Row 12942

Row ID: 12942 | Dataset Entry | Axioma AXP Content Repository

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What I am discussing is an idea for bootstrapping liquidity by creating something kind of like a faucet that gets increasingly expensive to use but is essentially selling coins in exchange for liquidity. The idea came to me the other day, and it seems so simple and elegant but I can't think of anyone who has tried anything like this.

The idea works like this: Let's says we have a token (let's call in TKN for this example). The total supply of TKN is 2million and let's say you take 500,k TKN and put it into a liquidity pool that is created by the project to be used as the faucet liquidity pool (FLP) along with 10,000 USDC (this would also be the maximum transaction size that the FLP would accept) and 490,000 iUSDC (imaginary USDC which the FLP considers as USDC for the purpose of price discovery). Now let's say you create a smart contract that holds another 500,k TKN and all this smart contract does is, when it is sent USDC it uses that USDC to bond with the TKN and create liquidity on a Uniswap USDC/TKN pool (LP) we will call this smart contract the liquidity bootstrapping contract (LBC).

Now on the FLP the price of TKN will start at $1 because the FLP sees there to be 500,k TKN and 500,k USDC (It sees the iUSDC and the USDC as the same) so the X=500,k TKN and the Y=500,k USDC so the K = X\*Y = 2.5E+11. If anyone buys the TKN, the most that they can purchase would be limited to $10,k. Now let's say someone buys $10,k TKN, what happens is that the FLP would create 10,k iUSDC, and send its USDC to the LBC, this would add 10,k to Y which would give us a new X of 2.5E+11/510,000=490196.1 meaning the person who purchased the TKN would be due to receive 9,803.922 TKN. This information would be sent to the LBC along with the USDC, and the LBC would then take 9,803.922 along with the $10,k USDC and bond it to the LP on Uniswap. Assuming there is nothing already on Uniswap this would give the LP an X of 9,803.922 and a Y of 10,k for a price of $1.02 which is exactly what was paid by the user on the FLP after slippage.

This means that the user didn't take a hit on using the FLP, and his bag didn't go down in price. Note that $20,k worth of liquidity was created on uniswap, effectively allowing the coin to provide leverage to its own LP and since the FLP still has 10,k USDC and the FLP and LBC both have the same amount of TKN this process can be continued indefinitely. After the initial purchase from the FLP the price of TKN on the FLP will now be 510,000/490196.1=$1.04, meaning it will be slightly higher than on the LP thus making Uniswap is the best place to get TKN. However if the price on Uniswap goes above $1.0608 this creates an arbitrage opportunity to buy another $10,k worth of TKN from the FLP which will add another $20,k to the Uniswap liquidity pool.

Also note that by limiting the transaction size to $10,k per purchase from the FLP it means that the FLP will always have access to the USDC needed to generate the LP on uniswap thus the bonded USDC/TKN token can be burned by the LBC and ensure that this liquidity is permanent, and no one trader can drive up the price too fast. As the price of TKN rises the liquidity on uniswap will also rise, and the price of TKN on the FLP will act as a high watermark for the price (since the FLP can only sell TKN and not buy it the price of TKN on the FLP will be roughly equivalent to the ATH on uniswap due to arbitrage). In addition this allows the price of TKN to start low and go up rather than start high and go down, rewarding early participants rather than punishing them. Finally, one of the best features in my opinion is that it allows liquidity to increase proportionally with price, thus ensuring that if price goes parabolic so thus the underlying liquidity of the uniswap pool.

My question is, does this already exist? If not, why the hell not? What's going on here, this seems so simple and optimal that I feel like I must be missing something.

FieldValue
text What I am discussing is an idea for bootstrapping liquidity by creating something kind of like a faucet that gets increasingly expensive to use but is essentially selling coins in exchange for liquidity. The idea came to me the other day, and it seems so simple and elegant but I can't think of anyone who has tried anything like this. The idea works like this: Let's says we have a token (let's call in TKN for this example). The total supply of TKN is 2million and let's say you take 500,k TKN …
label r/cryptocurrency
dataType post
communityName r/CryptoCurrency
datetime 2024-05-20
username_encoded Z0FBQUFBQm5Lakw3X01fc3pRcjE2V2g4b1lKZXBpNl9CUXVjejA5aldlakNRZTNGV0tpckw5NDUzYnJzOFpId1lNbk56SHJMYkZsem41VTFJeFhrYUpHWHVJWnBtSmtDcHc9PQ==
url_encoded Z0FBQUFBQm5Lak9LM3BVbExrcHZqalI4S2xGQzR2WTE0U1hwNlhPRDh0Smg2ejROWjlUOEJHTUh5SkViRDJFc1V6b2RSQTl2UU13V3hISGFoX0NYZkNoTFl3dW54UlU5aC1JTWVheWJtd09fUldYOXF1elZrYjBnVVBjSTlsOE4wOFMySjVOaVdSMFMxM2NBblBCZEc0M19IdWppOTV5VlhwVmo1V2gyRVk4M1NUcFQ1anE4cE5zejdxVjQ3QW1pNTdadEpuc0NLVlpqZWZnbnRTNmd4bUhURDZfaFc0cDBhQT09

