Research Summary
This report discusses the concept of Liquidity Bootstrapping Pools (LBPs), their history, and their current relevance in the DeFi space. It highlights the advantages of LBPs over other token distribution methods, despite their fading popularity. The report also introduces the Savvy LBP, a new token distribution initiative by Savvy DeFi, which aims to provide a fair and efficient token distribution process.
Key Takeaways
Understanding LBPs
- Definition of LBPs: LBPs, or Liquidity Bootstrapping Pools, are a method of token distribution in the DeFi space. They were popularized by Balancer and aim to provide a fair and efficient token distribution process, free from bot and whale manipulation.
- Unique Features of LBPs: LBPs allow protocols to adjust the weighting distribution of the two tokens in the pool, rather than sticking to the default 50/50. This custom-weighted structure allows for a high initial price which gradually decreases until a fair price is found.
- Reputation of LBPs: LBPs are often associated with reputable and serious teams who are committed to fair distribution to their community.
Decline of LBPs
- Reasons for Decline: Despite their advantages, LBPs have seen a decline in popularity due to the emergence of new token distribution methods like airdrops, launchpads, fair launches, lock drops, and dutch auctions. These methods often provide quicker returns, attracting more users.
- Comparison with Other Methods: Other token distribution methods are often more extractive than LBPs, allowing teams and insiders to exit with high valuations and liquidity. LBPs, on the other hand, are fair, slow, and better for long-term growth, especially for smaller projects.
Savvy LBP
- Introduction to Savvy LBP: The Savvy LBP is a new token distribution initiative by Savvy DeFi. The token being distributed is Savvy’s native token $SVY, which is used for governance, DAO membership, and incentivising liquidity providers.
- Features of Savvy LBP: The Savvy LBP aims to provide a more even distribution of tokens regardless of wallet size. It is also more retail-friendly and allows users to buy in and sell out at any time of their choosing.
- Post-LBP Phase: After the LBP phase, the SVY/ETH pool will be live on TraderJoe on Arbitrum and will trade like any normal coin in the market, allowing for more efficient and elongated price discovery.
Actionable Insights
- Consider LBPs for Token Distribution: Despite their declining popularity, LBPs offer a fair and efficient method for token distribution. They are especially beneficial for smaller projects looking for long-term growth.
- Explore Savvy LBP: The Savvy LBP offers a unique opportunity for users to participate in a fair and efficient token distribution process. It also provides additional benefits like poolside NFTs for all participants.
- Monitor Post-LBP Trading: After the LBP phase, it’s important to monitor the trading of the distributed tokens for efficient and elongated price discovery.
