TLDR: This document presents a sustainable and fair approach to tokenomics, designed to address common pitfalls in the industry. Alongside this general framework, we are proposing an entirely new tokenomics model -- Milestone Based Vesting -- for the upcoming TGE of Conwai, an AI-focused blockchain. For those interested in jumping directly to Conwai’s proposed model, see: Fairly Launched Milestone-Based Vesting Hybrid.

To learn about the Conwai chain go here, and to join the public sale go here (not live yet).

Something is wrong with tokenomics

The majority of tokenomics designs is flawed—let’s be honest. Balancing project incentives, user acquisition, and investor returns is no easy feat, but recent years have shown that most projects don’t even try. The landscape has seen a massive wave of value extraction where the primary beneficiaries seem to be founders and high-profile venture capitalists, leaving retail investors to bear the losses.

Despite some technical innovations, there has been minimal effort to address the deeper issues of incentives. Countless projects enter the market with a standardized model: private sales backed by VCs, time-based vesting schedules and token release mechanisms. These structures, originally intended to protect investors through vesting schedules and cliffs, have been circumvented by insider tactics like selling SAFTs through private Telegram channels or massively rewarding staked yet locked tokens.

Through repeated rounds of high-profile investor raises, projects create the illusion of high valuations on the secondary market. By the time they go public, many investors believe they’re justified in valuations reaching billions, often without real support for such high expectations.

We can do better

Creating solid tokenomics is essential for any project, yet crafting the right structure can be incredibly challenging. Tokenomics not only dictate the financial health and appeal of a project but also serve as a foundation for sustainable growth, fair value distribution, and community trust. Today, we see two dominant funding models in the crypto space: one relies on extensive VC backing, often at the expense of community involvement, and the other attempts a fair launch model, which, while appealing in principle, can fall short in ensuring strategic, long-term development.

To fully appreciate a project’s economic workings, we must take a comprehensive view that examines where the funds come from, how they are allocated, and, critically, what is given in return for them, at what price, and over what timeframe. Without understanding these elements, it’s impossible to grasp how the project will balance investor interests, community engagement, and team incentives, all while ensuring that the value proposition remains intact. In many cases, a project’s future hinges on carefully structuring the timing and valuation of token distribution, the strategic use of funds, and the alignment of stakeholder incentives to create a robust and adaptive economy that serves both its mission and its users. Currently, two main funding models dominate, and both have serious issues.

The VC/Angel-Backed Model

The first model relies on private funding rounds, each at higher valuations. In these rounds, big-name VCs often appear in every project, and valuations soar as tens or even hundreds of millions are raised before a single product is released. By launch, the project’s fully diluted valuation (FDV) is sky-high, leaving retail investors to buy in at inflated prices, often at the end of the price cycle. This setup usually benefits early investors and team members, who cash out while retail holders are left with steadily devaluing tokens. Backroom deals are common, with unvested tokens accruing rewards that are later dumped for profit, leaving retail and community investors feeling shortchanged.

Adding to this, early investors often offload their SAFTs in private deals at 40-50% discounts even before the token generation event (TGE), further harming retail’s position and confidence in the project. Communities are also used strategically, often lured by hints of an airdrop or rewarded through points campaigns with unclear rules. These campaigns build hype and bolster user metrics for VCs but often end up rewarding insiders with the bulk of the promised tokens, while active community members receive little.

• Cobie's piece on high FDV schemes: New launches (part 1) - private capture, phantom pricing.
• Berachain and Monad raise over $360 million.
• Polychain invests 20 million in Celestia, dumps 82 million in locked tokens staking rewards.
• Scroll Community Criticizes SCR Token Launch Plan for Favoring Binance Whales.
• ZKSync airdrop disappoints community

The "Fair Launch"

The second model, the so-called "fair launch," appears better on the surface but also has issues. Despite being marketed as fully open and fair, these launches are often manipulated. Team members or insiders may use methods like sniping or hidden wallets to gain a disproportionate share, leaving others at a disadvantage. This model also lacks structured, long-term incentives for the team, leading to a loss of motivation to build once the initial hype dies down. Concentration risk is another problem, as a few large holders often end up controlling a major portion of the tokens, which can lead to volatility and undermine decentralization.

• Cointelegraph describing Sharpei as fair launch
• Solana Meme Coin Sharpei Plunges 96% in Seconds in Epic Rug Pull.
• Gnon dives -95% after developer sells tokens.

