.
If people wanted memes, then their job is to launch meme tokens. Fundamentally, it's the
market makers that are putting up collateral in these assets, whether it's collateral provided by the teams or by themselves. So the market makers
are at risk if a token goes to zero. The exchange isn't, only based on their reputation. And they
chose that their reputation would not be as hurt as it would be losing customers to go to other
exchanges that have the assets that they want to trade.
Trump especially. It's not surprising at all. It got tradable everywhere because it was insanely viral. And nobody in the industry is buying it at these $60 billion valuations. We all know that
that's retarded. But at the same time, I've got friends that have never talked to me about crypto
like, hey, do you see Trump coin? Do you think this is going to be the new money?
Is this going to replace the dollar?
I'm like,
you guys are idiots,
but go make Coinbase their,
go make Coinbase their money.
It'll fill up their venture arm and,
you know,
I'll get the trickle down from that.
yeah,
their job is to give clients what they want the same way any business is.
And,
that's,
that's the ROI process.
Yeah,
that's an, I mean, it's an interesting, uh, dive into their like incentives and how
they think, especially as, and I don't, I don't think I want to cover decks for decks
for strategy or decks only strategies today.
I think that could be, and will be a, uh, an interesting space in the future. But for tokens that generate demand for the actual token,
exchanges will list them. We saw that with Across on Binance, and we see that with Trump and all
the other meme coins on Coinbase. And I think that's a great signal and proof of concept that
you can do DEX first or DEX only strategies and expect that if
your token has enough demand from retail and from users through demand side tokenomics,
you can expect some exchanges to list it. So that was just a curiosity of mine.
Thanks for humoring me on that. So starting to wrap up here, we talked about
market makers and exchanges, market making deals gone wrong. How have you seen exchange listings
or deals gone wrong? If you've seen that, whether public tokens or anything you've seen from from negotiating these deals over time
yeah all the all the different scenarios i described about like bottom 10 top top 10
performance like all of these are are uh examples i've like personally experienced as well as tried
to warn and protect people from um you know like for the bottom 10 percent like i was very heavily
involved in archways market
making deals i'm sure you guys are aware i i warned them specifically about this that they're
negotiating too hard and that they're anchoring too hard on on strike prices sure enough they
flopped out the gate because they launched the token before they had the centralized exchange
listing live um and the token flopped because there was hardly any place to sell it uh when they got an airdrop so they didn't supply a bunch of liquidity and the token flopped because there was hardly any place to sell it when they got an airdrop,
so they didn't supply a bunch of liquidity, and the token went from, you know, 20 cents,
they were trying to keep it at, down to, you know, 14, 13 cents pretty quickly, then down under 10
cents, and now it's like the market makers weren't going to get any money unless they got it over 40
cents, so they didn't care, and now with them not caring, they weren't providing the spread and the
services that they were hoping for, and with Archway's crumbling valuation and pissed off investors,
then it's not like they're trying to go up to these market makers and be like, hey, you're
supposed to do this and the other. And they're like, screw off. You tell me why to care. If
anything, because it's a call option model, they lost money on that deal. So they're already the
ones that are pissed at Archway. So you can't have both parties being angry at each other for bad service,
especially when one's the one literally holding the money.
So that's an example of the bottom 10% of not having the timeline
ironed out in a way that makes sense.
High performance, call options.
I mean, you guys have seen what's gone on with Mantra.
And that was literally a one-year uh strike option cliff and then just nuked uh from six dollars down to 80 cents by
one of the market makers uh which is very very difficult to recover from um then uh i think
man january 2022 if you go check the chart there in secret at some point uh though like one year
post-migration uh this is secret network by the way one year post-migration, this is Secret Network, by the way,
one year post-migration of their token,
like they had to promise deals to Binance
to be able to facilitate the migration
from the Enigma token to the Secret Network token.
And part of the way they did that
is they gave them an extra strike price.
And so then Binance hit their strike price
and actually like nuked the crap out of the chart
over like a two-day period,
like 50% or something of like $10 down to four you could you could see the chart there
but a lot of that is like binance themselves like actually selling which is uh kind of crazy um
so yeah i just the these strike prices happen you might see these crazy lines and charts
um or you can just see projects look completely dead with no spread and terrible servicing.
And either way, that is a sign of market making deals gone wrong. You don't want 50% downside ever in a day. You don't want inactivity because stagnation is death.
Yeah. And that's not even an exaggeration. The projects just uh they you know they go tokens go to zero and and founders
end up with no runway after a couple of years because they're they're out of um the money they
raised and their tokens are not uh at a price high enough to sustain this so they got to think about
how are we going to use our literal remaining raise to maybe spin out a new token or add new utility and revive this
with like a token rescue um you know defy op kind of thing like i know you do at alpha growth and
we've been doing it token dynamics and um and but you end up you end up seeing so many charts that
all look the same and it's this this initial spike and then asymptotic drop
or exponential drop to zero.
