What is Mercenary Capital?

Mercenary Capital is a term used to describe a type of opportunistic capital. It’s issued by investors whose main goal is to benefit themselves from short-term programs that are launched by platforms in order to incentivize its users.

Usually, it’s a temporary stop for these investors while they wait for better opportunities. Additionally, investors withdraw their capital when the gains do not satisfy them any longer.

Investors often exploit mercenary capital through programs that offer huge rewards in a relatively short time. 

Let’s have a look at growth hacking programs as an example. Automated market maker (AAM) platforms often launch this type of program. If the liquidity providers (LP) stake or lock in their LP tokens, they receive additional rewards like governance or native platform tokens. They’re known as liquidity mining and yield farming. The main goal of these programs is to attract a number of smaller investors. 

When growth hacking programs offer additional features such as a pre-defined period of time to lock in or a temporary bonus, they mostly reward opportunists who jump from one boat to another instead of long-term members of the community.

After the growth hacking program ends, opportunistic investors sell off their rewards. Thus making the reward token prices decrease, and, in some cases, spread panic selling.

Mercenary capital can negatively impact the platforms that conduct growth hacking programs by sabotaging their long-term development. These platforms can fight mercenary capital by establishing trust within the community, practicing good tokenomics, offering solid products, and implementing longer lock-in staking periods for greater rewards.