In part 5 we saw how the pieces of Lifinity’s tokenomics fit together to form a cohesive whole. In this final part of our tokenomics series, we provide the finishing touches — how many LFNTY tokens there will be and how they will be distributed.
tl;dr
- Lifinity has no VC allocation and will instead be funded by our community through our veIDO
- In a veIDO, the more USDC you invest and the longer you lock your tokens, the more vote-escrowed tokens you receive
- We will sell 20% of the LFNTY supply as veLFNTY and will cap our raise at $30M
- The majority of the funds raised will become protocol-owned liquidity used to generate trading fees and market making profit
- Protocol revenue is distributed to veLFNTY holders, so our token has a clear use case from day 1
Table of Contents
What’s a veIDO?
The veIDO is a choose-your-own-adventure IDO where all participants get to be VCs, if they so choose.
Instead of the common IDO method where only fully unlocked tokens are sold, we will also be selling vote-escrowed tokens (see part 2 for our deep dive on this topic). Since we will sell veLFNTY rather than just LFNTY, investors will get to choose how long they want to lock their tokens, and this will directly affect how many tokens they receive.
In Mango-style IDOs, which have become fairly common on Solana, investors receive tokens in proportion to their share of USDC deposited into the IDO pool. Things work slightly differently in the veIDO because, in addition to how much USDC you invest, we also take how long you choose to lock up your tokens into consideration — the more USDC you invest and the longer you lock, the more veLFNTY you receive. Locking for longer means you get to buy veLFNTY at a cheaper price than those who lock for a shorter time.
In addition to being able to distribute tokens according to the investment time horizon of investors, our veIDO enables LFNTY to have a use case from day 1. In particular, protocol revenue will be distributed to veLFNTY holders (see part 4), giving them a source of passive income.
How the veIDO Works
Users deposit USDC and choose how long they wish to lock their LFNTY. The LFNTY allocated for the veIDO will be distributed pro-rata according to a user’s weight:
Weight = D / (1 - (1/2) * (L/1460)),where D is the USDC deposit amount and L is the number of days chosen to lock (maximum of 4 years = 1,460 days).
Let’s walk through a brief explanation of how the equation works. The 1/2 specifies the max discount possible (i.e. 50%) relative to those who lock for zero days. The L/1460 determines how much of the max discount a user receives according to their chosen lock period. Finally, the discount is applied to D by dividing it by the inverse of the lock-weighted discount.
An increase in the amount of USDC deposited increases your weight proportionally. On the other hand, an increase in the lock time has a smaller effect; those who lock for the maximum length of time will receive a 50% discount (i.e. 2x more LFNTY) compared to those who will have their LFNTY fully unlocked right from the start. The discount for any lock period in between can be linearly interpolated. For example, a 2-year lock period will receive a 25% discount, a 1-year lock period will receive a 12.5% discount, and so on.
The LFNTY allocated to each user is locked as veLFNTY for L days. To review from part 2, the amount of veLFNTY received for X LFNTY locked for L days is:
veLFNTY received = X * L / 1460We will initialize our LFNTY-USDC pool with a starting price that those who locked for zero days bought at. This means all participants will buy LFNTY (as veLFNTY) at or below its starting market price.
The following example shows the outcome of a veIDO where we sell 10,000 LFNTY tokens to 4 participants given their various deposit amounts and lock periods.
(Note: Only those who lock for 0 days receive LFNTY. Everyone else receives veLFNTY. The LFNTY allocation shown is how much LFNTY they will have when their veLFNTY fully unlocks.)
Since Doug locked for 0 days, the price they paid per LFNTY ($4.17) would be used as the starting price for our LFNTY-USDC pool.
For readers who want to gain better intuition for how the veIDO works, we have created a spreadsheet that people can download and play around with to see what allocations for various investment amounts and lock periods would look like.
Raise
Our veIDO will be capped at 30 million USDC, first come, first served. If we raise the full amount, we will have a fully diluted valuation between $150M and $300M; the longer investors lock their LFNTY, the higher our valuation.
