COMDEX Explains LBP
It's been a thrilling month with all of the new features and accomplishments that Comdex has attained this month.
Also, the community of comets has played a significant role in the ability to accomplish where Comdex is today. This was particularly clear during the Launch Party on November 20, 2021, which received a massive reaction.
You can watch documentation of the occasion here if you were unable to attend.
While COMDEX prepares to unveil the actual information of the forthcoming liquidity bootstrapping pool on Osmosis, it was observed that some members of the community had queries about what an LBP is and how to partake. As a result, a definition of LBPs is provided below.
What’s an LBP?
The LBP (Liquidity Bootstrapping Pool) is a ground-breaking way for fresh crypto projects to raise initial funding. In a basic sense, an LBP is a project that offers liquidity to a DEX-based dedicated pool (in this context Osmosis).
Irrespective of portfolio magnitude, anyone who wishes to partake can do so. There are several other benefits in terms of safety and market pricing, which will be discussed further.
During an LBP, the project that provides the tokens creates a pool with a weighted average depending on a maximum price. On Osmosis, the initial price discovery for $CMDX will be conducted in an opposite dutch auction format.
From the buyer's perspective, this means that the pool will be classified with a maximum auction price that will progressively decrease over time until the pool accounts of both tokens are the same.
Additionally, Vast token owners will be unable to sideline the market and later dump their tokens due to this method.
This approach is the best means of accomplishing reasonable price discovery and wide token distribution, according to Comdex. While avoiding bots or whales from committing harmful attacks
What are the Mechanisms behind LBPs?
As previously mentioned, Osmosis uses an opposite dutch auction to determine the initial price of assets. To make finding easier, the ratio of the two assets in the pool stabilizes at predetermined periods over time.
The token is listed at a pre-determined price ceiling based on the comparable weightage of the assets in the pools. These weights are then set to slowly decline, causing the price to decrease, giving intrigued buyers the chance to join at a reasonable price.
As the price drops, it's only normal for more buyers to place orders to take part. This procedure is repeated until all available assets have been purchased and the final asset weightage has been met.
Furthermore, as price discovery comes to an end, a long sales curve (Red) emerges, with the highest price at the beginning of the auction. Buyers can wait patiently for the price to drop to a level that they consider reasonable.
As the price falls, a greater percentage of buyers will be able to participate and keep the price at an acceptable level. It's also feasible that the final price aim will be perceived as too high, resulting in a drop in asset demand.
It's also feasible that the asset's goal price is set too high, resulting in little demand. This scenario is depicted in green on the left. A large order is placed by a buyer, but the price drops after that because no other buyers are willing to buy.
A large order is placed by a buyer, but the price drops after that because no other buyers are willing to buy.
Finally, it is critical for anyone interested in learning about LBPs to realize that they begin at an increased price and decrease gradually. The main objective is to let the society of buyers decide on a fair price for the protocol before purchasing it.
Why is LBP Important?
LBP, is an excellent way of providing a broader community a fair chance to participate in the development of a new protocol. Assets must preserve a 50–50 split in other liquidity pools. Prices are disrupted as a result of trading activities, resulting in asset pool rebalancing.
Traders prefer larger liquidity pools because the amount of slippage they encounter is dependent on the size of the pool.
At Comdex, it is understood that for a project to succeed, new investors and platform users are just as important as VCs and institutions.
In conclusion, as a result, Comdex wanted to give everyone in their community access to the $CMDX token at a reasonable price, without the price swings and other problems that come with smaller pool launches.
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