Crypto exchange Backpack reveals tokenomics plan to prevent 'dumping on retail'

Backpack, a crypto exchange founded by former FTX employees, is looking to prevent the dilution of its retail holders of its forthcoming utility token through a tokenomics scheme designed to progressively release tokens based on hitting key metrics, according to a plan disclosed on Monday. 

Under the new plan, 25% of Backpack’s native token supply will be unlocked and distributed during its token generation event. Of that, 240 million tokens will be airdropped to Backpack Points program participants, with another 1 million tokens reserved for Mad Lads NFT holders.

The exchange has also created pre- and post-IPO tranches, each containing 37.5% of the 1 billion token supply. Pre-IPO tokens will be “progressively” released based on "growth triggers" and milestones like obtaining regulatory approvals and product launches, according to Backpack CEO Armani Ferrante.

“Every time we open up a new region or launch a new product, that's an opportunity to grow,” Ferrante said on X, adding that expansion into markets like the EU, Japan and the U.S., along with products such as predictions, stocks and its card, fuels growth. “Like gasoline on a fire, the token helps continuously kickstart new markets.”

The move is meant to prevent “dumping on retail,” Ferrante said, where project insiders benefit at the expense of smaller investors, and other forms of dilution by tying the project’s tokenomics to actual economic activity. 

Backpack delays major token unlocks until after IPO

Backpack is following a number of projects eschewing traditional token lockups in exchange for metrics-based token circulation, like MegaETH, which decoupled its TGE from its mainnet on Monday. 

An additional 37.5% of Backpack’s total supply will be locked up until at least one year after the exchange’s initial public offering. These tokens will make up Backpack’s corporate treasury.

Rather than providing the founding team with “direct token allocations,” Ferrante said the “team owns equity in the company, and the company owns a large percentage of the token supply,” a move to prevent 

“It's not until the company goes public (or has some other type of equity exit event) that the team can earn any wealth from the project,” Ferrante said. “It's not until the company has access to the largest, most liquid capital markets in the world by going public — and it's not until the company has done all the hard work to earn access to those markets — that the team can reap the rewards of the value created by the Backpack community from now until then.”

Backpack did not disclose when the TGE will occur, but did hint that an additional outline of the token’s utility is forthcoming.