The Milestone Token Approach: An Adaptive Tokenized Crowdfunding Strategy for Ecosystem Projects

Abstract

Ecosystem projects suffer from a fundamental cooperation dilemma: they require significant initial investment from early participants, but later participants get the same benefits without exposing themselves to the same level of risk. This dynamic often results in the failure of such projects as no actor wants to take the risk of being the first investor. This white paper presents a new funding strategy, the milestone token approach, which aims to enhance the success rates of ecosystem projects. While this proposed framework utilizes the principles of crowdfunding in conjunction with blockchain technology, its main contribution is the introduction of a multi-staged crowdfunding process that enhances the incentives of early-stage investors.
The stages of the crowdfunding are aligned with significant events (i.e., milestones) in the process of the ecosystem project. When a milestone in a project is reached (i.e., a project phase is completed), new tokens are released. These tokens can be created completely flexibly based on an implementation framework. This approach incentivizes participants to invest early in two ways. First, it gives early investors some control over the subsequent process of a project (i.e., via voting rights). Second, the price of a token can be increased at later stages of the crowdfunding, building in additional value. Further, the flexibility of the approach allows organizers to combine different tokens (including NFTs) within a crowdfunding system that enables the targeting of different project stakeholders and align potentially differing interests.
Although the design of the phases can be entirely flexible and tailored to the specific project, funding with milestone tokens might look like this:
• Milestone 1 (planning phase): 20% of the total number off tokens are issued at a low price.
• Milestone 2 (concept phase): another 20% of the tokens are sold at a higher price.
• Milestone 3 (implementation phase): the remaining 60% of the tokens are sold at a considerably increased price.

Keywords: ecosystems, blockchain, tokenized crowdfunding, tokenization, white paper