FAQs - LBP Participants
Frequently Asked Questions for participants of Fjord LBPs.
How Do LBPs Work for Participants?
Liquidity Bootstrapping Pools (LBPs) function somewhat similarly to Dutch auctions but offer more interactive dynamics. In a Dutch auction, the asking price starts high and decreases until someone makes a purchase. In an LBP, the starting price also begins high and gradually declines. However, you as a participant can buy in at any point, influencing the price. If buying activity increases, the price might even rise temporarily. This makes LBPs a dynamic and equitable mechanism for you to acquire tokens.
What's the Benefit of Participating in an LBP Over a Batch Auction?
Unlike batch auctions, where tokens are allocated based on set contributions, potentially allowing large investors to dominate, LBPs provide a more equitable landscape. The pricing in LBPs is dynamic, starting high and then decreasing, allowing you to enter the market at a price point you are comfortable with. This could mean a more fair distribution of tokens to a broader range of participants like you.
What Do Weights Mean When Participating in LBPs?
In the LBP setting, weights describe the ratio between the project token and another asset in the pool, often a stablecoin like USDC. For example, a starting weight ratio of 99/1 means that 99% of the assets in the pool are the project's token, and 1% is the stablecoin. These weights change over time, such as shifting to a 1/99 ratio. This change in weights is what influences the token price to decrease, giving you opportunities to buy in at different price levels. Understanding these weights can be essential for your participation strategy.
When Is the Best Time to Buy in an LBP?
The ideal time to buy into an LBP depends on your personal assessment of what you consider to be a fair price for the token. To help you make this decision, it's crucial to understand how weights work in LBPs. For example, if an LBP starts with a 98% Project Token to 2% USDC ratio and ends at 90% USDC to 10% Project Token, the price could significantly drop if no one else is buying. This would mean a greater chance for you to buy tokens at a lower price.
On the other hand, if an LBP starts at a 75% Project Token to 25% USDC ratio and ends at 25% Project Token to 75% USDC, the price drop won't be as drastic if no new buyers enter. This results in a more stable pricing curve, making the tokens potentially less discounted by the end of the LBP.
Understanding these weight shifts can help you decide when to participate and at what price point you're comfortable buying in.
What Sets Fjord Foundry LBPs Apart in Ensuring Fair Pricing for Participants?
Fjord Foundry aims to make token distribution fairer through its unique approach to Liquidity Bootstrapping Pools (LBPs). Unlike other platforms, most projects on Fjord start their LBP at an initially high price. This strategy discourages bots and heavy buying when the LBP first kicks off, giving everyday participants a better shot at acquiring tokens.
As the LBP progresses, the token price gradually lowers, allowing participants to enter at a price they find reasonable. This stands in contrast to traditional platforms where bots can quickly deplete supply as soon as a new listing is released, often ending the sale in seconds and leaving few opportunities for regular users.
In summary, Fjord Foundry's LBPs provide a more level playing field for all participants, fostering fairer distribution and more accurate price discovery.
Can I provide liquidity on Fjord LBPs?
No, only LBP owners can remove and add liquidity.
What's the Difference Between Curated and Unvetted Projects on Fjord for Participants?
On Fjord Foundry, you'll encounter both curated and unvetted projects, each with its own level of visibility.
Curated Projects: Curated projects have undergone a level of review either by the Fjord Foundry team or third-party curators, depending on who the project requested for curation. While curation may offer a layer of credibility, it's important to note that curated projects are not risk-free. We recommend that participants consult with the respective curators to understand the basis of their curation decisions. These projects are more easily accessible on the Fjord Foundry UI.
Unvetted Projects: Unvetted projects are those that have not gone through the curation process and have chosen to launch directly via the LBP contracts on the blockchain. These projects are not prominently featured in the Fjord Foundry UI and come with additional warnings to make participants aware of potential risks.
It's important to consider these distinctions when making your participation choices on Fjord Foundry.
Why Can't I See the Tokens in My Wallet After Purchasing Them on Fjord?
If you've successfully participated in an LBP and yet don't see the tokens in your wallet, there are a couple of common explanations.
