This is an opinionated section and is not financial advice. The author of this section holds no Bitcoin L2 tokens.
The issue with this site is that it groups together projects who have (pretty much) stolen from users, with projects who are trying to do some cool stuff in the space.
So, let’s clarify this:
Not all tokens are (outright) scams.
The Bitcoin maximalist camp might kill me for saying that. That is fine. But launching a token to incentivize team members and investors is much different than stealing users’ funds who deposited some money in hopes of getting a token…
Now, are there projects who distributed tokens in poor ways? Are there core teams who dump their tokens on their community? Are there VCs who dump on everyone?
Yes, of course.
But this doesn’t mean all tokens are completely useless…
First, what is a scam?
Our site covers a few data points for Bitcoin L2 projects:
- What kind of L2 is it?
- Is there a token?
- Is the team actively contributing to the project?
- Is the price down over 80% versus its all-time high (against the US Dollar)?
In the “is there a token” section, we have a few answers:
- Yes (it’s live or been announced)
- No (or not announced)
- Rug pull (or likely rug pull)
To put it simply, if a team has done a “rug pull”, then it’s a scam. They stole from users. If the project has launched a token, isn’t very active on its GitHub (or socials), and isn’t in production (meaning launched a mainnet), then it’s also probably a scam.
I’d even concede that most governance tokens are silly (and might be scams) and are just a means to incentivize investment. But, launching the token pre-product is very different than not.
Now, is it a scam if a team launches its mainnet, gains some traction and then launches a token for decentralization purposes?
Maybe not.
Let’s look past governance
I’ve written before about a concept known as sequencer decentralization. This concept discusses how L2s can decentralize the parties who construct L2 blocks.
One mechanism to do this is with Bitcoin staking. You can have sequencer nodes participate in some Proof-of-Stake mechanism, stake their Bitcoin to provide security, and earn L2 transaction fees for the blocks they produce.
Now, what if the L2 has really low fees? Or it hasn’t gained much traction yet?
This is where teams will argue that launching a token, and using it as a mechanism to decentralize consensus participants in the L2, is a valuable use case.
You can run a similar Proof-of-Stake protocol, but instead of just transaction fees, validators (block producers) additionally earn newly issued tokens. If these tokens have value, then more parties will be incentivized to participate as a validator in the Proof-of-Stake network. This can lead to better decentralization and less federated systems.
I’m not quite sure if they’re right. But, launching a token to secure some decentralized protocol seems much better than launching a token pre-product for no reason… right?
It’s a grey area
We’re entering a weird world where Bitcoin L2s will have tokens. The utility for these tokens, and their distribution models, will vary from project to project.
Some projects will launch their token in scammy ways. Others will launch their tokens to support the decentralization for different aspects of their protocols. Some won’t launch tokens at all.
The purpose of this site is to share what projects have done rug pulls, which ones might, and others that haven’t.
We don’t take any opinion on whether the token is useful or has value.