Raw Record

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  "text": "What I am discussing is an idea for bootstrapping liquidity by creating something kind of like a faucet that gets increasingly expensive to use but is essentially selling coins in exchange for liquidity.  The idea came to me the other day, and it seems so simple and elegant but I can't think of anyone who has tried anything like this. \n\nThe idea works like this: Let's says we have a token  (let's call in TKN for this example). The total supply of TKN is 2million and let's say you take 500,k TKN and put it into a liquidity pool that is created by the project to be used as the faucet liquidity pool (FLP) along with 10,000 USDC (this would also be the maximum transaction size that the FLP would accept) and 490,000 iUSDC (imaginary USDC which the FLP considers as USDC for the purpose of price discovery). Now let's say you create a smart contract that holds another 500,k TKN and all this smart contract does is, when it is sent USDC it uses that USDC to bond with the TKN and create liquidity on a Uniswap USDC/TKN pool (LP) we will call this smart contract the liquidity bootstrapping contract (LBC).\n\nNow on the FLP the price of TKN will start at $1 because the FLP sees there to be 500,k TKN and 500,k USDC (It sees the iUSDC and the USDC as the same) so the X=500,k TKN and the Y=500,k USDC so the K = X\\*Y = 2.5E+11. If anyone buys the TKN, the most that they can purchase would be limited to $10,k. Now let's say someone buys $10,k TKN, what happens is that the FLP would create 10,k iUSDC, and send its USDC to the LBC, this would add 10,k to Y which would give us a new X of 2.5E+11/510,000=490196.1 meaning the person who purchased the TKN would be due to receive 9,803.922 TKN. This information would be sent to the LBC along with the USDC, and the LBC would then take 9,803.922 along with the $10,k USDC and bond it to the LP on Uniswap. Assuming there is nothing already on Uniswap this would give the LP an X of 9,803.922 and a Y of 10,k for a price of $1.02 which is exactly what was paid by the user on the FLP after slippage. \n\nThis means that the user didn't take a hit on using the FLP, and his bag didn't go down in price. Note that $20,k worth of liquidity was created on uniswap, effectively allowing the coin to provide leverage to its own LP and since the FLP still has 10,k USDC and the FLP and LBC both have the same amount of TKN this process can be continued indefinitely. After the initial purchase from the FLP the price of TKN on the FLP will now be 510,000/490196.1=$1.04, meaning it will be slightly higher than on the LP thus making Uniswap is the best place to get TKN. However if the price on Uniswap goes above $1.0608 this creates an arbitrage opportunity to buy another $10,k worth of TKN from the FLP which will add another $20,k to the Uniswap liquidity pool.\n\nAlso note that by limiting the transaction size to $10,k per purchase from the FLP it means that the FLP will always have access to the USDC needed to generate the LP on uniswap thus the bonded USDC/TKN token can be burned by the LBC and ensure that this liquidity is permanent, and no one trader can drive up the price too fast. As the price of TKN rises the liquidity on uniswap will also rise, and the price of TKN on the FLP will act as a high watermark for the price (since the FLP can only sell TKN and not buy it the price of TKN on the FLP will be roughly equivalent to the ATH on uniswap due to arbitrage). In addition this allows the price of TKN to start low and go up rather than start high and go down, rewarding early participants rather than punishing them. Finally, one of the best features in my opinion is that it allows liquidity to increase proportionally with price, thus ensuring that if price goes parabolic so thus the underlying liquidity of the uniswap pool. \n\n  \nMy question is, does this already exist? If not, why the hell not? What's going on here, this seems so simple and optimal that I feel like I must be missing something.  ",
  "label": "r/cryptocurrency",
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