Building in public with $QR: Bootstrapping via project coin
Following up on our project coins report, Splits talked to Jake of $QR about his experience operating one. If you're unfamiliar, $QR is "the onchain attention machine," a daily auction in which bidders compete to set the link of the day.
Three points stood out from our conversation:
- Founders with project coins experience a strange financial dynamic: so much of the "value" of their business is stored in the token, but it's tough to leverage.
- The traditional VC path comes with different tradeoffs that are less appealing to some frontier crypto builders. Pick your poison.
- Each founder is not just building a company, but leading a community of token holders. You can't please everyone all the time, but forthright transparency goes a long way.
Project coins have taken off due to enticing upsides: bootstrapping without gatekeepers by converting social (media) capital to financial capital, paired with the potential for tokenomic virality. When this works — when speculation becomes genuine stakeholder behavior — project coins create powerful ecosystems that benefit both founders and holders. Naturally, managing such an ecosystem comes with its own characteristic challenges.
The foundational challenge is establishing sufficient cashflow to start revving up. Jake introduced us to the framework of technical liquidity versus practical liquidity. Project coin founders are highly technically liquid, because that is the default in crypto: markets are 24/7 and you can sell anything, anytime. But practical liquidity approaches zero: founders can't sell due to optics and potential price impact. (Besides, usually they don't want to reduce their skin in the game.)
By contrast, the majority of token holders are able to exit at will without agonizing over the impact on the community or their personal reputations. Project coin founders don't have this luxury. When they need more operating capital to drive the business forward, it feels paradoxical having this theoretical source of it so near and yet so far.qr
Funded by attention
As implemented today, this is how a project coin typically works:
- The founder uses a launchpad like Clanker to initiate the token, often reserving some portion of total supply in a project vault, to be used for team allocations and community incentives.
- The founder earns a portion of trading fees (frequently styled as "creator rewards").
The genius of using trading fees to get the ball rolling is that crypto's trademark volatility becomes fuel for the underlying business. However, it's only enough fuel for a very lean bootstrap, unless combined with other funding sources. For example, $QR market cap floats between $2-3 million, but Jake's cut of trading fees has amounted to roughly $50k (half in WETH, which is genuinely liquid, and half in $QR, which is trickier to deploy).
Jake in particular is not stymied by the limited take from trading fees, because his business actually makes money. Since starting in March, the auction has earned $115k, from over $500k in bids, across almost 200 auctions. The average winning bid exceeds $500. Jake doesn't pay himself a salary at the moment, meaning these funds go right back into operations. So he has some capital to work with — but not that much.
"I can't even pay one Silicon Valley dev, you know? It's less revenue than I made in salary in my first year out of college." (Jake worked in investment banking.) "You're on the open market and you've got to make something that actually works and makes money, and it's really hard."
However, it is possible to use the token, provided you don't use that much of it. These things are money, after all; you can procure goods and services if the vendor is open to being paid in a niche internet currency.
"If your total expenses are not that large," due to disciplined bootstrapping, "you can pay people in your token without having a meaningful impact on the price," Jake suggested. "And without selling for personal gain. You're purely using the token to fund the development of the project." In addition, someone eager to earn $QR is relatively more likely to stack the token and let it ride.
This measured approach makes "the value created by the token" accessible without the downsides.
How much value is that, really? Another tricky question.
"I have a problem with market caps in crypto," Jake told Splits. "Like I know the system works reasonably well, but $QR has $300k pooled ETH [in liquidity] so it's not like there's $3 million to be taken out here." Technical and practical liquidity are both curtailed.
Token holders vs. term sheets
Part and parcel of "raising" via project coin is that most of the token's value accrues to holders, without the founder being able to tap into it directly. Preemptively reserving a percentage of token supply at launch has become the default workaround for project coin founders.
Jake in particular didn't do that, since he launched $QR on a whim, more as a financialized thought experiment than a serious business prospect. He decided to pursue the project in earnest after the first auction — built by a volunteer — went for $3,303.
