FTO Rating
Rating system for Fair Token Offerings
TokenBuilder has developed an FTO Rating system to help investors and the community assess whether a Web3 project’s token offering aligns with Fair Token Offering (FTO) principles, particularly regarding token allocation, transparency, and pricing. The system evaluates five key factors: access, appreciation, token supply, liquidity, and transparency. While these are critical elements for assessing a token offering's fairness, the FTO Rating does not evaluate the project’s business model, feasibility, token utility, or current market conditions. Therefore, conducting your own research (DYOR) remains essential. However, TokenBuilder’s Platform, FTO Calendar, and Rating system will make the evaluation process clearer and more transparent.
FTO Rating System Criteria
Here are the five FTO Rating factors we use to assess whether a token offering qualifies as at least partially fair. If a token offering meets one out of the five (1/5) criteria, it can be added to the FTO Calendar.
1. Access: Is the deal accessible to retail investors?
Access is a key criterion for fairness, particularly for smaller retail investors. For an offering to be considered fair, at least a portion of the private round must be open to retail investors, though access may be limited by time or deal size.
0: No access – available only to venture capitalists (VCs) and insiders.
1: Lottery or similar system – access is uncertain.
2: Launchpad offering – pricing may vary from private rounds.
3: Fair Token Offering (FTO) or Direct Listing – full access with a schedule and clear instructions on how to join.
FTO: Only Ratings of 3 qualify for an FTO point.
2. Appreciation: Token value increase since the first known round
This measures how much the token’s value has appreciated since the initial round, usually the seed or private round. Less appreciation before the FTO is generally better, as it indicates a fairer price for new investors. The level of appreciation will be classified as high, low, or moderate.
3. Supply: Is there a fair supply tradable on the secondary market?
Supply measures the percentage of the total token supply that is tradable on the secondary market. A higher supply generally indicates a more liquid and accessible market for investors.
1: Low supply – 5% or less (low float).
2: Moderate supply – 5% to 19%.
3: High supply – 20% or more.
FTO: Only a rating of 3 qualifies for an FTO point.
4. Liquidity: Is there a secondary market trading plan in place?
Liquidity is critical for investors who may want to sell their tokens. A proper liquidity plan ensures that tokens can be traded on the secondary market, such as on decentralized exchanges (DEXs). Projects should be cautious about the high fees and potential fake volumes associated with centralized exchanges (CEXs).
0: Not addressed.
1: In progress but not confirmed.
2: Secondary market venue and trading date are agreed upon and published.
FTO: Only a rating of 2 qualifies for an FTO point.
5. Transparency: How transparent is the project?
Transparency involves knowing who is behind the project and ensuring the company is in good standing. Anonymous teams pose a high risk for scams and rug pulls, which are prevalent in the crypto space. We advocate for full transparency and Silicon Valley-style due diligence, which is built into our DIAR (Ducks In A Row) system.
0: No proper information or an anonymous team (not fair).
1: Team members are listed but not verified.
2: Team members and top-tier investors are verifiable (via LinkedIn, team page, etc.).
3: Full due diligence through DIAR is completed, and all key team members and the company are KYC/KYB verified.
FTO: Only ratings of 2 and 3 qualify for an FTO point.
This system offers a structured way to evaluate token offerings and highlights the importance of transparency and fairness. Although the FTO Rating system covers essential aspects of a token sale, investors should continue to perform their own research (DYOR) into the project’s business model and market conditions before making investment decisions.
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