LBP FAQ

LBP specific FAQ

What are Liquidity Bootstrapping Pools (LBPs)?

LBPs are a dynamic way to participate in token sales where the price starts high and decreases over time. This mechanism helps discover a fair market price and encourages wide distribution of tokens.

How do LBPs work?

In an LBP, the token price is initially set high to deter bots and ensure fair participation. The price decreases over time due to changing weight ratios in the liquidity pool. Participants can buy tokens at any point when they feel the price is fair, typically stabilizing the price when demand matches the decay.

Why should I participate in an LBP?

LBPs offer a fair pricing mechanism that reduces the impact of large buyers ('whales') and bots. The dynamic pricing model allows participants to find a price they are comfortable with, promoting a fairer and more equitable distribution of tokens.

What are the risks associated with LBPs?

Participating in LBPs carries risks, including the possibility of the token's value decreasing after purchase. It is essential to do your own research (DYOR) and understand the project's fundamentals before participating.

What is the starting price for an LBP?

The starting price is typically set much higher than the expected fair market value to deter bots and ensure fair participation. The price decreases over time as the weights in the liquidity pool change.

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.

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.

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 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 Both Buy and Sell Tokens During an LBP on Fjord Foundry?

It depends if it's a 'buy and sell' LBP or 'buy only' LBP. Check the UI to learn what type of LBP it is as this may impact your purchase decision.