How Copper is supporting the divestment of Vitalik’s 23 trillion AKITA Gitcoin donation
Note: This article was written when Fjord was previously branded as Copper Launch. We are now called Fjord.
Copper brings to life the full power of Balancer’s Liquidity Bootstrapping Pools (LBPs). Over the last 6 months many ideas and teams have used Copper LBPs to provide their communities with access to early stage opportunities typically only available to insiders.
But bootstrapping liquidity isn’t the only use case for LBPs.
In 2021 we’ve seen many projects give large portions of tokens to well known groups and figureheads. Vitalik Buterin received trillions of Shiba Inu tokens while Gitcoin also received trillions of Akita Inu tokens via Vitalik ($5 million USD in value). These tokens are usually sent out for marketing and visibility purposes. However, following these surprise airdrops their recipients typically encounter the same set of questions. Do they sell the tokens right away and potentially damage the token’s communities by negatively impacting the price? Do they hold them forever? Do they donate them?
In the case of Gitcoin receiving the Akita Inu tokens from Vitalik, the Gitcoin community was left with a comparable conundrum and questions. What was the most efficient, fair and appropriate way to maximize the sale value of the tokens while not causing an immediate and negative impact to the token price and the AKITA community?
The answer for Gitcoin turned out to be a Balancer Liquidity Bootstrapping (LBP) Pool created through the Copper Platform.
The price decay mechanics of an LBP (which you can read more about in our FAQ) allow for true price discovery, and for price decay to occur via weighted pools over a time duration that can be customized to the LBP owner’s choosing.
In the instance of Gitcoin, the LBP has been scheduled over a period of 365 days, ensuring a supply shock does not instantly crash the price of the token.
Additionally, the Copper platform allows for both buying and selling of AKITA, so the price is able to generally keep equilibrium with the current market price available on alternative exchanges, with some savvy traders able to take quick advantage of any arbitrage opportunities that may arise from any price discrepancies.
Due to the slow price decay over a long time horizon and the arbitrage opportunity, the main token of the LBP, in this case AKITA, is slowly absorbed by the overall crypto market in exchange for WETH without a drastic impact to AKITA price.
Alex Van de Sande, who’s previously worked for Balancer and the Ethereum Foundation, collaborated with the Gitcoin Grants team to find this creative solution to their divestment problem:
In a comment, Alex said Gitcoin’s choice to use Copper was easy because “Copper has a great UI and all the features that [they] needed.”
And the result?
Of the 23 trillion AKITA tokens that were deposited into the LBP, 3 trillion have since been released into the market after 44 days of the 365 day LBP. Most importantly, 1,160 ETH has been raised for Gitcoin, nearly $3.6m at the time of writing. This is already over half the amount that was raised by Gitcoin’s 12th Grants Round last December.
During this time the Akita Inu community hasn’t been negatively impacted by an immediate supply side shock adversely affecting the market. Simultaneously, Gitcoin is closer to gaining access to funds that will support the next generation of developers who are building world-changing products for the public good.
Gitcoin’s experiment has been a huge success so far and Alex Van de Sande says “there is a lot more to explore in this space using LBPs”. Needless to say, the Copper team agrees and we hope that more DAOs and individuals will look at Copper’s LBPs as a sustainable way to conduct that large token divestments that work well for all involved stakeholders.
Follow us on Medium as we continue to discuss more creative use cases for Liquidity Bootstrapping Pools and what they can do for you.
