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FAQs - LBP Creators
Frequently Asked Questions about Fjord Foundry LBPs.
How do LBPs work?
Liquidity Bootstrapping Pools (LBPs) are a bit like Dutch auctions, but with a twist. In a Dutch auction, the price starts high and goes down over time until someone buys. LBPs do the same, but they allow for more flexibility. The price starts high and gradually decreases, but the catch is that people can also buy in at any time, affecting the price. If more people start buying, the price might go up a bit. This way, LBPs offer a fairer and more dynamic way to find the right price for your token. What's the difference between batch auctions and LBPs for my token launch?
LBPs offer dynamic pricing that starts high and gradually decreases, allowing potential buyers to jump in at their comfort zone. In contrast, batch auctions evenly distribute tokens based on contributions, often making it easier for 'whales' to take large positions. With LBPs, you have more control and can offer a more equitable distribution to your community.
What are weights in relation to LBPs?
In the context of LBPs, weights refer to the proportion of each asset in the liquidity pool. For example, if you start with a 99/1 weight ratio, it means 99% of the pool is your project token and 1% is the other asset, often a stablecoin like USDC. As the LBP progresses, these weights can shift, like moving to a 1/99 ratio. This change in weight is what drives the price of your token to decrease over time, encouraging wider distribution. Adjusting these weights strategically is crucial for the success of your LBP, influencing both token price and distribution.
What should the start and end weights be?
The choice of start and end weights in your LBP is a critical decision that depends on how many tokens you intend to distribute and what you value your project at. We generally recommend starting at a weight of 99/1. This initial weighting is designed to deter bots at the beginning of the LBP and set a high initial token price.
As the LBP progresses, we suggest ending at a weight of 40/60. This ending weight allows for a wider token distribution, leading to potentially more funds raised. As the weights change and the price of your tokens decreases, more buyers may become confident enough to step in and participate. However if distributing tokens is of less importance, we've seen successful LBPs conclude at up to a 50/50 end weighting. We do not recommend ending your LBP at 51/49 or higher.
Additionally, based on our research, we’ve observed a rule of thumb regarding the percentage of tokens sold: it tends to be the opposite of the end weighting. For example:
- If you start with 99/1 and end at 10/90, you can expect to sell approximately 90% of your tokens.
- If you end at 20/80, you might sell around 80% of your tokens.
- Ending at 75/25 would likely result in around 25% of your tokens being sold.
Please note that this is a rule of thumb and a guide only. The actual percentage of tokens sold can vary due to a multitude of factors, including market conditions and participant behavior during the LBP. It is advisable to monitor the LBP closely and adjust as necessary based on real-time data and results.
Can you share some recent examples of LBPs?
One of the most critical factors influencing the outcome of your Liquidity Bootstrapping Pool (LBP) is demand. While the initial weights and liquidity you provide set the stage, ultimately, it's the perceived value and demand for your token that drives its performance. Below are some examples from 2023 that demonstrate how LBPs have fared under different conditions:
Start-End Weight: 99/1 to 2/98
Initial Liquidity: $50k in USDC
Tokens Sold: 99%
Tokens Made Available: 1.5% of supply
Liquidity Generated: $547k
Fully Diluted Valuation (FDV): $39 million
Start-End Weight: 99/1 to 1/99
Initial Liquidity: 1 ETH
Tokens Sold: 99%
Tokens Made Available: 40% of supply
Liquidity Generated: 1,780 ETH (Approx $3 million)
Fully Diluted Valuation (FDV): $8 million
Start-End Weight: 99/1 to 70/30 (Hard Price Floor)
Initial Liquidity: $30k in USDC
Tokens Sold: 30% of available tokens for the LBP
Tokens Made Available: 5% of supply
Liquidity Generated: $430k
Fully Diluted Valuation (FDV): $30 million
Note that while Autonolas and $FLUT had similar start weights, their liquidity generation varied significantly. This variation underscores the influence of demand and market dynamics. Altitude, on the other hand, opted for a hard price floor, affecting both their liquidity generation and the percentage of tokens sold.
In summary, while the parameters you set can influence the LBP, demand remains the ultimate driving factor for its success.
How much initial liquidity should I put up?
