Inside Crypto’s ‘KOL’ Economy: Influencer-Investors Get Special Treatment in Token Deals

As a researcher studying the crypto industry, I’ve noticed a significant shift in funding sources for crypto founders in recent months. Traditional investors like venture capitalists and angel investors have taken a backseat to a new type of investor: Key Opinion Leaders (KOLs). These influencers have gained traction as they bring not only financial resources but also credibility and a large following to the table. This trend marks an intriguing development in the crypto ecosystem, and I’m excited to explore its implications further.

As a crypto market analyst, I’ve observed that Key Opinion Leaders (KOLs) play a significant role in shaping the investment decisions of global crypto users through their insights and recommendations shared on social media. These KOLs may choose to remain anonymous, using pseudonyms like a cartoon penguin, or they could be publicly recognizable figures, such as YouTube personalities. Regardless of their identities, their “alpha” – exclusive information or analysis about specific crypto protocols – can greatly influence the market trends and investor behavior.

As a researcher studying the cryptocurrency industry, I recently came across an intriguing finding from a CoinDesk review. This review revealed the emergence of a thriving economy among influencers known as Key Opinion Leaders (KOLs), who write significant investments in crypto startups and subsequently promote these projects to their substantial audiences on YouTube and other platforms like X, formerly Twitter.

As a market analyst, I would interpret Vlad Svitanko’s statement as follows: “The more distance there is between the expected selling points for bags, the greater the potential for the token to advance. This bodes well for the project and should lead to positive price movements.”

KOL rounds represent a new spin on the paid endorsements of previous cryptocurrency eras, featuring prominent influencers such as Ben Armstrong (BitBoy Crypto) who once charged substantial fees to advertise tokens to vast online followings. In contrast, KOLs now invest their funds directly into these projects under favorable conditions. These terms include lower valuations and the ability to sell tokens before other private investors are permitted to do so.

In a finding based on more than two dozen confidential conversations with industry leaders, including founders, developers, investors, and other insiders, CoinDesk revealed that the wealthy elite in the cryptocurrency sphere have a keen understanding of how “influencer funding rounds” function.

As a researcher examining the dynamic between Key Opinion Leaders (KOLs) and retail investors in the context of cryptocurrency projects, I’ve come across some concerning findings. While it is generally understood that KOLs have financial relationships with the projects they promote, the specifics of these arrangements are not always transparent.

As a legal analyst specializing in crypto law based near Philadelphia, I’ve observed that when influencers keep quiet about their sponsorship deals, they deceive their audience. Many people depend on these endorsements to guide their financial decisions. This hidden information erodes the trust required for successful digital commerce and may result in substantial financial losses for the unsuspecting fans following them.

The influence of Key Opinion Leaders (KOLs) is set to expand significantly as the creator economy, a vast market valued in billions of dollars, transforms the digital landscape. Cryptocurrencies might be accelerating this trend.

“A well-connected industry insider who collaborates with Key Opinion Leaders (KOLs) made this observation: ‘This is a significant development. It bypasses not just venture capitalists, but also marketing efforts. People are beginning to argue that they no longer require marketing – the capital comes directly from distribution.'”

Humanity Protocol

One company, Humanity Protocol, has lately adopted the strategy of collaborating with Key Opinion Leaders (KOLs), as it challenges Sam Altman’s massive digital identity project, Worldcoin, worth over a billion dollars.

In early March, the relatively small Humanity Protocol team successfully secured $1.5 million in funding from angel investors and key opinion leaders (KOLs), as stated in an investor prospectus. Meanwhile, a document labeled “Humanity Protocol’s Alignment Program for KOLs” outlined tasks for influencers, including engaging with three weekly tweets and composing three tweet threads about Humanity Protocol, along with participating in at least one of the project’s monthly Twitter Spaces sessions.