Bitcoin and Ethereum exemplify the potential of fair launches and presales; however, these successes have rarely been replicated in other projects. Both models reveal a need for an innovative approach that balances fairness, community focus, and team incentives. We propose a model that allows everyone to enter at the starting valuation, has no upfront team allocation, no discounted supply overhang, yet allows for ample runway and team incentives to ensure sustainable growth.

We believe both the launch and token vesting can be significantly improved, with a focus on prioritizing community and retail interests.

Proposed Model: Fairly Launched Milestone-Based Vesting Hybrid

Fairly Launched applies to the following characteristics:

Equal Access at Starting Price

As a public buyer, you know exactly the price at which you entered, confident that nobody else got in at a lower price. This price, set at launch, should represent the lowest possible entry point unless early buyers decide to sell at a loss. This is a distinct advantage over the VC-backed model, where private sale participants can offload their allocations below public entry prices, often reaping quick profits at the expense of new investors.

No Private Presales, No VC, No Angels

By excluding venture capital, angel investors, and presale buyers, this model eliminates insider advantages and minimizes risks of value extraction. The result is a structure that upholds true decentralization, with the community as the primary stakeholder rather than privileged early investors.

No Upfront Team Allocation

Rather than reserving tokens specifically for the team, we emphasize alignment with the community. We prioritize alignment with the community by foregoing any immediate, deliverable-free allocations for the team. Instead, a bonus allocation is structured to vest only upon the achievement of all milestones, payable after three years. This approach ensures that every reward reflects verifiable contributions to the project’s success, reinforcing a shared commitment between the team and the community.

Launch Mechanism

Fixed Price Sale Window: Instead of listing the token directly on Uniswap or another DEX—where bot activity and quick price swings can disadvantage regular participants—a fixed price sale window is established. This fixed price represents the initial entry point and remains consistent for all participants within a set timeframe, allowing broad and equal access to early supporters. With a flat price sale, there’s no first-mover advantage since everyone can purchase at the same starting rate. This approach addresses concerns over unequal access and ensures the sale is inclusive, enabling fairer participation for all interested parties.

Timeframe for Accessibility: The sale duration provides ample time for potential buyers to evaluate and participate, mitigating FOMO-driven rushes that can distort fair access. This extended window serves as a buffer, leveling the playing field and preventing rushed, uninformed decisions, which often favor highly informed actors or bots. This measured approach respects the principle that all participants, regardless of time zones or technical savvy, should have the opportunity to join on equal terms.

Post-Sale Listing: Once the initial fixed price sale is complete, the token can be listed on a DEX, where it will then enter the open market. By this point, early buyers can have more confidence that they’ve entered at a price floor, reinforcing the model’s commitment to fair access. This also reduces the immediate speculative pressure that often accompanies open market launches, providing a more stable initial trading environment.

The Hybrid Element: Milestone Based Vesting (MBV)

To ensure the project's long-term success and consistent growth, tokens must be earmarked for essential areas that drive development, foster innovation, and build community trust. By reserving tokens for specific use cases, we align the team's incentives with the project's goals, motivating continuous building, shipping, and delivering. This structure guarantees that resources are available precisely where and when they’re needed, creating a pathway for sustained progress and meaningful contributions that reinforce the project’s core mission over time. However, these disbursements are tied to achieving clear, quantifiable, and verifiable milestones. As a public buyer, you can see precisely when and how these allocations are made, ensuring that each release aligns with project progress and value creation.

Earmarked Tokens for Growth and Development

This model incorporates a hybrid approach by allocating tokens based on verifiable milestones. This ensures the project has resources to sustain growth, maintain liquidity, and keep building effectively. The allocation process is transparent, with each milestone and payout carefully documented and publicly visible, giving both the community and operators confidence in a structured, accountable development path.

Unlike a traditional fair launch, where a fully circulating supply might leave team incentives unmoored from the project’s future, this model ensures that continued dedication and measurable progress remain at the heart of every milestone, binding the team’s success to the project’s sustained growth and value.

Now... in normalspeak for a second, why do you want this? Well, for starters, you want the team sticking around and actually building, not ghosting you right after launch. Plus, with no VC bro sitting on a mountain of cheap tokens, there’s no risk of him tanking the price just to bankroll his midlife crisis. And let’s be real—without the pressure to pump up metrics for some big raise, the project can actually focus on real growth, so the numbers you see—TVL, transactions, wallets—are way more legit and not just fake hype. And the community? The community might actually be involved for real and not forced to say 'gm' for a year hoping to get some crumbs airdropped.

