Some crypto launchpads require holding native tokens. What is the reason for that? This article will fully discuss what native tokens are and why holding native tokens is required on crypto launchpads.
What is a Native Token in Crypto?
Native tokens as the primary currency of a crypto network, being an asset directly linked to the blockchain. Native tokens can be used to incentivize validators, support network management, pay transaction fees, and other functions. As one of the essential elements, native tokens can be the basis of a crypto network's economic value.
This "economic backbone" for blockchain provides incentives for participants. Any activity that uses these tokens is verified and transparent. Certain mechanisms keep native tokens safe from attacks or problems in the network.
Here's a closer look at some of the functions of native tokens in the crypto ecosystem:
1. Pay the gas fee
In a blockchain network, there are transaction fees that users need to pay. Users can use native tokens for these payments. Gas fees are required for several things including asset transfers, and smart contract operations. What is a smart contract? It is an automated computer program on top of the blockchain that governs the agreements of the parties involved.
2. Participation rights
Users who own native tokens have the right to participate in certain decisions on network development. They can contribute to system updates or network protocol changes by voting.
3. Incentivize miners/validators
As blockchain digital money, native tokens are also used to incentivize transaction validators. Validators and miners contribute to the processing of blockchain transactions so that the network remains secure and transactions can be successfully processed. Examples of native tokens are Ether, Binance Coin, and Solana.
What Is The Difference Between Native Tokens And Non-Native Tokens?
The role of native tokens in blockchain is very important. These tokens support various operations, enhance economic value, and provide incentives for contributors. A blockchain network cannot run effectively if there are no native tokens. Then are there non-native tokens? How are they different from native tokens?
Non-native tokens are derived from existing blockchains. These tokens depend on that network such as ERC-20 on Ethereum. Usually, non-native tokens are used to support specific projects such as NFTs, dApps, or DeFi.
Non-native tokens do not require a new blockchain and are flexible for various uses. Non-native tokens are usually the only tokens for payment or have certain benefits. It is different from native tokens that are at the core of the blockchain ecosystem as a native currency.
Why do Some Crypto Launchpads Require Holding Native Tokens?
As a user on the crypto launchpad, you may need to hold native tokens for certain reasons. To participate in an IDO or other token launch mechanism, holding this token is required. Many users think this is just a technical strategy, but it is much more than that and even an essential part of the launchpad platform economy. For instance, platforms like Kommunitas emphasize native token holding as a core component of their ecosystem.
As project teams, holding native tokens can provide advantages for project quality and other benefits. Check out the points below to know why some launchpads require holding native tokens:
1. Selection requirements
One of the common requirements for participant selection in Launchpad is native token ownership. Having a native token means that you have a serious interest in participating. This kind of selection can ensure the community stays at its best.
Only those who understand and support the project participate. This can also support the stability of IDO. Those who hold native tokens usually continue to support the project for the long term. After buying, they usually do not immediately resell their tokens.
They tend to use the platform more regularly and can even recommend the launchpad to others so that more people can use it.
2. Reward users
Depending on the relevant launchpad, users can get certain rewards for holding native tokens. One of them is lower transaction fees. Another example of incentives is getting additional allocations for tokens.
Users can use native tokens for staking. If done correctly, such staking can generate extra revenue. Other forms of incentives can include priority access, be it greater participation opportunities or early access.
3. Increase credibility
Holding native tokens is a clear sign of commitment. Users can show their credibility towards Launchpad's vision, mission, and sustainability. The more holders of this token, the more credible the platform becomes. This can also have an impact on the performance of the community.
4. Increased demand
As more native tokens are held, this will automatically increase the demand for those tokens. For the platform, such increased demand can strengthen the token economy. The value of the token can increase so that early adopters can benefit from it.
5. User and platform success
Holding native tokens can support the success of users and the platform. Users can earn incentives that can be used to support projects. Various user benefits are related to the success of the Launchpad platform. Users can also be more involved in supporting the platform by holding native tokens.
6. Increased liquidity
Staking systems are common in crypto launchpads. As native tokens are held on the launchpad, it can enhance liquidity in the crypto market. Although it can increase liquidity, it does not directly provide significant benefits.
Liquidity can be affected by other factors including trading activity, market rules, number of tokens in circulation, and other factors.
FAQs
What are native tokens for?
Users can use native tokens to pay for transactions, but the function of these tokens goes beyond that to the functionality and security of the blockchain. Not only to incentivize validators and miners, but native tokens are also useful as a guarantee of DeFi.
Why have crypto?
Owning crypto assets can bring passive income such as staking in these assets. The benefits of staking can be to grow asset ownership even if you don't buy much.
How does crypto launchpad work?
Crypto launchpads can increase visibility and raise capital for early-stage projects. Its main function is to mediate between investors and projects, allowing investors to access tokens early at competitive prices.
What is the difference between native tokens and non-native tokens?
SOL, BTC, and ETH are examples of native tokens. That's in contrast to non-native tokens that are created for related applications that are built using the related blockchain or to support its operations.
How does a native token work?
Native tokens become a unit of accounting that represents value in crypto management. Native tokens can be used for transactions or payments.