2-3 months ago, a Defi presale would be 100 Ethereum (ETH) at the most. At that time, ETH was around $200. The sale lasted for a day or two, and the standard announcement was: “We are going to launch this project. We will launch it at this particular time. Buy it at Uniswap.” Fast forward to today, we are seeing this model transformed into Presale Dominance because of the Gas Wars. Previously, we saw 200-300 ETH raises, now we are in the time where projects like ROCKET raise 2500 ETH in 2 hours.
You might ask yourself – what is a Gas War? The gas war is mainly happening with projects where there is a lot of hype, and you need to send in your ETH to participate in the presale. Gas determines the speed of a transaction. The more gas you put in, the more likely you will get in before others, and that is why you would set a high gas fee. In some cases, we’ve seen 1 ETH used in gas fees to get in on a private sale. Unilayer raised $1.2M, and the first senders used over 1 ETH in gas fees just to be first in line.
During a presale, the project team shares their ETH address, and participants have to send their ETH to that address. It’s always on a first-come, first-serve basis. If the hard cap is 100 ETH and is filling fast, you might want to increase Ethereum gas fees (GWEI) when you send the amount that you are looking to invest. If your gas fees are lower than everyone else’s, your transaction will stay pending, and you may miss your chance to get into the presale. If that happens, your ETH will be refunded to you.
Presales are the Hotgate to Defi.
If you get through, that’s where you can make the most gains due to acquiring the coins at the lowest price. Keep in mind that if something is hot, it can quickly burn you. All of these projects are at their riskiest during the presale stage, as anonymous teams do most of the projects that are moonshots (as well as the rugs). You are giving them your money, and they can do whatever they like,including run away with it. Groups of projects are initially the biggest liquidity provider as they provide the initial Ethereum and initial tokens for people to trade on Uniswap. Rugging at the Uniswap stage is merely reversing the process – removing ETH and tokens. The token price will stay flat, but if the cost of the tokens goes up, the ETH inside the pool is also higher. So when you are pulling the Rug, you take more ETH.
Sometimes Rug pullers do their magic in the presale stage before your token hits Uniswap. Let’s say they raise 2000 ETH in a private sale, right after they send that same ETH through something often called a “mixer.” The ETH is now lost in the network, no one knows where it is, and scammers can cash it out without revealing their identity.
A good recent example was UniSnipe. Unisnipe had a professional website, social handles, and even an MVP. Yet they turned around and ran away with 1000 ETH. There is undoubtedly a correlation between anonymous teams and pulling the rug. If you come across a project that is anonymous and/or making grandiose promises, you might want to do some more due diligence just so your ETH stays safe.
Everyone is empowered now as the barriers of entry are removed by the DeFi decentralized exchange (DEX) Uniswap. It allows developers to put their ideas out, get funding, and similar to Unigraph, raise funds, and develop their dreams.
Elastic supply tokens are a problematic area because of the complexity of the model itself. A project worth mentioning is Softlink (SLINK). It is one of the latest presales to collect funds that raised 216 ETH in the public sale. Softlink was possibly the launch of the week that outperformed all expectations. It is a fork of Ampleforth (AMPL) – a non-dilutive elastic token. Its target value is $1, and the purpose of the coin is to increase or decrease the supply, so the price of the token navigates towards the target. Supply adjusts in response to the demand. Let’s just say the AMPL price is below $1. Instead of airdropping the supply, everyone who is holding the coin loses supply, pushing the price back up towards the target price. It is also an elastic price coin with rebase functions that allow the token holders to get additional tokens by airdrop for holding previously acquired tokens.
Softlink is different in the sense that it is pegged to 0.01 LINK (Chain Link) rather than 1 USD, so Its target price in USD is always increasing or decreasing. In terms of token value, at the presale stage, the price was $2 and peaked at almost $38, which is 20X with rebasing mechanics with an airdrop supply to all the current token holders. Out of several stages, 1st was at 50%, 2nd was 50%, and the 3rd added a 100% rebase. Imagine if you have 1000 coins, you get another 1000 SLINK airdropped to you. Now, if the rebase was at $38, early birds would yield over 4000% returns, if not more. The key here is to get in early, compound airdrops, and manage your risk appropriately.
SLINK and AMPL are similar in the sense of the rebase mechanism; the supply change happens every day, at the same time. This periodicity was abandoned by another project, RMPL (random AMPL), where it is conducted randomly and sometimes within 48 hours.
With this industry moving at such speed, improvements building upon older projects are inevitable and happen quickly. ROCKET (RCKT) is one of those that is set to do exactly that. There is a lot of talk about it, and within the community, it is gaining momentum as a promising project. It is being developed by well-known players in the space – a code developer of Unitrade, and a founder of Unitrade. Unlike AMPL and SLINK that are hard-pegged, ROCKET is different because the price target is set for increasing always, and a rebase is icing on the cake. It offers a different twist that could turn out to be profitable in the near future.
Monitoring the DeFi space takes a lot of time and effort. It’s all about the community that can spot these scam red flags. DeFi Insiders MSH work to crowdsource due diligence by referencing developers and analysts who investigate projects, as well as their teams, before making any comments.
DeFi Insiders MSH are a group of experts working in the heart of the movement. This is a live reflection of what is happening on a day to day basis. Nothing written in this article constitutes financial advice and does not reflect either the views of City AM or those of Crypto AM.