Why should liquidity mining be part of your token marketing strategy?
Why should liquidity mining be part of your token marketing strategy?
Blog»Why should liquidity mining be part of your token marketing strategy?
2021-07-27 · 9 min read
Whenever a blockchain project issue makes its ambitious move to issue a token, one critical question that could shape the project’s fate would be: “how do we increase market awareness and adoption of our token?”
Marketing has long played an important and integral part in raising awareness for new token projects and accelerating the growth of a token’s community and ecosystem. In this article, we will provide an overview of the basics of token marketing, and argue that liquidity mining should be integrated with a token project’s overall marketing strategy to 1) maximize its exposure and gain access to active and passionate token traders, and 2) cultivate a positive community-driven brand image, which further helps the project gain traction among like-minded token supporters.
The current state of token marketing
Today, token projects tend to leverage the following marketing channels through a token’s lifecycle:
A detailed and well-written whitepaper is key to demonstrate a project’s innovation, its value, roadmap, and token economics that convince potential holders, investors, and traders.
The website is often the first touchpoint with the target audience and plays a key role in the top-of-funnel success.
Social media such as Twitter and Facebook (page and groups) is one of the most important owned channels for any project. A big following provides impressive social proof that converts.
Normally the exchanges that will list a token will be partnering with the token project to make a blast for the upcoming listing. On top of it, projects can also host trading competitions, airdrops, and other events by partnering with exchanges. Exchange partnership provides an excellent opportunity for raising awareness among the target audience.
Cryptocurrency data platform
Data platforms such as CoinGecko and CoinMarketCap also provide a great venue to put projects in front of the target audience. Token projects should make timely changes to their information and project description to make sure the audience can make informed decisions.
PR is an ongoing effort throughout the token lifecycle. Being covered on major crypto and blockchain media, a project will be able to keep the community informed and engaged, and build trust with its development progress, product updates, partnership announcements, and news.
Blog and video are owned channels that organically improve SEO of your site, build credibility and provide education to the target audience.
Email is another owned channel that serves an important role in engaging, converting, re-engaging, and retaining your audience throughout the entire token listing process.
Influencers are generally a paid channel that can be effective when used properly. There are numerous crypto/blockchain/DeFi influencers on YouTube, Twitter, and Facebook. It is particularly useful when you want to reach the audience in specific geographic locations or affinity groups.
Token projects can also leverage airdrops to pique interests and build up their initial communities by distributing tokens for free.
For existing tokens, some of the key channels mentioned above such as social media, PR, email, influencer, and content would remain important as part of ongoing marketing efforts. In addition, the following channels will be often used to keep the post-launch engagement with the community and continuously increase project awareness.
Online forum and chat group
Online forums such as Reddit and Bitcointalk, and chat groups on Telegram and Discord often serve as the homebase for your community once you issue the token. Maintaining and growing the community remains an essential ongoing effort. You can directly interact with your community, provide support, collect feedback, and enable the community members to help each other.
Bounty & Hackathon
Token projects can launch bounty programs and hackathons to incentivize the hacker and developer community to make continual contributions to the project. The number of contributors tends to be a good indicator of the credibility and trustworthiness of a project.
Event, conference & webinar
Event marketing provides an important interactive experience for your target audience to learn about and connect with your project. This experience is irreplaceable by other digital channels in its efficiency of building trust (the audience can see the real people behind your project) and engaging the community (questions can get answered in real time).
The problems with current token marketing
You have tried numerous owned, paid, and earned marketing channels, there are still gaps between your efforts paid and your ideal situations:
Your community is highly fragmented. Your Twitter followers, your event attendees, and your airdrop receivers are all different people, looking for different things.
Your followers might be purely interested in speculating, even new to crypto, and therefore cannot positively contribute to your ecosystem.
You might not get access to the audience who will value your project and actually trade your token on a regular basis.
Now, you may wonder what the next best marketing channel will be for your token project.
Why is liquidity mining an efficient channel for token marketing
Liquidity mining is crowd-sourced liquidity provision that incentivizes the participants. The liquidity mining solution provided by the Hummingbot Miner platform aims to address the token liquidity problem by rewarding a decentralized community of individual market makers commensurate with the risk they bear.
Building a community brand
As mentioned in the recent $2bn FOV milestone announcement post, Hummingbot Miner has seen 2,900+ individual traders who have participated in liquidity mining and earned rewards, achieving US$2 billion traded volume within 1.5 years since the launch. We have served 30+ token projects in different verticals, including but not limited to privacy, payment, finance, gaming, etc. across three major exchanges with great results (see how Zilliqa graduated from our liquidity mining program with an impressive ranking improvement and why NEM considers liquidity mining an ongoing initiative to reward the community). The liquidity (i.e. open order volume) our miners are providing at any moment peaked at more than US$1 million.
