Retail investors and venture capital: finding balance in Web3

Summary of key points

• The imbalance of investment opportunities between retail investors and venture capital in the cryptocurrency market is an ongoing topic of discussion.

• The Fair Launch platform strives to address this imbalance by providing fair investment opportunities, but it still faces structural constraints.

• Innovative methods such as providing investment opportunities based on on-chain and off-chain data, using transparent and fair launch mechanisms under artificial intelligence agents are attracting attention.

1. Introduction

Source: rsuthar94, Dune Analytics

Launchpad platforms such as Pump.fun and DAOS.Fun are gaining momentum in the cryptocurrency market. They are notable for their high trading volumes and active user engagement. Unlike traditional ICOs and IEOs, these platforms adopt a fair issuance mechanism-all users can freely participate in investment at the beginning of the token issuance without the need to sell to capital parties in advance. This model has attracted widespread attention by enabling retail investors to participate from the start, share value and benefit from a fair distribution of tokens. This trend highlights the fact that retail investors have long been excluded from high-quality investment opportunities, while also raising market expectations for more inclusive investment models.
This report will analyze whether the Fair Launch platform can effectively solve the problem of unequal investment opportunities for retail investors and support the sustainable development of the cryptocurrency market.

2. Retail investors and venture capital: the origin of the conflict

Inequality in investment opportunities between retail investors and venture capital institutions has always been a persistent problem in traditional financial markets, and this problem also exists in the cryptocurrency market. Venture capital institutions purchase large amounts of tokens at low prices during the private placement stage, and then sell them at higher prices in the open market to make a profit. This process puts retail investors at a disadvantage, forcing them to enter the market only after prices have already climbed, deepening dissatisfaction with the lack of fair investment opportunities.

MC/FDV of tokens issued in 2024 dropped to the lowest in nearly three years, source: Binance Research

This question is supported by data. According to Binance Research, the market capitalization (MC)/fully diluted valuation (FDV) ratio of the cryptocurrency market continues to decline from 41.2% in 2022 to 12.3% in 2024. This shows that the proportion of tokens circulating in the market is decreasing, while the proportion of locked supply is increasing. The limited supply artificially inflates the price of the token, benefiting early investors such as VCs. However, when a large amount of locked supply floods into the market during the unlocking period, the excess supply often causes prices to plummet, with retail investors bearing the brunt of losses. Ultimately, retail investors often suffer financial losses due to inflated pricing at the time of issuance.
Against this background, retail investors are naturally attracted to fair distribution platforms. By issuing all tokens at the outset, these platforms eliminate the risk of token unlocking and provide an equal starting point for all participants. This model promotes a balanced distribution of tokens and the development of a healthier ecosystem, and meets the demands of retail investors for early participation in projects.
3. Fair Launch Platform: A truly fair alternative or just another imbalance? The Fair Launch Platform opens up new opportunities for retail investors and positions itself as an alternative to traditional investment models. However, whether these platforms truly address the issue of unequal investment opportunities remains controversial. On the surface, they create a level playing field where all participants are on the same page. But in practice, new forms of inequality and challenges have been revealed.

$DRUGS VIP participant list, source: DAOS.fun

Taking Pump.fun as an example, the platform faces challenges posed by automated tools, such as Token Generation Event (TGE) sniper bots and trend bots, which often seize trading opportunities and push retail investors to the back row. In addition, some projects undermine fairness through mechanisms such as whitelists, giving priority to specific groups, or forming interest groups to provide preferential conditions to insiders. These issues erode the original intention of a fair launch platform. Facts have shown that inequality has not been eliminated, but has just changed its form. It is still difficult for retail investors to obtain fair opportunities to participate. Even more worryingly, this pattern is now repeating itself with greater frequency. Since fair issuance platforms often skip the due diligence process of traditional venture capital, retail investors face greater risks, further exacerbating the inequality of investment opportunities.

4. The underlying reasons for unequal investment opportunities

The Fair Launch Platform does not fundamentally solve the problem of unequal investment opportunities. To understand this issue in depth, we need to look at it from a more fundamental perspective. This inequality is not limited to the difference in opportunities between retail investors and venture capital, nor is it just about the fairness of opportunities. More importantly, it threatens the long-term sustainable development of the entire ecosystem.