And here’s the deal with milestone-based allocations: it just makes sense. Time-based vesting just means tokens start flooding the market whether or not the project has done a thing, leaving everyone guessing what’s actually being delivered when new tokens hit circulation. With milestone-based allocations, every token release is tied to a real accomplishment, so holders actually know what’s been built before tokens are in the mix. It’s a setup that cuts down on volatility and gives the project room to breathe—because when those tokens go live, they come with proof that the project is moving forward.

By fostering equal entry opportunities, excluding private discounts, and implementing transparent, milestone-based runway allocations, this model establishes a sustainable, community-centered approach that prioritizes trust, fairness, and long-term project health.

Token Allocation Overview (100%)

For Conwai this high-level allocation provides a broad breakdown across key categories, each of which is further detailed and justified in alignment with the milestone-based allocations.

Allocations for Liquidity are critical to ensure a healthy trading environment for the network’s token. High liquidity encourages stable token prices, reduces volatility, and makes it easier for users and investors to buy, sell, or trade the token. This stability attracts more participants to the network, supporting its growth and adoption.

R&D (Research & Development) funding drives innovation, allowing the chain to remain competitive and adapt to emerging technologies. These resources are essential for optimizing protocol efficiency, enhancing security, improving interoperability, and developing new features that meet user and developer needs.

Business Development (BD) is key to building strategic partnerships and expanding the chain’s presence across industries and markets. These partnerships increase the network’s utility, adoption, and value by enabling integration with other projects, enterprise clients, and platforms.

Community funding fosters a loyal and engaged user base. Investments in community-building activities, such as events, grants, and support programs, create a vibrant ecosystem around the chain. This engagement is crucial for long-term sustainability, as active communities contribute to the network’s innovation, security, and growth.

Milestone-Based Allocations

Milestone-based allocations provide a powerful advantage over traditional time-based vesting schedules, particularly when it comes to price stability and reducing volatility. With time-based vesting, tokens enter circulation at predetermined intervals, creating a looming supply overhang with no assurances about project progress. This can lead to uncertainty among holders, who may be left in the dark about deliverables tied to the circulating supply. In contrast, milestone-based vesting aligns new token release with tangible progress; tokens only enter the market when significant achievements have been met, clearly signaling the project’s state. This approach not only motivates the team but also gives current holders a transparent view of development, fostering confidence and a more stable, predictable market environment.

Chain Operations - 15% Allocation, max 5% per year

This allocation focuses on rewarding milestones that indicate the chain’s growth, stability, and active use. Each milestone completion releases 0.5% of the allocated tokens, with two final milestones unlocking 1% each.

Purpose: This structured release ensures that the network’s stability and activity are prioritized, building confidence for users and participants.

Development - 5% Allocation

The Development fund is essential for milestones that indicate successful network infrastructure and protocol upgrades. Each milestone completion releases 1% of the allocation.

Purpose: This allocation drives ongoing technical improvements, ensuring the network remains secure, scalable, and adaptive to community needs.

Business Development and User Acquisition: DeFi Campaigns - 5% Allocation

Focused on incentivizing ecosystem growth, user adoption, and key partnerships, each milestone completion releases 1% of the allocation.

Purpose: These milestones ensure growth and adoption, creating value for the network through meaningful user engagement and high-quality partnerships.

Release Schedule, Circulating Float, and Implied Market Cap

The unique milestone-based vesting model we’ve adopted makes it challenging to represent token release over time in the typical graph format, where time is on the x-axis and circulating tokens on the y-axis. Unlike traditional schedules, our approach prioritizes safety and stability, ensuring that tokens are released only when concrete progress is made. So the release schedule would sho ranges rather than fixed points. Certain milestones, such as achieving 99.5% uptime over a continuous 12-month period, inherently limit early releases, as they cannot be completed until at least one year post-mainnet. Also the operations focused releases are capped at max 5% per year. We can, however, use the tokenomics breakdown and the defined milestones to outline a rough release schedule.

For example, the Milestone Completion Bonus for the Team allocation, set at 2.5%, has a 3-year cliff and will only be paid if all milestones are achieved. This allocation is further subject to a 2-year linear vesting schedule and is the only allocation designated exclusively for the project team. As a result, this allocation will not enter circulation within the first three years.

Additionally, from the breakdown:

• Initial Distribution: At the time of the IDO, we see 8% of the total supply will enter circulation: 5% allocated for the first sale and 3% for liquidity provisioning. Assuming for example a fully diluted valuation (FDV) of $50 million on IDO, this initial release would imply a circulating market cap of approximately $4 million.