The project assigned detailed tasks to influencers who are experts in content, with trader Key Opinion Leaders (KOLs) urged to buy Humanity Protocol’s unannounced tokens post-launch as a sign of support. YouTuber KOLs were instructed to produce two speculative videos: one highlighting Humanity Protocol as a potential rival to Worldcoin, and the other covering the Airdrop.

“We monitor all engagements and will cancel SAFT contracts and return tokens to those influencers (KOLs) who are disinterested in collaborating with our project.”

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A spokesperson for Humanity Protocol declined to comment.

In a more recent YouTube video, a representative from Altcoin Buzz, boasting an impressive subscriber base of 419,000, highlighted Humanity Protocol’s significant edge over Worldcoin. Witnesses reported that this endorsement was subsequently shared within a private Telegram group affiliated with Humanity Protocol by Altcoin Buzz employee Shitij Guptas. Noteworthy influencers are invited to join this exclusive channel upon completion of an “alignment” form, which CoinDesk has obtained for review.

Reached out to by CoinDesk, Gupta responded, “Altcoin Buzz hasn’t put money into Humanity,” and mentioned that he’s part of a exclusive Telegram group for the project in order to receive updates.

He hadn’t definitively rejected the possibility of getting further remuneration, replying “not yet” to questions about payment. However, he assured that Altcoin Buzz would make public any sponsorship arrangements.

In the crypto sector, venture capitalists (VCs) and angel investors typically receive equity from companies as compensation for their investments. On the other hand, Key Opinion Leaders (KOLs), unlike equity holders, are usually awarded tokens instead. These tokens represent a significant role within the decentralized network that the company is constructing.

In simpler terms, tokens hold significant value in the cryptocurrency world. According to a document from Humanity Protocol that doesn’t specify a date, Worldcoin’s total valuation, which represents the worth of all its WLD tokens, is estimated to be an impressive $80 billion.

In simpler terms, tokens can be more quickly offloaded among crypto startup investors than equity. Few private investors in the crypto sphere boast a swifter route to selling their tokens than Key Opinion Leaders (KOLs).

Evolution of KOLs

As a researcher studying the evolution of social media monetization, I’ve observed that influencers have been implementing BitBoy-esque monetization strategies for their followings for quite some time now. Surprisingly, the traditional pay-to-play model continues to yield significant results.

A venture capital general partner remarked, “Key Opinion Leaders (KOLs) in crypto can earn substantial fees, even just for a single tweet – up to tens of thousands of dollars.” In the crypto sphere, they represent a highly profitable business.

In the realm of startups, “angels” refer to wealthy individuals who invest relatively small amounts of money in fledgling companies. These investors not only provide financial resources but also bring credibility and influence to the table. Recently, angels have been merging with another influential group – Key Opinion Leaders (KOLs) – resulting in a rapid acceleration of this trend.

As a crypto investor looking back at the year 2024, I can’t help but smile at the memory of how inclusive the world of Key Opinion Leaders (KOLs) in cryptocurrency had become. It wasn’t just celebrities and industry experts who were partaking in KOL rounds; instead, anyone with a decent following – thousands strong – could join the fray. A high-ranking employee at my favorite crypto startup made light of this trend, quipping that “even those with a pulse” were making their mark in the world of crypto investing.

As a researcher studying token generation events (TGEs) that have occurred this year, I’ve found an intriguing statistic: approximately 75% of the more recognized TGEs have included Key Opinion Leader (KOL) rounds. Despite my involvement as an influencer with a following of 46,000, I personally choose not to participate in these deals through private text messages.

Based on studies carried out by market intelligence company The Tie, it has been observed that influencers significantly impact the cryptocurrency market through their activities on social media, including price fluctuations of tokens.

CEO Joshua Frank expressed that KOLs (Key Opinion Leaders) undoubtedly leave a significant mark on the crypto world. Moreover, he suggested that their impact might be particularly substantial for cryptocurrencies with less extensive market capitalizations.