Jake is sanguine on the missed opportunity: If he were starting over from scratch, he would probably reserve a project vault. However, lacking the ability to go back in time, it doesn't feel like the make-or-break factor on whether $QR succeeds.
"The question is, does it materially make operating harder, and the chances of success lower, or is it just something where success or failure is roughly the same probability?" If Jake didn't have auction revenue to work with, this might be a different story. On the flip side, "The positive of not reserving is the truly fair launch, which makes for a good story. Maybe that ends up moving the needle on success more than the extra capital would have."
The traditional solution to early-stage resource constraints would be VCs. By disposition, Jake prefers to avoid that path. "I value freedom," he explained. "Last year I was working on Base Colors. I don't know for sure that I could have raised money for Base Colors, but I think I could have." If Jake had done that, would he have been able to pursue $QR?
"The ironic part is that I avoided raising money from one investor who's super supportive, in favor of raising money from like a hundred thousand people who are impossible to please." In either case, Jake is not purely accountable to himself; he can't just tell everyone else to kick rocks.
Yet it's not the same type of relationship. As we wrote, "The roster of project coin buyers cannot be equated with a standard cap table; they are the financial equivalent of social media followers." Any given one of them can be told to go kick rocks, or simply ignored. Handling a lead investor is different.
Whenever the price of $QR surges to a new all-time high, Jake announces the market opportunity: "By definition, if you've ever bought, you can sell now for a profit. And if you want to do that with some or all of your tokens, you can do that." To the extent humanly possible, he doesn't take it personally.
"I don't think you should be pressured to hold for social reasons," Jake said. If someone offloads $QR, that doesn't mean they aren't rooting for him anymore. "You buy it to sell it, you know? The ultimate goal is to make money," and money is important to people's lives.
Profiting may not be the only reason to buy a project coin, but Jake is right that it's a top concern for most holders. Jake's insight into their priorities balances his determination to act decisively.
Market performance art
About telling people to kick rocks, though. It's still better to avoid, if you can.
In June, Jake posted about selling $420 worth of $QR to take his wife out for a fancy dinner. "If this concerns you, you can front-run me," he quipped. The response was positive to the extent that a $QR holder funded the dinner (and others offered as well).
"That was really popular," Jake recalled, "I think because it's kind of refreshing. The combination of the transparency of a sale, plus it's not a large amount, plus it's a wholesome thing."
This anecdote exemplifies Jake's approach: straightforward, unapologetic, and scrupulously open. It also reveals another dimension of the technical-practical liquidity gap: founders must carefully choreograph any sales, even minor ones, to maintain community trust.
Wallets are public, after all. It's not enough to have technical access to funds — founders must navigate the social protocols around using them. They are called to craft narratives around every transaction, guiding the perceptions of token holders. Public company CEOs offer quarterly guidance to investors at earnings calls, but project coins are 24/7, like all of crypto.
At one point, Jake required the native $QR currency for auction bids, in an effort to stockpile the token and create a steady buy pressure. This turned out to be too much friction, detracting from the actual product experience. Later he shifted to opportunistic buybacks as the superior option. This was not perceived as breaking a promise to the community, because 1) Jake has never promised anything, 2) he explained his rationale and the holders agreed that it was sensible.
(As for what he does with the $QR after buying the dip, the project's Farcaster mini app dispenses micropayments to reward users who check in on the day's winning auction link.)
Beyond the first iteration
Project coins represent a genuinely new take on capital formation. Startup funding doesn't have to follow the traditional arc from friends and family to angels to VCs. But like any financial innovation, the first implementations are rarely the final form. $QR is a revealing example of the promises and challenges in action.
Trading mechanics are a significant aspect of practical liquidity, but it is equally crucial to develop sustainable communication frameworks that allow reasonable access to capital without provoking community ire. The gap between technical and practical liquidity relies on social technology — and personal charisma — as much as financial infrastructure.
The real question isn't whether project coins will replace traditional funding, but how they can evolve to better serve both founders and communities. Jake's transparency-first approach with $QR offers one model for navigating these challenges, but the design space remains wide open.
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