Preface
The pre-market market, also known as "over-the-counter OTC trading", refers to the method by which unissued projects distribute project token shares in advance through test network tasks, social media interactive draws, etc. Since the token has not been actually issued, market users will be given expectations of the project's tokens in advance through whitelists or points.
The pre-market market has experienced rapid development in recent years, and its trading content has gradually evolved from the initial whitelist to points, PASS cards, medals, etc. It can be found that in the current market, more and more project parties have begun to choose to use the pre-market market to continuously attract users and create project expectations.
However, we can find that there are many problems in the pre-market market. Since points, whitelists and other assets are all off-chain assets, there are risks such as unclear distribution rules, unknown token launch time, inability to trade before the market, and insufficient capital utilization due to the need for double stakes for user transactions. These risks have been reflected in projects that have recently released airdrops, such as Blast, zkSync, etc. If the pre-market market can be tokenized and the original off-chain assets can be put on the chain for trading, then can the above problems be solved? It can not only give users the possibility of pre-market trading, but also reduce the various risks in the pre-market trading process.
Coral Finance came into being. This article will start from the current situation of the pre-market, explain the huge potential and chaos of the current pre-market, and explain in detail Coral Finance's innovative solution to tokenize the pre-market.
The huge potential and chaos of the pre-market
For users, the main purpose of the pre-market market is to bring users reasonable market expectations before the project tokens are officially released, that is, users can reasonably deduce the profit space after the project tokens are officially launched based on the current pre-market price, total circulation and other data. At the same time, the pre-market market can also help users lock in profits in advance before the tokens are officially launched. Initially, the points and whitelists held by users cannot be traded on DEX/CEX like tokens. The emergence of the pre-market market allows users to lock in profits in advance before the project tokens are officially launched through the previous over-the-counter trading method or the current on-chain trading method. And the pre-market market can also give users psychological comfort to a certain extent, that is, users will think that the points, whitelists, etc. they are holding now can be converted into specific token amounts later, making the original relatively vague token expectations more concrete.
For the project side, the development of the project also requires the pre-market market to build a healthier chip structure. In the early days, the core purpose of the project side issuing points was to attract users to participate and experience the product. By encouraging users to participate in the agreement by staking assets, forwarding social media, etc., the project side can expand its voice and influence. A broad and active community ecology is the cornerstone of the success of every project. The token airdrop after TGE is essentially a reward for users to participate in the community and make contributions. However, in today's market, some professional "money-pulling studios" have accumulated a large number of points by registering a large number of accounts and using automated tools to participate in project activities. This phenomenon not only distorts the true distribution of chips, but also may raise the threshold for real users to participate in the project, because the more people who make money, the more they will be rolled, and the expected returns will be reduced accordingly. When the token TGE, these studios may choose to sell for profit, which may lead to a large number of sell orders in the market, putting pressure on the token price. If the chips are highly concentrated in the hands of a few studios, once they start selling on a large scale, it will not only harm the interests of ordinary users, but may also bring down the project's coin price at the beginning, affecting the long-term development of the project. The pre-market market allows early participants, including studios that may hold a large amount of chips, to have the opportunity to trade before the project is officially launched. This not only alleviates the pressure of immediate selling at the token TGE, but also helps the project party gradually achieve the dispersion of chips through market mechanisms and promote a healthier token distribution.
In the traditional financial field, the derivatives market has an absolute advantage over the spot market in terms of trading volume, which is nearly 5 times that of the latter. Similarly, the trading volume of derivatives in the crypto market is also much larger than that of spot trading. Derivatives provide users with greater flexibility and diversity, allowing investors to adopt a variety of trading strategies in different market conditions. We can also understand the pre-market market as a derivatives market based on token expectations. Token asset certificates such as points and whitelists are actually a type of derivative. Although the pre-market market has great potential in concept, due to the lack of a centralized platform to provide sufficient liquidity, the current development stage is relatively rudimentary, resulting in trading needs not being fully met.
Looking further into the market dynamics, we can see that the actual application of the pre-market market is rapidly expanding, indicating that it is gaining market recognition and adoption as an innovative financial tool. As of now, among the top 30 mainstream DeFi projects in the market, the total market value of projects that adopt the pre-market market approach is $29.5B, accounting for about 31%. This shows that the pre-market market has developed rapidly and has gradually become a mainstream choice for project parties in the current market. Its growth potential is still huge, including in the recent airdrop projects, all of which have adopted the pre-market approach.
