- Crypto launchpools enable early-stage projects to crowdfund from investors, who in turn earn token rewards when they deposit crypto assets into a liquidity pool.
- Crypto projects benefit from launchpools as it helps accelerate token adoption and increase asset liquidity.
- Investors benefit from participating in launchpools because the vetting process undertaken by exchanges supporting these launchpools means that there is less risk of loss and fraud even as they participate in passive earning opportunities.
As the popularity of cryptocurrencies continues to grow, more and more innovative crypto projects will emerge. The one thing all these projects need–funding. Among the more popular fundraising models nowadays is a crypto launchpool.
What is a Crypto Launchpool?
A crypto launchpool is a type of fundraising platform that enables early-stage crypto projects to raise funds by inviting users to contribute or deposit their crypto to a “liquidity pool” in return for token rewards–otherwise called yield farming, just like how a bank savings account earns interest on deposits.
The rewards generated is calculated according to an annual percentage yield (APY) which is generally much higher than interest rates offered by banks, as well as the size of the user’s stake in the entire liquidity pool. In other words, the number of new tokens users earn is determined by the percentage of his stake in the entire pool.
It is a win-win arrangement – the crypto projects receive much-needed liquidity to support the development of their projects, while crypto holders can generate passive income when they stake their crypto in the pool.
Launchpools backed by centralized exchanges have emerged as a popular crowdfunding platform as these combine DeFi capabilities of staking and yield farming with the security and convenience offered by a centralized exchange in several ways:
- Safety from scams and rug pulls: While there are always risks in investing, the vetting and review process undertaken by exchanges that support these launchpools greatly reduce the risk of illegitimate project fraudsters running away with users’ money.
- Simple participation process for earning passive income: Users can buy and stake/deposit the token through the exchange in the same way as they would other tokens, as long as they have an account with that exchange.
Who can join a crypto launchpool?
Anyone who has an account with the exchange supporting the launchpool can join, as long as they have completed the KYC process (see below). In addition, users will need to hold a certain amount of tokens as each launchpool will have a minimum staking amount.
How long is the staking period?
Staking periods can vary from 7 days to 30 days. This means by staking in the launchpool, crypto holders will earn new tokens throughout the entire staking period.
Can users unstake and redeem their assets anytime, or will it be locked for a certain period?
Yes, users can unstake their tokens from the liquidity pool at any time, plus the new tokens they have farmed. However, users will maximize their earnings if they leave their stakes in the pool for the entire duration of the launchpool.
How are earnings calculated in a launchpool?
New tokens earned from launchpools are calculated hourly starting from the time of staking, and the number of tokens a crypto holder earns every day is directly proportional to the percentage of tokens they contribute to the pool.
Rewards are usually paid out daily or hourly into users’ spot wallets, and users can harvest or redeem the pending rewards at any time.
Can users trade the tokens they have earned?
Yes, the new tokens are available for trading so long as it has been listed on the exchange. For example, if the staking period is 7 days, users can redeem all their staked tokens and token rewards on day 8 to be traded like any other coin.
Can users participate in both a launchpool and a launchpad for the same crypto project?
Yes, in fact many users will take part in a launchpad to buy tokens at a low price and then stake these in a launchpool in order to farm more of those tokens.
What is a launchpool KYC and why do I need to do it?
Know Your Customer (KYC) is a form of identity verification that allows financial institutions to acknowledge the identity of their customers in an effort to counter money-laundering and other illegal financial transactions. The process typically requires users to provide identification documents, such as a passport or an ID card.
Cryptocurrency exchanges like Phemex encourage users to complete KYC in order to enjoy enhanced security, benefits and privileges on the platform such as spot trading with no fees for up to $1 million everyday or $5 million every month.
How is a Crypto Launchpool Different from a Launchpad?
Crypto launchpads and launchpools serve a similar purpose of fundraising but are distinct in terms of mechanism. While a launchpool invites users to earn passive income by depositing their crypto, a launchpad gives users the chance to invest in early crypto projects before they are listed publicly. In other words, a launchpad enables users to buy tokens on the cheap so that they can maximize their return on investment when they sell those tokens later on.
A launchpad ensures an equitable distribution of tokens by limiting the number of individual allocation, so that not only crypto whales or venture capitalists (VCs) but regular users have an opportunity to invest in a promising project at a low price–before it gets listed on exchanges and prices shoot up (which is often the case).
It also benefits the crypto projects because with a broader user base, coins are less vulnerable to pump and dump schemes by crypto whales. In a recent Phemex launchpad, for example, a total of 166,667 REVO coins were allocated for distribution, with a maximum of 333 REVO (20 USDT) individual allocation. This means each wallet is only eligible to purchase 333 tokens.
3 Steps To Earn Launchpool Crypto
There are usually on-going launchpools on various exchanges. For starters, users can participate in the Phemex launchpool for REVO. Here’s how to do it:
- Set up a trading account with Phemex.
- Stake the minimum amount. For this launchpool, users need only stake 0.01 REVO to participate.
- Claim rewards anytime, or at the end of the launchpool period (7 days).