In this article, Dragonfly provides two points of economics advice on tokens: Unlocked coins should not be pledged, cliff-like unlocking should be eliminated

Dragonfly Capital proposes two token economic improvement suggestions, aiming to reduce market volatility and panic caused by token unlocking. These suggestions are mainly aimed at the stake of ununlocked tokens and the token unlocking mechanism itself.

Suggestion 1: Prohibit ununlocked token staking

Dragonfly believes that allowing ununlocked tokens to be staked is "stupid" because it undermines the trust base of private equity investment. This practice has been popular in some projects in recent years, but Dragonfly has never recommended it and calls for an immediate stop, especially in new projects.

Suggestion 2: Eliminate "cliff-style unlocking"

Common token unlocking mechanisms, such as four-year periods, usually include a "cliff-style unlocking", which means unlocking a large number of tokens at the end of the first year, and then unlocking them monthly. This design can easily cause market panic because investors have difficulty telling whether this will lead to a token sale.

Dragonfly recommends using a linear unlocking mechanism instead: starting from the second year, unlocking the tokens daily and continuing until the end of the fourth year. Although the total unlocking time remains unchanged, this method is smoother, avoiding the market impact caused by centralized unlocking.

Alternatives and evaluations linked to KPI

Some experts recommend pegging token unlock to key performance indicators (KPIs) of the team or investors. Multicoin Capital co-founder Tushar Jain supports this view. However, Dragonfly's Haseeb Qureshi believes that the KPI hooking mechanism has many problems in actual operation, such as being easy to be manipulated and having high management complexity, which ultimately "just create more trouble."

All in all, Dragonfly's recommendations aim to create a more stable and transparent cryptocurrency market environment by improving the token unlocking mechanism.

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