Data source: Statistics based on Defilama data
Similarly, although the pre-market has achieved unprecedented development, it still has many problems and influencing factors, which are gradually being exposed in market projects. There are mainly the following five points:
Buyers and sellers are not equal, and the utilization rate of user funds is limited: Simply put, the current pre-market transactions are more dependent on human matching off-chain, that is, a third party (individual/institution, etc.) manually sorts and matches the transaction needs of buyers and sellers. In this process, both buyers and sellers need to pay a deposit to the third party to lock the transaction in advance, but this greatly reduces the user's fund utilization rate. And if the seller believes that the expected profit space of the pre-market transaction is much greater than the value of the deposit paid, the seller may regret it. In this process, the buyer can only receive part of the funds confiscated by the seller, but loses the high return of the token later. Therefore, this is an extremely unequal transaction for the buyer, which not only reduces the utilization rate of its own funds, but also does not get the high return after the token is launched.
Unable to provide pre-market liquidity and allow instant trading: From the above trading process, we can find that the pre-market market is mostly off-chain assets, so transactions can only be matched manually. This process requires a lot of manpower and energy, and it is not possible for users to provide liquidity for assets and allow instant trading like DEX, which greatly affects the trading efficiency of the pre-market market.
The pre-market market cannot reflect the expected price of tokens: Due to the characteristics of off-chain matching transactions, there is no unified trading market in the pre-market market to reflect the expected price of tokens. We can understand each third party as a small pre-market trading market, and the trading price of this market depends on the user group that the third party can reach. Therefore, the prices between various "small markets" are not uniform, and cross-market transactions cannot be carried out, which results in the current pre-market market being unable to accurately reflect the expected price of tokens.
The launch date of the project token is unknown, and the user's time cost has greatly increased: This problem has been reflected in zkSync, which recently released an airdrop. zkSync clearly pointed out in the early days that there would be token airdrops in the future, which led to a large number of users actively participating in its major airdrop incentive activities. In this process, the project party did not specify the specific time of the project token launch, which would lead to a phenomenon that the project party constantly stimulated users' expectations of the launch of its token through various good news before the token was launched. For users, since they cannot know the specific date of the project token launch, they need to continue to spend time and energy to complete the project party's major airdrop incentive activities to play and make choices. The sunk costs generated in this process are huge for users. Assuming that a user has been insisting on completing major incentive activities, it is unknown whether the final benefits can cover the various costs incurred before and bring in excess income. In the zkSync project, the launch time of its token was more than 4 years different from the initial release of the airdrop incentive activity. In this process, users have spent a lot of time and energy, but ultimately they are unable to make ends meet.
Unclear distribution rules in the pre-market: Since most of the pre-market assets are off-chain assets, the distribution rules and process are not transparent, so it is easy to have risks such as the project party's temporary modification of the distribution rules and the project party's insider trading. This is the case with the Blast project that recently released an airdrop. For example, @Christianeth, due to the project party constantly adjusting the distribution rules during the event, only received an airdrop return worth 100,000 US dollars after more than four months, even though it had pledged 50 million US dollars.
Image source: https://x.com/Christianeth/status/1805973786443067602
It can be seen that the pre-market market is still in a state of chaos while it has great potential. Currently, there are projects that tokenize the pre-market market. Pendle Finance and Whales Market are doing well, but they still have some limitations or potential risks. We will compare them in detail in the following chapters.
Coral Project Analysis
Coral is committed to becoming the expected market and liquidity center for token voucher assets. In order to do a good job of cold start of the project, the project party usually attracts users to participate in the project and gather the community by issuing token voucher assets such as points, PASS cards, and whitelists in the early stage; these vouchers will often be rewarded to users in the form of project token airdrops in the future to reward their contributions. Due to the differences in expectations of different users for the value of project tokens and airdrop vouchers, Coral will build an expected market to promote trading liquidity through innovative mechanisms and meet the long-short game needs of market participants. In addition, the pre-market trading mechanism will also allow users to realize their earnings in advance in the pre-market trading market without waiting for the project token to be officially launched, thereby locking in investment returns.
It is worth mentioning that not all points can be traded on Coral. Many social and trading points in the market are less valuable because they can be inflated and cannot accurately measure the user's contribution to the protocol. They are also increasingly scrutinized by anti-sybilists. Only token certificates backed by real assets, such as Eigenlayer points, can be traded and circulated on the Coral platform. The Coral platform will use a strict review and screening mechanism to ensure that only token certificates with actual value and liquidity can be traded on its platform.
The core features of Coral can be summarized as follows:
Points tokenization: Coral connects to points of real assets, and the system automatically converts points into tradable tokens. Each type of points corresponds to its own corToken.
Lock-release mechanism: Tokenized points are not fully circulated at the beginning. Coral adopts a "basic + accelerated" unlocking mechanism. Users can cash in their earnings in advance and accelerate the accumulation of earnings by adding liquidity.
Native SWAP: Coral has built a native DEX - corSwap, which will provide users with a deeper liquidity pool and a smooth and efficient trading experience.
