Solana-Based Crypto Exchange Drift Plans Pre-Launch Market for New Tokens

• Drift Protocol is opening up a "pre-launch market" for trading tokens that have not yet started trading.
• The first token with a market will be Wormhole's upcoming W.

There's soon to be a marketplace on Solana for trading tokens that don't yet exist.

Drift Protocol – a crypto spot and futures exchange that operates on the Solana SOL$133.05 blockchain – plans to expand into "pre-launch markets," too, with a service that lets traders bet on the price of tokens before they start officially trading.

There's plenty of such assets to choose from these days. A coterie of crypto startups on Solana are preparing to airdrop new tokens to their users, including Wormhole's W, and Tensor's TNSR. Their token holders will get to vote on the future of the project.

But these so-called governance tokens are fundamentally financial assets. They trade on unregulated exchanges where buyers and sellers are filled – often chaotically – by market makers and algorithms. The first moments of their trading lives are often highly volatile. How does one price an asset that didn't exist before?

Cindy Leow, Drift's co-founder said traders and market makers have generally followed a stilted logic: price the token at the project's most recent valuation and add "some sort of premium." To find the premium (or something close to it) traders could use a pre-launch market.

"If it's an efficient market it should price [tokens] well enough to launch close to the starting price," she said in a recent interview with CoinDesk conducted over Telegram.

But there are risks that come with this kind of product. While spot and futures exchanges can get their price data from a variety of sources, Drift's pre launch market will only be able to reference itself. It will thus be vulnerable to manipulation that if left unchecked could force a liquidation cascade across the entire protocol.

Drift is putting liquidation guardrails up that will stymie runaway prices, according to a blog post. It will also require traders to settle up any debts they've accrued on other trading products, some of which allow for risky leveraged positions.

"Having a fair, liquid market is even harder for pre-launch markets than it is for memecoins," Leow said. But Drift nonetheless has signed a few market makers up to back these contracts.

Pre-launch markets aren't a new concept in DeFi though they have not yet taken hold in Solana. Demand for these services aren't sky-high, either, according to Leow. She estimates Drift's market could see less than $1 million in daily volume if it follows the trend set on other chains.

"But the interesting thing is that people reference these prices a lot on social media," she said.