In the evolving landscape of blockchain projects, DFINITY stands out with its conservative yet strategic approach to funding and token management.
Dominic Williams, Chief Scientist at DFINITY, recently highlighted that only three monthly token unlocks remain, underscoring a critical phase nearing completion.
DFINITY’s careful planning of this process has been key in preventing sudden increases in market supply, which helps to stabilize the token’s supply dynamics and protect the market from volatility.
Token unlock refers to the process where tokens (cryptocurrency units) that were initially restricted or locked are made available to their owners. When a blockchain project raises funds from investors or team members, it may offer them tokens at a discounted rate,but these tokens are often locked for some time. This means the investors or team members can’t sell or trade them immediately.
The tokens are usually locked to prevent too many tokens from flooding the market at once, which could cause price instability. A token unlock happens when these restrictions are lifted, and the holders of the tokens are allowed to access or sell them.
The unlocking often happens in stages, over months or years, to help prevent sudden drops in the token’s value due to a large number of tokens being sold at once.
The financial journey of DFINITY began with its Seed Round in February 2017, attracting CHF 3.9 million from 370 participants at a valuation of $16 million. The strategic management of these funds, including holding portions in ETH and BTC during the 2017 crypto bull run, significantly increased their fiat value to $40 million.
Anticipating a larger valuation post-boom, DFINITY adjusted its strategy, sidestepping a planned ICO to avoid potential legal complexities regarding securities law. Instead, it assured Seed investors a generous 24.72% of tokens at genesis, rewarding their early participation and trust.
The Strategic Round in January 2018 saw DFINITY raising $20.54 million for 7.00% of the initial token supply, marking the first investment in tokens by renowned firms like Andreessen Horowitz and Polychain Capital. This round not only supported the foundation’s financial base but also led to the creation of the DFINITY Ecosystem Venture Fund aimed at fostering the Internet Computer’s application ecosystem.
A later private sale in August 2018 saw 110 participants contribute $97 million for 4.96% of the initial supply, with a vesting schedule set to commence at the main net launch in May 2021. These funds were critical in scaling DFINITY’s operations and technology development.
Recognizing the importance of community support, DFINITY conducted an airdrop in May 2018, distributing ICP tokens worth $35 million, which accounted for 0.80% of the initial supply. This initiative helped to build a robust community.
Token Distribution and Governance: The token distribution at genesis was thoughtfully allocated to balance the interests of various stakeholders:
Seed Investors: Received 24.72% for their early faith and financial support.
DFINITY Foundation: Manages 23.9%, using it to fund research and development, operations, and community initiatives.
Team Members: Approximately 200 team members hold 18.0%, aligning their interests with the project’s success.
Early Contributors and Strategic Investors: Account for 16.5% combined, rewarding those who contributed to DFINITY’s early stages and strategic growth.
Private Presale Investors: Hold 4.96%, reflecting significant late-stage support from major investors.
Source: https://messari.io/report/an-introduction-to-dfinity-and-the-internet-computer
Source: https://dropstab.com/coins/internet-computer/vesting
It is noteworthy that the volume of tokens received by venture capitalists has been decreasing over time. Initially, on May 11, 2021, they received 44.52 million ICP, which accounted for 8.41% of the total supply. From June 11, 2021, to June 11, 2022, the monthly distribution was reduced to 5.40 million ICP, or 1.02% of the total supply. This allocation further decreased from July 11, 2022, to June 11, 2024, to 3.23 million ICP per month, representing 0.61% of the total supply. From July 11, 2024, to the present, the amount has been further reduced to 2.37 million ICP monthly, which is 0.45% of the total supply. This gradual reduction in token disbursement is an integral part of DFINITY’s strategy to manage supply effectively, aiming to mitigate potential market saturation and support the stabilization of ICP’s market value over time.
Source: https://cryptorank.io/price/internet-computer/vesting
While the DFINITY Foundation has taken a cautious approach to token unlocks, it’s important to acknowledge that these events have had a notable impact on the price of ICP over the long term. However, with only three token unlocks remaining, it is reasonable to expect that selling pressure on exchanges will diminish after May 2025. This reduction in selling pressure is likely to stabilize the token’s price and could be viewed as positive news for all ICP holders.
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