Acceleration Rights Leasing Market (coming soon): In response to the special unlocking mechanism, Coral will build a convenient acceleration rights leasing market to meet the needs of borrowers who have insufficient costs to add LPs and renters who make full use of idle LPs.
veToken Voting (coming soon): Users lock CORL to obtain veCORL and participate in the pool's voting, further incentivizing users to participate in adding liquidity. At the same time, projects can bribe veCORL holders to get more votes for the liquidity pool.
Specifically, Coral's operating mechanism is as follows:
Users will stake the LST/LP Tokens obtained in the DeFi protocol to Coral;
Coral will convert the points corresponding to the LST/LP held by the user into corTokens in a locked state;
The user receives the locked corToken and has the base unlocking speed (Base) to start unlocking corToken;
Users can freely trade unlocked corTokens on DEX; users who are not participating in DeFi protocols can directly purchase corTokens through DEX;
Users can add corToken liquidity and stake the corresponding LP Token to obtain Boost acceleration rights (Acceleration). Acceleration rights can speed up the unlocking speed of corToken;
The user's acceleration rights/LP can be rented to other users through the rental market to obtain additional income;
During the project TGE, Coral will count and liquidate the corTokens in the hands of users and distribute tokens to users according to the project rules.
Coral's Flywheel Effect
Coral has built a powerful economic flywheel by cleverly combining the accelerated unlocking mechanism with the veToken design. This innovative design not only effectively empowers the tokens, but also provides users with continuous participation incentives, forming a self-driven and accelerating growth cycle.
In Coral's lock-release mechanism, the corTokens of the integral tokenization will not be unlocked at once. Users can choose to unlock corTokens at the base rate, or use the Boost mechanism to accelerate their unlocking process by injecting funds into the liquidity pool.
This design not only encourages users to provide liquidity to the corToken trading market, but also controls the potential huge selling pressure in the original points market, increasing users' immediate benefits. In addition, by providing liquidity, users can not only obtain the rights of accelerated unlocking, but also obtain CORL tokens issued by the platform as rewards, which brings additional incentives to users. The acceleration right leasing service in the leasing market lowers the participation threshold for some users who do not want to provide liquidity directly, and opens up additional income channels for users who have already provided liquidity, thereby effectively promoting the growth of liquidity of the entire Coral platform.
Combined with these incentives, Coral will attract users to deposit their assets for a long time, thereby building a deeper and better point liquidity pool. This deep liquidity and diversified incentive strategy will enable Coral to provide users with the most competitive point prices in the market, continue to attract new users, and increase liquidity and trading volume.
For project owners, Coral's built-in liquidity incentive mechanism and more stable liquidity foundation will also provide the lowest liquidity acquisition cost for project owners. Better point prices and a mechanism to lock in revenue faster through contributions will attract users and studios to continue to participate in the point market of projects on the Coral platform and attract new users. Increased TVL, frequent transactions supported by real assets, and an expanded user base will enhance the competitiveness of projects. This will also continue to attract more high-quality project owners to issue tokenized points on the Coral platform, bringing in new users and traffic.
In this process, CORL, as Coral's project token, also captures the value of the protocol through sophisticated utility design:
Users can lock CORL tokens to obtain veCORL and influence the distribution of liquidity rewards through voting.
Projects bribe veCORL holders to gain more liquidity rewards, thereby increasing the attractiveness of the liquidity pool.
veCORL holders receive benefits based on voting results and liquidity reward distribution. These benefits include transaction fees, interest, and incentives from other cooperative projects.
It is conceivable that as the value of Coral gradually emerges, through veCORL’s governance participation and as a medium for Boost earnings, users’ demand for CORL will continue to increase, which will drive the increase in its market value.
Coral and other pre-market players
In the existing market, there are not many projects dedicated to solving pre-market trading problems. Whales Market and Pendle are representative projects among the existing solutions.
1. Whales Market
Whales Market has launched an innovative OTC market, which is centered on securing transactions through collateral. Sellers lock assets as collateral to ensure that buyers can deliver tokens when they are officially launched. If the seller fails to fulfill his promise, the collateral will be automatically transferred to the buyer as compensation, eliminating the trust and security issues of traditional OTC markets.
Before the emergence of Whales Market, the trading of illiquid assets such as crypto credits, airdrop allocations, and whitelists often faced high risks due to the lack of formal markets. The introduction of Whales Market provides a safe and transparent trading platform for buyers and sellers without relying on trusted third parties, which is an important innovation in the pre-market trading market.
Whales Market is essentially a two-bet P2P trading model, similar to options trading, a design that is unfair to the buyer when the token value soars. Because when the income from the skyrocketing token is greater than the cost of the mortgage, the seller will choose to compensate for the mortgage instead of delivering the token. Although the buyer will receive collateral as compensation when the seller defaults, it loses the potential token appreciation opportunity, the opportunity cost of the collateral, and the time cost of waiting for the token TGE. For example, if you encounter a project like ZKsync that has not issued coins for a long time, the buyer's losses may be more significant.
