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SPS predeployment considerations

Advanced
Governance
Concept

Overview​

Preparing an SPS launch includes many non-technical considerations. For example, to decentralize a dapp, the governance control has to be distributed among many parties. Therefore, a successful decentralization with many participating parties may rely on non-technical strategies such as advertising.

Moreover, the decision to hand over a dapp to an SPS with a new utility token has many implications for the business behind the dapp. Therefore, developers should deeply consider these business implications throughout the process of tokenizing their dapp.

Prerequisites​

The groundwork for a successful token launch is laid well before the proposal for an SPS is submitted to the NNS DAO. A developer may want to consider doing the following in the interest of making their dapp attractive to future investors:

  • Demonstrating the dapp’s product-market fit through growth and usage metrics. A founder should be able to demonstrate that the dapp has active users loyal to the dapp.
  • Explaining clearly the future utility of the soon-to-be-launched token within the dapp ecosystem. Example utility could be:
    • The ability to use the token to pay for in-application purchases of goods or services.
    • Access to additional functionality or services within the dapp.
    • Interoperability with other dapps.
  • Demonstrating positive unit economics (ability to generate value per new user greater than the cost of acquiring a new user) and/or user scalability for continued growth of the dapp.
  • Articulating business risks and mitigation plans.
  • Acquiring any regulatory approvals, or having a plan to do so.
  • Achieving growth or other hurdles for competition that make it challenging for competitors to replicate the dapp's success.

In addition to the above, tokenizing the dapp on the SPS will decentralize control of the dapp and place the dapp under the control of a DAO/many different parties. This usually means that development of the dapp will slow down due to the need to get many people or parties in agreement for changes, instead of just the developers. Therefore, the developers of the dapp must feel comfortable that the code base is in a stable place and the product roadmap is positioned for the likely slowdown in development speed.

Starting the launch process by an NNS proposal​

The launch process for an SPS is triggered by an NNS proposal where the NNS tokenholders approve the SPS and its parameters. This proposal serve different functions, including an opportunity to pitch the dapp to the NNS community and potential participants of the SPS decentralization swap. An NNS proposal should build trust within the NNS community that the dapp is sustainable in the long run and that the dapp is ready to be handed over to a decentralized community. Therefore, a proposal should include standard information that would be presented in a venture capital slide deck, including:

  • The management team backgrounds and any previous successful application launches.
  • The total addressable market of the dapp market space.
  • Proof of product-market fit and growth traction, including the source of the information.
  • The utility of the token and the tokenomics and why this encourages price stability and growth.
  • A product roadmap showing clear understanding of the user's needs and a prioritization of the tasks to be carried out.
  • A communication plan to ensure continued growth of user-base.
  • Business competition, both at the time of the proposal and expected future competition.
  • Budget and financial details, including what the raised funds will be used for, if appropriate.
  • A description of the technology stack for the dapp.
  • If applicable, information on the desired token holding audience to ensure long-term success and continued pursuit of the initial intent and vision of the dapp roadmap.

After the launch​

After launching an SPS with a utility token, it is important for developers to manage the SPS community. Even though the dapp is decentralized, it is possible that the original developers will need to continue to lead the project as the project matures into its decentralization.

During this stage, it is possible that developers may need to work closely with the token holding community to continue project success and direction. This may include providing data and information about ecosystem growth and financial changes. It may also include managing the product roadmap with token-holder input, feedback and buy-in.