On April 22nd, ChainSwap will be holding the world’s first Uniswap LBP. This article aims to explain this unique mechanism.
Summary:
- The LBP will auction a minimum of 0.4% of total supply to a maximum of 2% of the TOKEN total supply.
- ChainSwap Uniswap LBP is going to take place on April 22nd, a detailed user guide can be found HERE.
- ChainSwap is introducing a new way of conducting public offerings on Uniswap. Currently, the only place to conduct an LBP is Balancer, we aim to change that by introducing an open-source codebase.
- The current LBP model on Balancer is lacking user experience and is complicated.
- The Chainswap LBP smart contract will be open source and audited for everyone to use.
The Mechanism
LBP is a tool designed for projects to launch their tokens with liquidity generation and price discovery. It also helps to prevent front-running and speculation of normal auctions. The nature of LBP is a price decreasing auction, in which auction price gradually decreases until demand is met.
The auction has three parties:
- Auctioneer, who is the seller/supplier of the token.
- Auction market, which provides the environment for matching demand and supply.
- Participants, who act as bidders from the demand side.
From our perspective, Uniswap provides the environment for the auction market. The ChainSwap LBP contract acts as the automated auctioneers supplying tokens to the Uniswap market.
Our model is similar to the Balancer LBP model that the automated auction uses smart contracts to supply tokens to Uniswap while adjusting to the demand.
The amount of tokens automatically released to the Uniswap pool for LBP is determined by the following formula:
In simple terms
- A longer period between releases leads to an increase in An, the number of tokens released into the Uniswap pool per trigger. Inactive purchasing activity creates excess supply, thus driving the price down.
- High market price also leads to an increase in An. The release of more TOKEN into the Uniswap pool will eventually drive down the price to equilibrium.
Output speed
The token output speed from the LBP contract adjusts based on demand and supply. The balance point is the starting point of $3. If the LBP price declines below $3, the output speed will decrease. On the other hand, when demand is high and TOKEN price increases above $3, the output speed will increase.
Advantages:
- When the market is in a downturn, it reduces the release amount and eases the selling pressure, which will help the market rebound;
- When the enthusiasm is high, increasing the amount of release will help the market to suppress the bubble to a certain extent.
The LBP will auction a minimum of 0.4% of total supply to a maximum of 2% of the TOKEN total supply based on market demand and supply.
Summary for you as a buyer
- ChainSwap LBP Contract is an autonomous seller to the Uniswap pool.
- The amount of TOKEN released is determined by the equation above.
- Buyers need to purchase through our website in order to trigger the release LBP contract. You will get a better price by purchasing from our website instead of through Uniswap.
- When a buyer starts a purchase through our website, two transactions are made:
- First, it triggers the contract to sell the calculated amount of TOKEN to Uniswap.
- Then, it purchases the buyer’s desired amount from Uniswap. Resulting in a better price than you buying directly from Uniswap.
ChainSwap LBP numbers:
We are adding 1,000,000 USD worth of ETH and 333,333 TOKEN to the Uniswap pool as the starting liquidity.
- The starting price will be $3.
- The running time for ChainSwap LBP is 24 hours.
Important Reminders ⚠️
One important reason for using a Uniswap LBP for token distribution is to effectively prevent front-running and speculation. The sale token normally starts at a high price and eventually converges to some lower price (could also be higher than the starting price) per the buy/sell transactions made during the process. There’re a few important reminders we would like to make for your kind attention.
Don’t race to buy
Uniswap LBP is not a Flash Sale! You don’t need to rush to buy TOKEN tokens at the start of the sale unless you want to secure the tokens as early as possible. The starting price is normally set at a relatively higher level, but it will fall in the absence of buying demand. The better strategy would be to wait till the price falls to your desired valuation, and you can execute your orders.
Detailed participation guide can be found HERE
