To the DeFi Community,
DeFi is starting to experiment with token distributions.
Whether it’s a fair launch, an initial bonding curve offering (IBCO), Balancer’s new liquidity bootstrapping pools (LBP), or the DAICO, all of these distribution models offer a novel way to get tokens into the hands of the community. While they may not be perfect, they’re all substantial improvements over the ICO model of “hey send us ETH and we’ll give you tokens”.
Perpetual Protocol became the first DeFi project to trial Balancer’s new Liquidity Bootstrapping Pools – a smart pool allowing the market to value the native tokens over time while simultaneously building liquidity on Balancer. With PERP, the token price starts at a fully diluted valuation of roughly $1B and drops in price programmatically over three days in order to mitigate initial hype and the respective volatility. That said, Balancer’s smart pool template is showing early signs of a PMF and I’m positive we’ll see more projects leveraging and optimizing the template in the future.
And while Balancer LBPs may serve as a foundational money lego for bootstrapping liquidity for the long tail of DeFi assets, the DAICO is my personal favorite that’s finally starting to see the light of day. Originally published by Vitalik, DAICOs enable users to purchase new tokens without having to trust a centralized team. Anyone can contribute ETH into a new protocol team’s ‘DAICO smart contract’ in return for protocol tokens. The caveat here is that the team is not able to withdraw the entirety of the funds at once. Instead, the amount released to the team is entirely programmatic and trustless.
Simply put, it holds the core team accountable for fundraising. It’s a new token distribution mechanism where the capital allocated to build the project isn’t controlled by a single entity, but instead by the decentralized group of tokenholders that contributed the capital. And while the DAICO hasn’t been popularized yet, Aavegotchi – an Aave NFT project – is leveraging this model for their native token, GHST. Keep an eye out on this one, it’ll be interesting to see what comes of it!
But fair launches are still the holy grail. It’s the birthplace of BTC and YFI – two crypto assets with immaculate conceptions. No founders allocation, no investors, no premine – only equal opportunity. Everyone has to play the same game to get the tokens. And while we’ve seen a handful of other projects look to mimic these fair launches, the good ones will be rare.
One of the goals with YFI was to launched without being qualified as a security.
There are 3 basic principles;
1. Was money exchanged
2. Is there a promise on future value creation
3. Is the team responsible for value creation
Having my theory validated, is pretty cool
— Andre Cronje (@AndreCronjeTech) September 11, 2020
They require altruistic founders with no ulterior motive but to build better technology for the world. Those opportunities only happen once in a decade.
Don’t be fooled.
Till next week!
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Anonymous founder, Chef Nomi, removed all SUSHI liquidity & sold for millions in ETH. The funds have since been returned.
Generalized synthetic asset protocol, UMA, partnered with Ren Protocol to launch a BTC-backed dollar
Yield Aggregating protocol, yEarn, is launching a new DeFi product
The self-described “decentralize Bitmex” is announcing their liquidity mining program featuring Balancer Liquidity Bootstrapping Pools
The permissionless options protocol is conducting its token distribution via an IBCO
In Other News…
- Tokenized Risk platform – BarnBridge – raises $1M from ParaFi, Stani Kulechov, and Kain Warwick
- Introducing Lien Protocol – ETH-backed options & stablecoins
- Flexa Announces AMP token migration for retail crypto payments
- SushiSwap transfers admin keys to Community Multisig
- Total Value Locked: $7.86B (down -11% from last week)
- DeFi Market Cap: $16.2B (up +4%)
- DEX 7 Day volume: $5.87B (down -15%)
- DAI supply: 448.2M up +8%)
- Total DeFi users: 443K (up +3%)
- [Andre Cronje – yEarn] Introducing StableCredit, a new protocol for decentralized lending, stablecoins, and AMMs
- [dYdX – The Integral] How DeFi is eating traditional finance
- [Lucas Campbell – Bankless] How to get the best yields on crypto money (DFR Writer!)
- [Mason Nystrom – Messari] The Rise of WHALE token and NFT liquidity mining
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Aave is a leading lending protocol supporting dozens of the top DeFi tokens. Aave recently showcased an EMI license, giving them the ability to onboard new users directly into DeFi through their parent company – Aave Limited.
We’ve done an extensive amount of coverage on Aavenomics – a new suite of protocol upgrades that incentives protocol safety through AAVE rewards and protocol fees. The best part about Aavenomics is that all of its parameters – including the logistics of Aave yield farming – are governed by tokenholders. There’s a ton of good activity happening on the Aave governance forum and we’d definitely recommend checking it out if you fancy yourself to be an Aavenger.
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Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.