A Pre-TGE Convertible Token — Why you might need one

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A Pre-TGE Convertible Token — Why you might need one

What is a Convertible Token?

A convertible token is a token that can be traded for another token. Simple.

They’re actually pretty common, especially in the DeFi world.

Common Examples

If you provide liquidity on Uniswap v2, you’ll receive tokens that represent your ownership stake in the pool and your claim on the underlying assets. Those convertible tokens can be used later to retrieve your share of the pool, plus any accrued trading fees.

If you stake $ETH, $stETH (or similar) will be sent to your wallet. This convertible token can be used later to retrieve the original $ETH plus accrued rewards.

How to use a Convertible Token pre-TGE

These DeFi use-cases are well understood.

But it turns out that convertible tokens can also be used to build a community and reward its members before TGE. This is especially important — and sometimes necessary — in a fair launch scenario.

Projects that plan to use a token to power their economy have a cold start problem.

Post TGE projects can use their token to reward community activities such as:

moderation,
content creation,
bug reporting,
Etc.

But these activities must start long before TGE. A community doesn’t suddenly appear once a token is available! For a successful TGE — especially a fair launch — having an engaged community is critical.

Projects that have raised from VCs prior to fair launch (a “little less fair launch”) may have cash on hand to reward community activities, but that isn’t as powerful as using a project token. Holding a project token aligns community members with the project, unlike a stablecoin.

A convertible token solves this problem. The project can pay people with a temporary token that will be convertible to the final token post-TGE. This gives them the currency to build community, and the flexibility to make sure the rewards are fair since the conversion rate can be established once the market has priced the project token.

$KIN, a Case Study

At TrueTribe we faced the problem described above. We are planning to release a $TRIBE token with extremely interesting properties (see our LitePaper for details) but until TGE, we couldn’t reward anyone!

This is why we created a token called $KIN, a convertible token.

We minted 100MM $KIN. It isn’t traded on any exchanges, but we have promised that $KIN will be convertible to $TRIBE post-TGE.

Whenever a community member contributes to the project, we drop them some $KIN. Because we’re an Airdrop platform, and $TRIBE will be an Airdrop token, we airdrop often. Every week we reward people who have completed quests on our token site. We’ve also aidropped to holders of other tokens, because we want to encourage these token holders to support our fair launch.

$KIN has been sent to thousands of wallets that have an interest in TrueTribe’s success. Post TGE that $KIN will be exchanged for $TRIBE, a token we expect most people to hold.

$KIN has been a critical component of our community-building work. We encourage any project with a similar profile to explore the convertible token option.

We are, of course, happy to provide advice and help.

A Pre-TGE Convertible Token — Why you might need one was originally published in TrueTribe on Medium, where people are continuing the conversation by highlighting and responding to this story.