The power of Liquidity Bootstrapping Pools used by Merit Circle
Blockchain projects go through different market cycles, looking for the right approach and model to build sustainable operations.
An immediate takeaway is that crypto is volatile and unpredictable. The market swings can affect the development process of new projects.
Majority of projects have unstable liquidity because the pair is volatile, and interest in the token driven by a mixture of coordinated social media shilling, unreal enthusiasm, or short-term influencer collaborations. Also, projects should aim for stable liquidity, protecting at some level anyone who supports, hold or invest in the project token. An example is a project where the liquidity is paired with a stable asset like USDC or DAI.
At the same time, the fundraising ratio of crypto projects remains positive, and the interest in trading too. We have witnessed the ICO boom, the crowdfunding power-house, the token listing issues, the decentralized exchanges, LBPs, and on and on…
What are Balancer — Liquidity Bootstrapping Pools?
As stated in Balancer docs “Liquidity Bootstrapping Pools (LBPs) are pools that can dynamically change token weighting (e.g 1/99 to 99/1 for TokenA/TokenB). LBPs use Weighted Math with time-dependent weights. The starting and end weights and times are selected by the pool owner, who also has the power to pause swaps.”.
What are the benefits of LBPs?
During a weight shift, the token price of one token experiences sell pressure while the other experiences buy pressure. When this is mixed with modest trading volume, the price approaches the generally agreed-upon market price.
LBPs often start with intentionally high prices. This strongly disincentivizes whales and bots from snatching up much of the pool liquidity at the get-go. When LBPs are used for early-stage tokens, this can help increase how widespread the token distribution is.
Starting Capital Can Be Small
Teams who use LBPs to kickstart the liquidity of a token that has not been well distributed yet can do so with minimal starting capital. For a team running an LBP with their TOKEN and DAI, starting with 10% or 20% DAI, as opposed to 50% DAI like they might need on another platform, significantly reduces their starting capital requirements. Shifting from 80/20 TOKEN/DAI to 20/80 would look like this:
and would ultimately result in the team holding far more DAI at the end of their LBP while reducing the (sometimes extreme) price volatility that teams experience when just launching a 50/50 pool.
⚓️Merit Circle LBP
The MC Liquidity Bootstrapping Pool was a huge success and broke records in the crowdfunding space.
At the end of the LBP, on-chain data shows Merit Circle LBP started with 3M USDC & 75M MC tokens and withdrew 108M USDC & 33M MC tokens, which is a victory from a token distribution PoV because mid-size holders > whales and the number of tokens held by mid-size holders > whales.
On the other hand, the effectiveness of LBPs is shown in the Merit Circle auction because all participants had access to a fair market, the MC team distributed the capital weight, and the addresses involved in the LBP could sell/buy any amount without issues.
The main token issuance will be in the form of a LBP sale through Copper platform. Details on how a LBP works can be found here. Due to regulatory reasons, there will be some geo-IP restrictions on participating in the LBP.
To maximize community involvement, the LBP will likely be several months long with the goal of the LBP completing just a few days prior to Big Bang.
Total Supply: 1,000,000,000 VXG
Crowd Sale Allocation: 300,000,000 VXG
Crowd Sale Percentage: 30%
Join the discussion on our Discord
One of VXG goals is to achieve initial liquidity. There is no perfect method for launching a token, but at the very least, we believe our launch should be fair as possible to everyone. In order for the crypto ecosystem to progress and evolve, key features and functions need to be built that support the crypto mainstream adoption. Liquidity Bootstrapping Pools are an excellent first step towards a fundraising infrastructure that is fair and secure to anyone who participates.
Thank you All,