2. Pendle
Pendle is a permissionless yield trading protocol that allows users to execute various yield management strategies. The core innovation of Pendle lies in the tokenization of yield. First, Pendle packages the interest-bearing token into SY (Standardized Yield Token) - after packaging (e.g. stETH → SY-stETH), the underlying interest-bearing token will be compatible with the Pendle AMM. Then, SY is split into two components: principal and yield, namely PT (Principal Token) and YT (Yield Token). Both PT and YT can be traded through Pendle's AMM (Automated Market Maker).
Pendle's application in the pre-market market is particularly eye-catching, as it hits the point of discounted yield trading. As the LRT concept took off, Pendle's TVL and market cap grew significantly in a matter of months. Pendle integrates LRT through customization, allowing users to lock in ETH earnings, EigenLayer airdrops, and airdrops related to the Restaking protocol that issues LRT, bringing diversified income opportunities to users. Additionally, Pendle’s YT token supports a “leveraged points liquid staking” strategy. Users can exchange 1 interest-bearing token (such as eETH) for more YT through Pendle's exchange function, thereby accumulating more points, similar to holding a higher amount of interest-bearing tokens. This mechanism allows users' expectations for points to be directly reflected in the price of YT. However, there are potential challenges with the Pendle model. The early market is prone to bubbles; as the expiration date approaches, YT and its implied points value will gradually decay to zero.
Looking back at Coral, as a pioneer in the tokenization of pre-market points, it has effectively addressed many challenges in the existing market with its innovative solutions and provided a more efficient and fair trading environment.
The innovative “lock first, release later” mechanism reduces the selling pressure of points and is more conducive to reducing the fluctuation of the value of points rather than causing the value to decrease over time.
Through its unique mechanism design, Coral breaks through the limitations of traditional pre-market trading and creates a win-win situation for users and project owners. Unlike other projects that only allow users to participate in transactions unilaterally, the Coral platform provides a two-way interactive environment: users can cash in points and trade in advance on the Coral platform, enjoying liquidity and flexibility. At the same time, for project owners, the points system will become an effective incentive tool. The active trading of points tokens will provide project owners with a window to demonstrate their value and potential, and this positive market feedback will also have a positive impact on the market performance of their tokens after TGE.
Based on its unique mechanism, Coral will cover a wider range of user groups including interactive users, investors, speculators, and traders. This diversification will not only help increase the activity of the platform, but also help improve market liquidity and transaction depth.
Coral will provide a fair trading platform, allowing buyers and sellers to participate in transactions without restrictions and jointly determine the market price of points to improve market transparency and fairness.
Coral is not limited to providing liquidity, but will also expand the use of points in a variety of scenarios in the future. These extended values will provide users with more profit opportunities and strategy options.
Coral simplifies the trading process, removes complex financial concepts and collateral asset requirements, and makes it easy for ordinary users to participate in trading. This ease of use lowers the entry barrier and will attract a wider user group.
Summarize
The pre-market trading market, with its unique trading method, provides cryptocurrency investors with the opportunity to participate before the project tokens are officially issued. This model not only enriches the market ecology, but also brings new investment strategies and expectation management methods. However, this market also faces challenges such as insufficient liquidity, low transaction transparency, and limited capital efficiency. In particular, the uncertainty and risks of off-chain assets make investors bear considerable risks while enjoying potential returns. The existence of these problems has limited the further development and maturity of the pre-market trading market.
In such a market environment, Coral has brought a breakthrough change to the pre-market trading market with its innovative points tokenization solution. Coral provides a safe and efficient trading environment, allowing users to convert pre-market assets such as points into tokens and realize value in advance in a fair and transparent market. In addition, multiple scenarios such as LP providing liquidity, acceleration rights leasing market, and veCORL voting governance also provide users with diversified value-added opportunities.
For the project side, Coral’s role goes far beyond this. The lock-release mechanism also locks the user’s liquidity and attention on the platform, reducing the risk of the project going to zero. With the continued positive flywheel effect of the platform, Coral will become a powerful traffic distribution platform, attracting new users, stimulating the project’s TVL to climb, and providing a strong environment for the growth of other development indicators. Through active trading of pre-market assets and positive market performance, Coral will also enhance the market appeal and influence of the project, and lay a solid foundation for the market performance of the project token after TGE.
Coral's mechanism design achieves a win-win situation among users, project owners and the market, and promotes the healthy development and continued prosperity of the pre-market trading market. Eureka Partners is optimistic about the future development prospects of Coral and expects this new asset and new narrative to play an important role in the development of the pre-market trading market.
Reference
https://defillama.com/
https://www.coraldex.finance/
https://docs.pendle.finance/cn/Introduction