The amount of liquidity you should deposit to pair against your token is largely a strategic decision for your team to make. This is influenced by a variety of factors such as your project valuation and the amount you aim to generate from the LBP. We highly recommend utilising the preview tool in the Creation Wizard to assist in making an informed decision regarding liquidity. However, as shown in the FAQ above this point, you can generate healthy amounts of liquidity from putting up just 1ETH if there is demand for your token, in addition to getting a strong result by putting up more common amounts, around $30k.
How do I set the LBP swap fee for my project?
You decide the LBP swap fee which is customisable during the LBP creation process. These fees are live-collected during your LBP and serve to deter price manipulation, thereby encouraging a fairer token distribution. All fees get added to your project's token balance automatically.
What fees do Fjord charge?
At the conclusion of your LBP, Fjord takes a flat 3% fee from the collateral token (Usually $USDC, $WETH) balance. This balance includes both swap transactions and swap fees you have earnt during the LBP. The fee is automatically transferred to Fjord when your LBP ends.
Does Fjord help with Know Your Customer (KYC) requirements?
While we can configure the UI for KYC LBPs, actual KYC checks are external to Fjord. You'll need to whitelist wallets and may opt to work with third-party KYC vendors to meet compliance demands.
What should be the starting price for my LBP?
Setting the starting price can be a bit tricky because it's not what you'd initially think. The starting price is essentially the maximum you think the token could be worth. It should be much higher than what you'd consider its fair market value. This strategy takes advantage of the LBP's weight mechanics, which gradually decrease the token price, allowing buyers to join when they find the price fair. For example, if you think the token's fair value is $1, starting at $5 could be a good strategy.
What is the difference between curated and unvetted projects on Fjord?
Curated projects have undergone a review process according to the standards of the curator and are prominently featured within our platform's interface. Conversely, unvetted projects are accompanied by additional risk warnings. Users are required to acknowledge these risks through a confirmation modal before participating in an unvetted LBP.
How can I become a curator or service provider for Fjord?
To apply as a curator or service provider, please initiate a support ticket on our Discord channel. Our team will review your application and guide you through the subsequent steps.
When are tokens distributed to participants in an LBP?
Tokens are automatically allocated to the user's wallet immediately upon their successful participation in the LBP.
What tokens are accepted in LBPs hosted by Fjord?
Typically, projects accept Wrapped Ether (WETH), USDC, USDT, and DAI. However, we can support custom ERC-20 tokens to be accepted. Contact us to learn more.
Are there hard caps or wallet limits for LBPs?
No, there are no hard caps or wallet limits imposed on LBPs. This is one of the unique benefits of using LBPs for your project.
Can I block participants from certain countries participating in LBPs?
Yes, projects can block countries that are required in accordance with their local legal jurisdictions and regulations. This is done during the LBP creation process.
How do I seek technical support?
For technical support, please join our Discord channel and open a support ticket. Our team will be glad to assist you.
Can I change token weights during the LBP?
Unfortunately, the adjustment of token weights during a live LBP is not permitted. It is crucial to finalise these parameters before initiating the LBP.
What parameters can I modify during a live LBP?
The only actions permissible during a live LBP are pausing the swapping function and withdrawing liquidity. Due to these limitations, we strongly recommend conducting tests on the Goerli Testnet to preemptively identify and resolve any issues.
How much liquidity should I deposit in a DEX after the LBP?
While we cannot offer specific financial advice, we recommend that projects deposit a sufficient amount of liquidity to facilitate healthy trading activity if they intend to list on a decentralised exchange post-LBP.
Can participants both buy and sell tokens during an LBP?
Yes, the ability for participants to both buy and sell tokens within the LBP fosters a community-directed pricing mechanism. Please note that all tokens contributed will be collected by the LBP creator. How do I exit an LBP?
If you are the project creator, you'll have access to an LBP Creator Dashboard displayed on the live LBP page. This dashboard allows you to efficiently manage the LBP, including withdrawing any remaining liquidity and project tokens. Exiting an LBP involves just a few clicks and signing the necessary transactions via the wallet that was initially used to set up the LBP.
What chains can I launch on?
Fjord is currently live on multiple networks including Ethereum (ETH), Polygon, Binance Smart Chain (BNB), Avalanche, Arbitrum, and Optimism. Additionally, we offer cross-chain swaps via Connext to provide more flexibility and options for your LBP.