Frequently Asked Questions
What is the difference between a utility token and a governance token?
A utility token provides access to a specific service or discount — you hold it because the protocol requires it or rewards holding it. A governance token gives voting rights over protocol decisions — you hold it for ownership and influence. Many tokens combine both: governance rights + fee discounts + staking rewards. The distinction matters for regulatory purposes (utility tokens have different treatment than securities in most jurisdictions) and for economic design (different value accrual mechanisms).
How do you design the initial token allocation?
Standard allocation benchmarks: community/ecosystem 50-60%, team 15-20% (4-year vesting), investors 15-20% (2-3 year vesting), treasury/foundation 10-20%. Community allocation should be majority — it signals that the project is community-owned, distributes governance broadly and reduces concentrated sell pressure. Allocations where team + investors exceed 40% face credibility challenges in the current market.
What is veTokenomics?
veTokenomics (vote-escrowed, pioneered by Curve Finance) requires users to lock tokens for a period in exchange for voting power and enhanced rewards. Longer locks give more voting power and higher reward multipliers. This creates alignment between governance power and long-term commitment — someone who locked tokens for 4 years has more governance influence than someone who bought yesterday. It also reduces circulating supply and creates buy pressure from users wanting governance power.
How do we handle token taxes (buy/sell fees)?
Token transfer taxes above 5% cause most DEX aggregators to route around the token. Taxes above 10% effectively make the token untradeable through standard infrastructure. If transaction taxes are part of the tokenomics (auto-liquidity, redistribution), keep them under 5% total and document clearly. For governance or utility tokens targeting serious DeFi integration, zero transfer taxes are the standard — revenue should come from protocol fees, not transfer friction.
What is the LayerZero OFT standard?
OFT (Omnichain Fungible Token) is a LayerZero standard that allows a token to exist natively on multiple chains without bridge wrapping. Rather than locking tokens on chain A and minting wrapped versions on chain B, OFT burns on the source chain and mints on the destination chain — maintaining a unified total supply. This eliminates bridge security risk (no locked liquidity to steal) and removes the UX complexity of "wrapped" vs "native" token versions.
Do we need a separate audit for each contract?
The token contract, vesting contracts, governance contracts and any staking contracts should all be audited — ideally in a single engagement that reviews their interactions. Cross-contract interactions (governance contract calling timelock calling treasury) can introduce vulnerabilities that individual contract audits miss. An audit that only covers the ERC-20 contract and ignores the governance and vesting system is incomplete.
How long does token development take?
Simple ERC-20 with basic vesting: 2-3 weeks. Full token system (ERC-20 + vesting + governance + staking + airdrop): 6-10 weeks. Cross-chain token (LayerZero OFT, multiple chain deployments): add 2-4 weeks. Audit and remediation: 2-4 weeks. Total for a complete token launch: 8-16 weeks from tokenomics design to listed token.
What is a Liquidity Bootstrapping Pool (LBP)?
An LBP is a Balancer pool with declining weights — it starts with a high token ratio (e.g. 98% token / 2% collateral) and gradually shifts to equal weighting over the launch period. This creates downward price pressure at launch that discourages bots from buying the entire supply in the first block. Price discovery happens over hours or days rather than seconds. LBPs are the fairest launch mechanism for tokens where organic price discovery matters more than instant liquidity.