Manually Add Token: Most tokens purchased on Fjord Foundry won't automatically appear in your wallet. You may need to manually add the token by using its contract address. This can usually be done within the settings of your wallet interface.
Approval vs. Purchase: Ensure that you've actually completed the token purchase transaction. Sometimes, a preliminary transaction is required to "approve" the token for trading in your wallet. This is different from the transaction that actually transfers tokens to you.
Make sure to verify both these aspects if you encounter this issue.
How Soon Will I Receive the Tokens I Purchase?
The tokens you purchase in an LBP will be directly available in your wallet once the event concludes. However, they may not automatically appear in your wallet's interface. To make sure you can see and access your newly-acquired tokens, you'll need to follow the steps outlined in the FAQ above about adding the token to your wallet manually. Once you've done that, your tokens should be visible and ready for use.
Can I Both Buy and Sell Tokens During an LBP on Fjord Foundry?
Absolutely, you can both buy and sell tokens during an LBP on Fjord Foundry. Our platform offers a transparent ecosystem for dynamic price discovery, which involves both buying and selling activities.
Additionally, if the project conducting the LBP already has tokens in circulation, those existing tokens can also be sold into the LBP.
Are There Any Fees Associated with Participating in an LBP?
Yes, there is a volume fee involved when you participate in an LBP on Fjord Foundry. The amount of this fee is set by the creator of the LBP and varies from one pool to another. You can find specific information about the volume fee for each individual LBP in the "LBP Details" section on its live page on our platform.
These fees are designed to discourage speculative buying and selling, promoting instead a community of participants who are genuinely interested in the long-term success of the project. By imposing a volume fee, the aim is to ensure a more committed and invested community around each LBP.
What Are the Risks Associated with Participating in an LBP?
Engaging in an LBP on Fjord Foundry does involve some level of risk, as with any token purchase. While we provide a transparent and decentralised way for new tokens to be introduced, it's important to note that we have no control over how projects use the liquidity bootstrapped through the LBP. Teams gain full access to the liquidity generated and we strongly recommend you do your own in-depth research to make an informed decision. Look closely at the project's whitepaper, assess the credibility of the team, and consider their future plans to ensure you're comfortable with your participation.
Is There a Minimum or Maximum Amount I Can Buy?
There are no specific wallet limits for participating in an LBP on Fjord. Your ability to buy tokens is as open as the terms set by the LBP creators allow. Participation can continue until either the tokens sell out or the LBP period comes to an end.
How Is the Starting Price of the Token Determined?
The initial pricing of a token in an LBP is set by the project creators and is usually determined based on various factors such as perceived value, community interest, and market demand. This price often starts at a higher point to discourage bots and heavy buying at the onset. It then decays over time, allowing for dynamic price discovery. Always be sure to research and understand the basis for the initial price before participating in any LBP.
Can I Use Any Token to Participate?
No, you can only use the specific 'collateral token' chosen by the project creators for the LBP, such as USDC, WETH, or USDT. This information is usually made clear in the LBP details, so always double-check which token you'll need for participation.
What Is the Duration of Most LBPs on Fjord Foundry?
Most LBPs on Fjord Foundry last between 3-5 days, but this duration is ultimately decided by the project creators. The specific duration for each LBP can be found on the LBP's individual live page. It's important to know this duration so you can plan when you'd like to participate in the event.
What Is Slippage and How Does It Affect My Purchase?
Slippage occurs when there's a small discrepancy between the price you expect to pay for a token and the price you actually pay when the transaction is executed. In LBPs, this can happen because prices are dynamically adjusted in real-time based on buying and selling activities in the pool. Slippage is not necessarily a result of high volatility but a feature of decentralised trading mechanisms. It can work both ways—you might end up receiving a bit more or a bit fewer tokens than you initially thought.
To manage slippage, you can set a "slippage tolerance" in your transaction. This is a percentage range within which you're willing to accept a price difference. If the slippage exceeds this range, your transaction won't go through. So, it's always a good idea to be aware of your slippage tolerance setting and adjust it according to your comfort level when participating in an LBP.