Community Takeover (CTO) in cryptocurrency refers to the situation where the original development team of a project exits, and the management and operation are subsequently assumed by members of the community. This model represents a shift towards decentralized governance and community-driven development for projects that may have been abandoned or experienced founder departures. ^[1]

Overview

The concept of Community Takeover (CTO) has gained prominence, particularly within the meme coin sector, where the ease of token creation via platforms like Pump.fun has led to a proliferation of projects, many of which are quickly abandoned by their initial developers ^[1].

In a CTO scenario, the community steps in to maintain, operate, or further develop a project after the original team's departure. This can occur for various reasons, including the original developers cashing out, losing interest, or internal disagreements ^[2].

When a community takes over a project, there are generally two approaches to continuing its operation.

The first is Partial Inheritance, where the new community team gains control of the original development team's accounts and assets, essentially replacing the management while maintaining existing infrastructure.

The second is Complete Separation, where the community starts anew, creating new social media channels, websites, and community platforms, while preserving the existing token and its underlying information ^[1]. This community-led model, while challenging, can foster strong cohesion and a sense of ownership among token holders ^[1].

Origins

While the term "Community Take Over" is more recently associated with meme coins and smaller projects, the concept of a project continuing or being significantly influenced by its community after the initial creator's reduced involvement can be seen in earlier cryptocurrencies. Bitcoin, for instance, saw its pseudonymous creator Satoshi Nakamoto disappear, leaving the project's future development and direction largely to the community of developers and miners ^[1].

Similarly, the founders of Dogecoin sold their holdings and exited community development in 2015, leaving the project's continuation to its community. These instances can be viewed as early forms of community-driven continuation, predating the formal term CTO. ^[1]

Reasons for CTO

Community Takeovers can occur for several reasons, often stemming from the actions or inactions of the original project developers ^[2]. Common reasons include:

• Scams/Rug Pulls: The most frequent reason, where developers intentionally abandon the project after raising funds or achieving a certain market capitalization, often selling off their holdings and disappearing ^[2].
• Discouragement/Demotivation: Original developers may lose interest or become discouraged if the project does not gain expected traction or faces significant challenges, leading them to abandon it .
• Disagreement: Internal conflicts or disagreements among the founding team members can lead to the project being abandoned if a resolution cannot be reached .

In these situations, a motivated community that still believes in the project's potential may decide to take over its management and development .

Representative Projects

Several projects have experienced Community Takeovers, with some achieving notable success under community management.

POPCAT ($POPCAT)

POPCAT is a meme coin on the Solana blockchain inspired by a cat named "Oatmeal" known for its distinct facial expressions ^[1].

• Created on December 12, 2023, with an initial supply of 1 billion tokens ^[1].
• The original creator sold all their tokens and the project's contract update ownership and social media accounts to a community user known as @jpeggler for 35,000 USDC when the market cap was below $100,000 ^[1].
• Following the community takeover, the project's popularity increased.
• Within 8 months of launch, $POPCAT reached a market cap of $1 billion, becoming the first cat-themed meme coin to do so ^[1].
• In mid-November, its market cap surpassed $2 billion ^[1].
• As of the source publication date (December 2024), it maintained a market cap of $1.3 billion ^[1].
• On-chain data indicated approximately 114,700 holders, with the top 10 addresses holding 26.02% and the top 100 holding 53.19% of the supply ^[1].

Quant ($Quant)

Quant is a meme coin that originated from a live stream on Pump.fun by a 10-year-old referred to as "Kid Brother" ^[1].

• On November 20, the Kid Brother purchased approximately 51 million $Quant tokens for $350 ^[1].
• He sold the tokens within 10 minutes, making a profit of about $30,000 ^[1].
• Following his exit and a gesture perceived as mockery, the community reacted, and the price surged ^[1].
• Within 4 hours, the market cap reached $100 million, representing a significant increase ^[1].
• The Kid Brother reportedly missed out on substantial potential profit due to his early exit ^[1].
• As of the source publication date, the market cap had declined to around $1.2 million ^[1].

Moo Deng ($MOODENG)

Moo Deng is a Solana-based meme coin created on September 10, inspired by a pygmy hippo from Thailand ^[1].

• The creator sold off all 51 million tokens held just hours after the token's launch ^[1].
• Half a month later, the market cap exceeded $400 million ^[1].
• On November 15, it reached a historical high of $800 million ^[1].
• As of the source publication date, the price had declined, but the token had seen a significant increase from its original price in under 3 months ^[1].
• The community takeover is cited as potentially strengthening consensus and cohesion by eliminating the risk of insider selling by the original creator ^[1].
• Latest data showed approximately 70,400 holders, with the top 10 addresses holding 37.58% of the total supply ^[1].

Pros and Cons of CTO Projects

The CTO model presents both potential benefits and challenges for a cryptocurrency project.

Pros:

• Alignment with Decentralization: The community-led nature aligns with the core principle of decentralization in cryptocurrency ^[1].
• Elimination of Founder Risks: The exit of the original team can remove potential issues such as large-scale selling by founders ("whale" dumping), exploitation of contract vulnerabilities, and continuous selling pressure from the initial team ^[1].
• Token Distribution Reshuffle: Founder exit can lead to a redistribution of tokens, potentially broadening ownership ^[1].
• Strengthened Community Cohesion: Community management can enhance trust, engagement, and a sense of belonging among members, potentially promoting sustainable development if community cohesion is strong ^[1].

Cons:

• Decision-Making Efficiency: Community governance can face challenges in making timely and efficient decisions due to distributed authority and potential disagreements ^[1].
• Resource Allocation: Managing and allocating resources effectively within a decentralized community structure can be difficult ^[1].
• Potential Conflicts of Interest: Different community members may have conflicting interests, which can impact the project's direction and progress ^[1].
• Uncertainty of New Team's Intentions: Token holders may find it difficult to assess whether the new community team is committed to long-term development or is primarily motivated by short-term speculation ^[1].

Common CTO Tactics (Fake CTOs)

Not all instances that appear to be Community Takeovers are genuine. Some projects may simulate a CTO scenario to manipulate the market, potentially leading to losses for token holders ^[1]. These "fake CTOs" often follow a pattern:

1. Developers create and promote a project ^[1].
2. When the token price rises, the original developers sell all their tokens ^[1].
3. The same developers, using multiple different wallets, buy back tokens to create the appearance of a community takeover ^[1].
4. Once the token price rises again due to the perceived takeover and renewed interest, the original developers sell their tokens once more ^[1].

On-chain data can sometimes reveal characteristics of these disguised projects, such as high trading volume coupled with low trading activity, or sudden, unexplained price surges. Tools that provide developer indicators, marking instances of developer token sales or burns, can assist users in identifying potential fake CTOs ^[1].

On-chain data can show patterns like sudden price surges ^[1]