Snapshots on Jul 23, 2021
Liquidity is a scarce resource for which many exchanges and token issuers are paying substantial amounts to dedicated providers, i.e. professional market makers. As stated in our Whitepaper, against the historical backdrop of market maker compensation schemes, traditional market making is susceptible to adverse selection, monopolization risk, and verification difficulty. On top of these weaknesses, one important trait that makes traditional market making even more inferior than liquidity mining is that the act is always and can only be “behind the curtain”. Few token projects will announce the market maker they hire to the public.
A liquidity mining campaign, on the other hand, will be announced publicly and proudly to engage the trading community and signal to the market the issuer’s support of trading efficiency, price discovery, and community building. The community-driven and decentralized nature of liquidity mining echoes the ethos of DeFi and blockchain in general and serves well not only as a liquidity strategy but also as a marketing and branding strategy.
“I like the idea of paying a community rather than paying a market maker. I like the decentralized nature of it.” -- Nicholas Pelecanos, Head of Trading at NEM
Tapping into the right community with the right user persona
Liquidity mining on Hummingbot Miner offers token projects the valuable access to Hummingbot’s 15K-member strong trader community. This is a serious community with professional and hobbyist crypto traders who are technical, knowledgeable about the crypto market, and passionate about high-frequency algorithmic trading. There are no talks about speculation or pump-and-dump schemes. While general trading strategies are also discussed, this is the only community of market-makers, with specific discussions on market making strategies and liquidity provision.
A predominant user persona of the Hummingbot community is an engineer by training and trader at heart, technical and serious about trading, 20-50 years old, living in the US, Canada, Russia, UK, India, Germany, Netherlands, or China. This type of user is among the hardest to access for token projects because they are not active in the general mainstream marketing channels; token issuers cannot simply pay to acquire them. Hummingbot allows its token partners to meet the ideal users where they are.
In addition to its 15K-member online Discord community, Hummingbot runs a 10K-subscriber newsletter, a 4K-subscriber YouTube channel, a 7K-follower twitter account, and a 1.6K-member subreddit, all grown organically from scratch.
Strong track record of supporting initial listing
Hummingbot Miner has strong experience supporting initial token listings with liquidity mining. We have supported Kava’s HARD listing on Binance with US$39 mm filled order volume through a short 2-month liquidity mining campaign, NEM’s XYM listing on KuCoin in this April with a US$23 mm filled order volume so far and 231 individual miners participating, and BitClout’s initial listing on AscendEX with a US$1+ mm filled order volume and 90 individual miners participating within a week.
These liquidity mining campaigns have effectively helped token issuers 1) introduce their projects to the highly targeted Hummingbot community, 2) earn backlinks from our trustworthy website that improve the project credibility and SEO, 3) generate buzz around their token ecosystem, and 4) garner trading efficiency.
How to leverage liquidity mining as part of your marketing strategy
Excited about liquidity mining but wondering how to integrate into your marketing strategy? Follow the following steps:
Do your research
Familiarize yourself with the basic concepts of trading, market making, and liquidity. Spend some time researching what liquidity mining is, how it can make an impact on your token ecosystem, and what the best way is to implement liquidity mining.
Set a budget
Set an amount aside from your marketing budget for liquidity mining. The liquidity mining budget should take both miners’ rewards and Hummingbot’s platform fee into account. Generally, the budget should not be lower than US$10K per month.
Reach a partnership
Email us at firstname.lastname@example.org to learn more. Hummingbot would love to provide the right solution package for you.
Leverage the community
Hummingbot provides access to its highly targeted trader community as well as marketing support for your liquidity mining campaigns. You can also consider building a liquidity miner community (e.g. Zilliqa built a telegram group for its liquidity miners) around your token project, providing timely support and engaging with it on a regular basis.
Consider liquidity mining as an ongoing effort for community building and marketing
Treat liquidity mining as a long-term ongoing effort that continuously fuels your community growth, and build useful content around it. To better integrate it with your existing marketing efforts, you can leverage it as an intriguing, news-worthy, and educational topic for your influencer network, media resources, and email/video/blog content.
🏛 Token issuers: contact the team at email@example.com to learn more about running liquidity mining campaigns on AscendEX, Binance.com, KuCoin, or to suggest the next exchange for us to integrate with!
🏦 Exchanges: contact firstname.lastname@example.org if you’d like to bring Hummingbot and liquidity mining to your exchange!
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