‘A quick buck’

As an analyst, I would rephrase that statement as follows: I’ve observed that KOL (Key Opinion Leader) rounds have evolved into a cost-effective marketing solution for projects. Rather than bearing the upfront expenses themselves, they now invite numerous influencers to invest in their venture, essentially granting them access to a vast network of potential customers at no additional cost.

One productive investor with a large following suggested in a text message that it’s more effective when influencers personally invest, by purchasing a stake.

The alignment of incentives for those involved in KOL (Key Opinion Leader) rounds isn’t always sustainable in the long term. On the day of a token’s launch, these participants typically receive a significant portion of their tokens, enabling them to sell immediately after the token becomes available on the market.

As a researcher studying trends in the metaverse and marketing industries, I’ve observed that the prevailing sentiment currently is that no one is willing to accept vesting periods longer than 12 months. The desire for immediate returns is widespread.

An AI-centric cryptocurrency initiative named Creator.Bid is allowing Key Opinion Leaders (KOLs) to claim up to 23% of their BID token allotment on May 15, which is when the general public receives an airdrop, based on information being shared among investors. In contrast, Veggies Gotchi is granting identical numbers of tokens to its KOLs as they sell to the public, according to project documents. Neither initiative responded for comment.

Adviser Julian Leitloff of Citizens, a token launch platform on the verge of hosting a community token sale, revealed that key opinion leaders (KOLs) will encounter more stringent unlocking and vesting conditions than regular buyers.

“That is their obligation and nothing we enforce contractually,” he said.

‘Heavy loss for retail’

“From my perspective as someone who doesn’t engage in KOL (Key Opinion Leader) arrangements, these deals bring benefits for both protocols and KOLs. However, the retail sector bears a significant loss. The lack of proper disclosure surrounding these deals and their vesting terms is a common issue, which prevents the community from being informed.”

According to key opinion leaders in the crypto space, most digital asset projects do not regard their tokens as securities and thus do not adhere to the disclosure requirements for stock market promoters.

According to Givner, a lawyer based in Philadelphia, there are potential infringements of Federal Trade Commission guidelines on clear and conspicuous disclosures among many Key Opinion Leaders (KOLs), beyond the realm of U.S. securities law. The fundamental issue is that if individuals receive compensation to promote a product or service, they must make this fact known to consumers in an unambiguous manner to prevent any possibility of misleading them.

As an analyst, I would put it this way: The current setup keeps me, as a retail trader, uninformed about the financial interest and token selling capabilities of Key Opinion Leaders (KOLs) who have been vigorously promoting upcoming token launches to us.

“You obviously make your community exit liquidity,” Muur said.

Weeding out ‘garbage’

As a seasoned crypto investor, I’ve noticed that the Key Opinion Leader (KOL) economy is continuously improving in its ability to generate value. Multiple marketing agencies specializing in crypto have approached me with extensive lists of KOLs. For a reasonable fee, they connect influencers with projects where their influence can be most effectively utilized.

KOLs (Key Opinion Leaders) are also undergoing changes. Some smaller KOLs are joining forces to create syndicates, enabling them to negotiate more favorable terms during brand collaborations, according to two sources familiar with the situation.

It’s important to note that not every cryptocurrency project conducts a Key Opinion Leader (KOL) marketing round. According to one KOL marketing executive, approximately 95% of teams are rejected due to being considered “random nonsense.” Only the most credible and promising projects can successfully secure funding from influencers. The executive explained that this is because influencers want to protect their reputation and their followers’ trust by avoiding the promotion of obvious failures.

As a crypto investor, I’m constantly inundated with pitches from the upper echelon of the community, often multiple times a day. These invitations to join various projects usually come with expectations for promotional efforts, but seldom include any disclosure requirements.

Projects have the luxury of being selective when it comes to choosing advocates for their products.

An executive from a prominent crypto initiative shared, “We carefully selected 100 Key Opinion Leaders (KOLs). We were meticulous in our process, ensuring only genuine and valuable additions to our community.” However, not all of these individuals are committed for the long-term; some may be focused primarily on pumping and selling tokens as rapidly as possible.