Liquidity Bootstrapping Pools
Fair and efficient token launches for all.
Liquidity Bootstrapping Pools (LBPs) are the fairest, most open and user-friendly way to participate in a token launch. Comparable to a crowdfunding event, the LBP enables a project to launch a token in a manner that is permissionless, capital efficient and most importantly, unbiased. Not only does an LBP create a pathway for new projects to launch a token, they also unlock a fair and inclusive launch for users to participate in the early investment stage of price discovery.
The LBP is a pool type that dynamically changes its parameters to facilitate fair price discovery for a given token. LBPs use an AMM logic known as weighted math and incorporate time-dependent weights; the starting and end weights for both tokens are pre-defined over a set period. Often, the token weights are set heavily in favour of the project token at the start of the launch and gradually slide to favour the collateral token by the end of the event. A high starting price disincentivizes bots, front-running and speculation, creating a more even playing field for participants. Anyone can buy or sell at any point during the event; as the buying pressure builds, it outweighs the planned decay curve, allowing the token to reach a consensus price discovery.
Note: A 2% protoocl fee is applied to the collateral raised in the LBP. The fee will go directly to the Beethoven X DAO treasury.
The BEETS token was launched utilising the innovative Liquidity Bootstrapping Pool (LBP) The Liquidity Bootstrapping Pool was allocated 2% of the Total Max Supply of BEETS (5,000,000 BEETS)
- 5M BEETS tokens were distributed using a Liquidity Bootstrapping Pool (LBP) in October 2021.
- The LBP ran for 24 hours and was open to anyone.
- Unlike a regular weighted pool, the price of entry starts very high to disincentivize bots, front-running, and speculation. Over time, the price automatically decreases by design.
- Below is a graph that shows the BEETS/USDC pool weight starting at 95/5 (with a high BEETS price) and declining to 80/20 (lower BEETS price) over 24 hours.
- At the end of the 24-hour period, the funds were transferred from the LBP into an 80/20 BEETS/USDC weighted pool.
- The LP tokens received by the development team for making the initial pool were deposited into the BEETS/USDC farm on behalf of a vesting contract was time-locked for 180 days.
Unlocking a fairer market for all. LBPs start with intentionally high token prices to strongly disincentivize whales / bots from manipulating and front-running the rest of the market. This reduces stress from all parties involved and means that users can benefit from a fair token launch.
Unlike traditional token launches, everyone has a seat at the table. There are no whitelists, hard caps, or listing requirements. Anyone can participate. There is no minimum or maximum allocation and LBP participants have free reign and flexibility to invest on their own terms.
The freedom to explore. Participants can buy and sell at any point during the event allowing the price to regulate itself. As the price of one token experiences selling pressure, the other experiences buying pressure. This, mixed with modest trading volume, allows the price to find a generally agreed-upon market price.
Now that front-runners and whales are out of the picture, there is no longer a scramble to be at the front of the pack. LBPs flip the first-come-first-serve launch model on its head and projects can now focus on getting their tokens into the hands of as many people as possible in a fairly distributed manner.
Accessibility through efficiency. The initial price of the project's token in the LBP can be magnified by up to 99 times relative to the collateral deposited along with it. Additionally, the collateral can be fully retrieved at the end of the LBP.
Teams can use an LBP to bootstrap the liquidity of a token with minimal starting capital. By leveraging a weighted token split, for example 80% TOKEN and 20% DAI, protocols can significantly reduce starting costs when compared to a standard 50/50 liquidity pool.