How do we fix that?
How do you fix that
with good market-making deals
and proper exchange listings?
Do you think this is a solvable problem?
It's a gameable problem.
Anytime you have
something that's publicly tradable,
every single party that deals
with it is going to try to extract more value
than they contribute
in the nature of capitalism.
And so in order to build something that's
long-term lasting, you need delayed
gratification and people to contribute more value
than they extract. And you can, through capitalism, convince people to provide more
value than they extract by convincing them that they'll extract more value at a later time and
play these kind of time games that you see with voter escrow, with staking rewards, stuff like
that. But all of this is just manipulation to have people contribute liquidity rather than extract
liquidity. But only, but like liquidity is basically like,
what do you call it? The musical chairs of crypto?
Yeah. Yeah. Yeah. We've got the chair ratio of like how many people are there waiting to exit?
And yeah, lots of, lots of metrics there. Yeah. I appreciate that you called out VE tokenomics too.
That's how I think of it is borrowing from the future. That's like,
that's why it works. It's just, it's just borrowing from, you know, the maybe the Ponzi
recipient down the line or the yield recipient down the line. It's a little, it's Ponzi-esque.
It's not quite a Ponzi, but it's, we're great for America so far, but at the same time,
it's worth great for America so far.
but at the same time,
like ways to fix this,
ways to fix this.
Yeah.
I was just going to say the Thanksgiving Turkey,
graph.
You've seen like the happiness level of,
of the Turkey and it's like a thousand days and it's just keeps going up and
it's great.
And then the last day it just goes to zero.
I think they call it the Thanksgiving Turkey effect.
That's hilarious. I love i love that um but yeah in general um even the low float high fdv like we talked about like retail's pissed
about it but at the same time a lot of those projects have done really well because then by
anchoring at that price they've been able to convince other money to come in at prices that
were inflated so you could sell a 50% OTC if
you've got a $6 billion valuation, and now you just raise a whole bunch of money in a $3 billion FDV
that you might have struggled to raise at a 40 mil. So then with the extra cash, now as the price
comes way back down, you can then have more firepower to support the price. The more you can
support the price to keep it lindy, the more you can borrow against price to keep it lending the more you could borrow against it and eventually turn these charts into available operational capital which is the eventual goal but
it takes so much work and time and effort to turn liquidity into operational capital rather than just
a perpetual expense um that most are never able to get there so um yeah i mean buy buy low sell high
find ways to convince other people to buy high from you.
Convince them that them buying high is them buying low
by doing things like the low float FDV, high FDV.
But then as people catch on to that game,
you need to come up with a new game.
So now people are coming in with raising more tokens
and then going into low float
and then buying the tokens,
the way buying the way up.
But even then you have to have a real,
real stranglehold on liquidity or it gets incredibly expensive.
Goal to grow customer base is by making people rich.
Making people rich is expensive.
Powerful words.
This has been so packed with alpha. It's just, there's so much and I want to, I want to, uh, yeah, there, there's so much that I still want to explore, but, um, I think we'll push that
to another space because we're coming to the top of the hour here. The, uh, the topics that I would
love to go into in the future are,X-only strategies and DEX liquidity,
and then also the potential for demand-side tokenomics to generate the kind of buying
pressure that you would need to do one of those alternative strategies that you mentioned,
like anchoring at a low price and maybe a high float, low FDV,
and pushing the price up through genuine use of the token in the protocol
or otherwise giving it value.
But I think for this time, we're probably coming to a close.
Appreciate all the audience for joining and listening to this and Eric for coming on.
Really appreciate you making the time for this and sharing the massive amount of value that you have
on the space today. And it looks on my end like you've been turned into a listener, but if you can still speak,
let me try to invite you back up here.
Maybe you can sign off
and tell people where to find you
and then we'll just close the space out.
Thanks, man.
I think Elon wrote me here at the end.
If you guys can hear me,
thank you to the audience.
Thank you, Nate.
Awesome space as always.
Happy to dive in further with this
and yeah, hope more people use token always. Happy to dive in further with this.
And yeah, hope more people use token dynamics going forward to get this stuff set instead of falling victim to systems they don't know exist.
Well said. Well said. Yeah, there's that. It's a minefield out there. And, you know, we love to help founders navigate these kinds of things.
So thank you for the shout for all the alpha. And I'm looking forward to talking with navigate these kinds of things. Thank you for the shout, for all the alpha,
and I'm looking forward to talking with you again soon, man.
All right, thank you guys.
Have a great Friday.
