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Liquidity Bootstrapping Pool
To help realize our vision towards becoming a strategy hub for a cross-layer, cross-chain future and facilitating boundless LPing opportunities, we are taking a fair launch approach to distributing $STRM. This was accomplished via CopperLaunch, which leverages Balancer’s Liquidity Bootstrapping Pool (LBP) solution.
Our aim was to ensure participants in Instrumental’s LBP event enjoy fair price discovery for our $STRM tokens while we attain near-even distribution as all users will have an equal shot at securing our tokens.
At 14% circulating supply on day 1, with a starting price of $2.43, this equates to a starting market cap of $34,020,000 and $243,000,000 FDV.
The Instrumental LBP event on CopperLaunch ended on the 9th of December, 2021 at 15:59 UTC. Results of the LBP can be found here on CopperLaunch as well as summarized here on our GitBook. We are beyond thrilled to see everyone who has aped into the launch and are excited about $STRM and supporting the Instrumental vision. If you would like to obtain $STRM and support Instrumental further, check out our Liquidity Rush and Alpha Airdrop events. Below is the information originally provided to users on the metrics of the LBP:
Instrumental’s STRM token LBP parameters
- Total supply of Instrumental’s token — 100,000,000 $STRM
- Token pair on Balancer’s smart pool — $STRM/USDC
- Initial Instrumental’s token balance — 10,000,000 (10% of total supply)
- Initial collateral token balance — 1,000,000 USDC
- Initial weightings — $STRM 96%: USDC 4%
- Final weightings — $STRM 50%: USDC 50%
- LBP starting price — $2.43
- Swap fee — 0.0001%
Why LBP? — a different approach at bridging liquidity and token distribution
In Balancer’s own words, “An LBP allows projects to create meaningful liquidity and distribution at launch in a capital-efficient way.” Basically, LBPs allow for the creation of two-token pools (the project’s token and a collateral token) that leverage dynamic weight-shifting AMMs. The weighting is first in favour of the project’s tokens, and then gradually “flipped” in favour of the collateral token as the LBP approaches its end.
Technically, LBPs are smart pools — because they employ adjustable weighting mechanisms. LBPs work by setting the token sale parameters, which are primarily:
- Duration of the LBP
- Initial and final weightings
- Number of tokens to be made available in the pool.
Initial weightings are usually set at 96:4 in favour of the new token (i.e. New Token : Collateral Token = 96 : 4) and then gradually shifts in favour of the collateral token, often with a final weighting of 50:50 (i.e. New Token : Collateral Token = 50 :50). This makes it easier for the project’s team to provide the initial liquidity required to create the pool.
Fundamentally, LBPs are configured to open a project’s token price at a high point which then gradually drops until a purchase is made, with each purchase pushing the token price higher. Hence, no purchase means the token price continues to drop further. This is a paradigm shift in token distribution events as it hedges the token against huge price spikes that generally comes with the initial hype of many token launches, much of which is caused by whale investors swooping in to grab a large portion of the IDO supply and eventually dumping on latter investors. Ideally, what is expected at the end of an LBP token launch is a more stable price that investors are generally comfortable with trading.
This singular LBP feature makes it easy for the project to determine a fair price for the token as investors will tend to buy at prices they consider favourable.
To help you understand LBPs better, let’s look at a scenario:
Suppose we launch an LBP for a hypothetical TKN/USDC token pair at $0.40 and set the duration for 96 hours. We set the initial weighting of the TKN:USDC pair at 95:5 and an expected final weighting of TKN:USDC at 40:60. All things being equal, our token price should rapidly drop because investors want to hold out for let’s say until about 26 hours into the LBP, watching out for a spike due to token purchases.
If demand for the token is sustained, the price level is maintained or may even spike up towards or above the launch price in rare cases. But in most cases, the price continually drops and other investors can purchase at lower prices until the end of the sale.
Given the example above where token price keeps dropping until the end of an LBP, this ensures at least a fair distribution of TKN tokens as constantly dropping price deter whales from scooping massive amounts at the start of the LBP leading to concentration risk as obtainable in most IDOs. Rather, whales are encouraged to split huge trades into smaller chunks giving room for small pocket participants to get their fair share at a fair price.
Key Takeaways
LBPs are designed to rapidly and continually drop the token’s price as the weighting is adjusted in favour of the collateral coins, meaning it might not be advisable to ape into an LBP at launch, although there is no hard and fast rule here. Reviewing a project’s launch parameters and following the LBP meticulously throughout its duration are the safest ways to identify an appropriate entry price point to buy your tokens. Bear in mind that each purchase drives up the price temporarily, ensuring that the market decides the final price of the token at the end of the sale.
Our LBP token distribution event is set to take place on CopperLaunch on the 6th Dec 2021 starting at 16:00 UTC and lasting through a duration of approximately 72 hours. The event is scheduled to end on the 9th Dec, 2021r at precisely 15:59 UTC, after which will be followed by a detailed summary of the LBP event. We expect that we not only discover a fair market price for our $STRM tokens but have also executed a fair token distribution event.
Next steps after LBP
Shortly after concluding the LBP event, we will kickstart our efforts by seeding liquidity pools. One-third (1/3) of the funds raised from the LBP will be used to seed liquidity, where the liquidity seeding price will be the discovered price of the token.
Last modified 6mo ago