• Delayed Milestones and Stability Locks: Several significant portions of the supply are intentionally locked for extended periods to ensure a stable, measured release. For example:

  • One-Year Stability Milestones: 1% will be unlocked only after the network achieves a full year of continuous operation, with an additional 1% only unlocked if uptime exceeds 99.5% over that year. Both of these milestones can only be reached after one year, meaning these allocations are effectively locked until then.
  • Development Milestones: The Development fund, representing 5% of the total supply, is distributed gradually over several major technical achievements, such as the first protocol upgrade and Guardian Nodes integration. This allocation is released in steps, aligning with critical infrastructure milestones rather than time alone, so only a small portion will enter circulation in the initial phases.

• Transaction and Volume-Based Milestones: Further releases are tied to transaction volumes and liquidity achievements, with milestones such as $10 million and$50 million in gas token trading volume unlocking only 0.5% each. Additionally, high-volume thresholds for bridging and on-chain transactions mean these allocations are unlikely to circulate in the first few months and are instead designed to reward sustained growth over time.

Similarly the onboarding of a third-party issued stablecoin, 10 unique dApps or 50,000 MAU for more than 3 months are all milestones that ensure the circulating supply only increases gradually.

This approach ensures a deliberately slow and stable release, aligning circulating supply closely with actual network performance and long-term milestones.

Where does the money actually go?

When projects lay out their tokenomics, there’s often little transparency about how funds will be allocated or what each expense truly supports. Investors and users are rarely given a clear breakdown of why specific amounts are needed, or the strategic purposes they serve. However, some industry leaders have started sharing their own funding allocations to offer insight into these critical, often-overlooked details. Andre Cronje of Sonic Labs (formerly Fantom) recently provided a high-level breakdown of their expenditures, shedding light on the essential areas that keep a blockchain ecosystem functional and growing.

Typical expense categories in tokenomics (for a chain) often include:

• Node Operations: Funds are earmarked to maintain, upgrade, and scale node infrastructure, ensuring network stability, speed, and security.
• Block Explorer: A user-friendly and reliable block explorer is essential for transparency, allowing users to track transactions and view network activity.
• Bridges: Funds are reserved for developing and securing bridges, enabling cross-chain compatibility and increasing the network’s utility.
• API and Data Feeds: Many applications rely on API access and real-time data feeds. Maintaining these data feeds is crucial to attracting developers and projects to the chain.
• Network Security: Regular audits by reputable firms ensure network integrity, preventing exploits and vulnerabilities.
• Community Support and Developer Tooling: Providing resources for developers fosters a healthy ecosystem.
• Marketing and Ecosystem Growth: Attracting users and projects to the chain involves community engagement, educational campaigns, and outreach efforts.

Research & Development

• Protocol Improvement: Research to optimize the base protocol for efficiency, scalability, and security.
• Consensus Mechanism Enhancements: Development of new consensus protocols or enhancements to increase performance and security.
• Cross-Chain and Interoperability R&D: Research for better cross-chain operability, exploring standards and technical compatibility with other networks.
• User Experience Design: Investing in UI/UX research to create a seamless experience for end-users and developers.
• Blockchain Scaling Solutions: Ongoing work on scaling solutions to handle larger transaction volumes efficiently.
• Privacy Features: Research and implementation of privacy-preserving features that maintain user confidentiality while complying with regulations.
• Smart Contract Optimization: Development of tooling and libraries to streamline smart contract development and improve gas efficiency.

Business Development and Marketing

• Community Engagement and Events: Sponsoring events, AMAs, and online forums to encourage community engagement and project interest.
• Partnership Development: Building relationships with other projects, enterprise clients, and technology providers to expand the network's reach.
• Developer Grants and Bounties: Funding for developers to create dApps, tools, and innovative solutions on the chain.
• Educational Content and Tutorials: Producing guides, webinars, and tutorials to simplify blockchain development for new developers.
• Regional Market Expansion: Outreach efforts to expand the chain's presence in target regions, focusing on adapting to local regulations and market needs.
• Influencer Marketing and Media Presence: Collaborating with influencers and media outlets to raise awareness and credibility in the blockchain space.
• Incubation Programs: Establishing programs to nurture and support emerging projects, providing resources and mentorship to build on the chain.
• Token Incentive Programs: Initiatives that incentivize user adoption, such as airdrops, staking rewards, and loyalty bonuses.