The main reason we are capping our raise is because there is a limit to the amount of capital that Lifinity will be able to efficiently utilize. As explained in part 4, beyond a certain level of liquidity, the trading fees per LP token begins to decrease, reducing capital efficiency. While we will be able to gradually increase the maximum amount of capital that we can handle effectively, we have set the cap to match our estimate of what we’ll be able to handle at the start.
Additionally, the cap ensures that we avoid overvaluation through excessive speculation; investors can know that, even if we sell out, they are buying in at a relatively low valuation.
Of the USDC raised, the first $500k will be set aside to match an equivalent amount of LFNTY from the treasury for seeding our LFNTY-USDC pool. This ensures that our token is liquid from inception and its liquidity is not dependent on external liquidity providers.
Of the USDC that remains, 20% will go to fund the continued development of the protocol and 80% will be POL deposited into Lifinity’s liquidity pools to generate revenue for veLFNTY holders. Assuming the veIDO is a success, this means LFNTY will be backed by millions in assets that will be put to productive use in our DEX.
Token Supply, Allocation, & Vesting
There will be a total supply of 100,000,000 LFNTY tokens, and they will be distributed as follows:
Notably, we have not reserved an allocation for any VCs despite there being plenty of interest.
The Flare holders’ allocation will be distributed through a stake and claim model over the course of a year following the veIDO.
The team’s allocation will vest over 4 years with a 6 month cliff. Please note that the team’s tokens are LFNTY and not veLFNTY, and protocol revenue is only distributed to veLFNTY holders. The only way that team members can get access to protocol revenue is if, after the 6 month cliff, they take their LFNTY that unlocks over the course of 4 years and lock it for veLFNTY.
Currently, the only planned use of the treasury is to grow our protocol-owned liquidity (POL) as explained in part 1. Any other use of the treasury will be voted on by veLFNTY holders as explained in part 5.
Other Details
We will open for deposits on April 23 at 15:00 UTC. Participants will be able to deposit USDC within a 24 hour period.
Our veIDO will be similar to a Mango-style IDO but without a withdraw period. Participants will be able to deposit USDC throughout the duration of the veIDO, but they will not be able to withdraw the funds they have deposited.
Since each wallet address can only have one veLFNTY balance, if a user wants to buy multiple batches of veLFNTY with different lock periods, they will have to use multiple addresses. If a user deposits USDC once and then deposits again later using the same address, they will only be able to choose the same or longer lock period as they chose for the initial deposit. If a later deposit has a longer lock period than a prior deposit, the lock period of the prior deposit will be altered to match that of the later deposit.
The same discount for buying 4-year locked veLFNTY in the veIDO will be used for the max discount for buying 4-year locked veLFNTY with LP tokens after the veIDO (see part 1). In other words, the veIDO provides an opportunity for the largest discount possible. The same discount can only be achieved after the veIDO if the max discount is actually reached and you are the first person to be able to buy it at the max discount; the discount will be reduced if others buy first. Participating in the veIDO is the only way to guarantee that you are able to buy veLFNTY at the max discount.
Users who want to sell their locked tokens without waiting for them to unlock can do so by relocking them for 4 years (if they aren’t 4-year locked veLFNTY already), converting them to xLFNTY, and selling them on the market (see part 2 for details).
Roadmap
While the team is already thinking beyond the items listed on the roadmap, in the interest of maintaining the flexibility needed to adjust to ever-changing market conditions, we believe prematurely projecting our plans too far out into the future could create expectations within our community and unnecessarily lock us into certain paths. We will therefore keep our options open and only announce our intended direction once we have more certainty.
Thank you for reading our tokenomics series. We hope you’re as excited as we are to see Lifinity functioning at scale!
If you haven’t already, we’d love to have you join our community on Discord. It’s the best place to stay informed on our protocol.
See you at the veIDO!