If a project is only pursuing financing, it would indeed be logical to open investment opportunities to everyone. But a token-based ecosystem should not just focus on raising funds, it needs to grow with investors and ecosystem participants to continue creating and developing value. This requires real participants who are not just focused on short-term gains, but are more willing to contribute to the long-term development of the ecosystem.

In this context, the role of venture capital is particularly important. Venture capital not only provides financial support, but also brings extensive personal networks, human and material resources, and verifies the stability and reliability of the project through preliminary research and due diligence. This also explains why some fair launch platforms incentivize vetted participants through early access.

To solve the problem of unequal investment opportunities, it is not enough to simply achieve equal access opportunities. Long-term growth and sustainability of the ecosystem requires a structured approach that identifies and incentivizes those actors who can make a substantial contribution. This is a fundamental challenge that the Web3 ecosystem needs to solve urgently.

5. Finding a new balance: a value-driven ecosystem

The current cryptocurrency market falls into two extremes: on one side is a fair start-up model that pursues absolute equality, and on the other is a traditional model centered on a small number of senior investors. Both models fail to fully reflect the intrinsic value of the Web3 industry. Therefore, we need to shift to a "value-driven participant screening" strategy, that is, to identify and attract participants who can bring significant contributions to the ecosystem, focusing on their value creation capabilities rather than simply considering capital size or investor type. Two recent cases illustrate the potential of this new approach.

5.1. Legion: Community Investment Round Platform

Source: Legion

As a community-driven investment platform, Legion is committed to screening investors who can create substantial value for the ecosystem. The goal of the platform is not limited to raising funds, but also focuses on building sustainable cooperative relationships between project parties and investors.

Source: Tiger Research, Legion

The Legion Score system at the core of the platform comprehensively evaluates multi-dimensional data such as investors' on-chain activities, social influence, GitHub contribution, and project party recognition. The scoring system is based on investors’ actual ability to contribute to the ecosystem, rather than just their financial resources. Investors are required to submit a cover letter and Legion score detailing their potential contribution and participation plan, which helps build a bond of trust with the project side. This approach not only improves the fairness of investment opportunities, but also promotes in-depth interaction between project parties and investors. Legion is pioneering a new investment model that enhances the credibility of the crypto market while creating a community ecosystem that focuses on contribution.

**5.2. AI-Pool: a fair launch platform based on artificial intelligence

agents**

AI-Pool is an experimental fair launch platform based on AI agents, proposed by X user Skely on December 24, 2024. The idea quickly gained traction and went viral within hours. Many investors poured money into the project, raising more than $5 million. Note: Skely's account was suspended due to a fake account report. The exact cause is unclear as it was reported by a third party. Additionally, the platform is an early, untested experimental project and is not yet stable or reliable. However, users' ideas are still promising.

Source: Skely

AI-Pool attempts to solve the pain points of existing fair launch platforms through AI agents. Compared with the common centralized operations and insider trading problems of traditional platforms, AI-Pool uses a Trusted Execution Environment (TEE) to achieve process transparency. TEE protects the private key of the AI ​​wallet and ensures the autonomous operation of the AI ​​agent. This design effectively reduces the unfairness caused by centralized control and insider trading.

Although AI-Pool still faces challenges such as robot interference and insufficient liquidity, it has shown unique advantages in ensuring the fairness of token issuance and initial distribution, providing new ideas for solving the problem of unfair distribution in centralized platforms. As the technology is further improved, AI-Pool is expected to become an example of increasing trust and transparency in the cryptocurrency market.

6. Conclusion

The issue of unequal investment opportunities in the crypto market is often simplified into the confrontation between retail investors and venture capital, but in fact this is just a symptom. Whether it is a KOL round that favors a specific group or a fair launch platform that fails to fully achieve fairness, it shows the deep inequality that exists in the market. The innovative practices of Legion and AI-Pool provide new ideas for solving these problems: Legion selects valuable participants through a comprehensive data evaluation system; AI-Pool uses AI agents to improve process transparency. Both projects go beyond simple capital investments and demonstrate new directions in increasing trust and sustainability in ecosystems.

The core value of the Web3 industry is to create equal opportunities and a fair environment for all participants through decentralization. To achieve this goal, we need to build a balanced ecosystem that eliminates bias and establish a collaborative mechanism that promotes positive interactions between investors and project parties. These efforts will lay the foundation for a truly decentralized system.