Recently several token sales have struggled with certain buyers gaming the sale with the use of bots, and high gas levels to purchase the tokens before standard buyers had the opportunity to purchase. This has resulted in poor levels of distribution and an unhappy community. That is why we decided to launch our token sale on Fjord Foundry via an LBP.
LBPs — What are they exactly?
Liquidity Bootstrapping Pools or LBPs are pools that change token weighting dynamically. Traditionally, pools on Uniswap have a steady 50% weighting, this means that a pool would always have a 50/50 weighting between the two tokens in the pair. Weighting on an LBP pool can start with 99/1 and move to new weighting over a selected time by the pool owner, this makes them ideal for token launches.
Once the LBP period has come to an end or the ratio has finally been reached, the pool will be converted into a traditional liquidity pool.
LBPs allow price discovery by determining the acceptable market price for assets. It’s common that LBP’s have fewer investors at initial launch, however as the price dynamically changes, buyers are inclined to step in and purchase the asset. The price is maintained for the remainder of the LBP by using arbitrage, this is how the price declines and ratios adjust as buyers purchase until an acceptable price is reached.
The correct parameters must be chosen as this is very important for the LBP’s price discovery. If, initially the price is too low, as soon as the pool is launched the asset will be bought up quickly, similarly if the final price is targeted too high, there would be little demand for the asset.
LBP — Key features
Price discovery: The project token price starts high and slowly drops based on a pre-configured ‘price delay curve’, this will disadvantage bots and whales buying early while at the same time, anyone can buy and sell into the LBP freely throughout the sale.
Buy and Sell Pressure: When there is a weight shift, one token’s price will be experiencing buy pressure whilst the other token will be experiencing sell pressure. With modest trading volume, the price approaches the generally agreed-upon market price when the buying/selling is mixed.
Decentralised participation: There are no hard caps, no listing requirements nor whitelists. There is no minimum or maximum allocation, it is all entirely down to the LBP participants on how much they want to invest. They are the definition of a fair launch.
Unbiased distribution: LBPs stop all of the ‘first come first served’ token launches that favour the first bot in or the highest gas transaction fee. The tokens end up in the wallets of as many investors as possible in a fair way that stops whales and front runners from getting more favorable rates than smaller investors. If LBPs are used for early-stage tokens, this helps increase how widespread the distribution will be.
Capital efficiency: Projects that use LBPs to kickstart the liquidity of a token can do so with minimal initial capital. Projects that run an LBP with their own token and ETH usually start with 1% — 20% ETH (remember, other platforms require 50% ETH), this significantly reduces the starting capital needed. For example, the pool would change from 90/10 TOKEN/ETH to 10/90, ultimately resulting in the project holding far more ETH at the end of their LBP and also reducing the price volatility that projects can experience when launching a 50/50 pool.
We will announce the time and date of the token sale in the coming days!
All the best, Stephen.
FjordFoundry — https://fjordfoundry.com/
$TRACK DAO
