Explainer: Work out the value of your tokens on Polygen.
How to work out the value of your raiseTokens during FLO and understand how that correlates to Project Token value.
Why does Polygen have Raise Tokens (rTKN)?
For one simple reason — with raise tokens (rTKN), Polygen can offer much more to the Community!
For example, projects can offer more than one token to be claimed or they can offer different types of assets (e.g. NFTs). No other launchpad offers this! It is Polygen’s permissionless flexibility that makes us the future of launchpads.
The Raise Token (rTKN) creates an opportunity between the raise and the distribution of project tokens. This motivates us to keep creating new flexible tools to utilize in that time period. rTKN is an essential part of the community seeding process.
Q: How does raise-token enable seeding, why not just sell the token?
A: Polygen allows anyone to post a raise and anyone to provide the initial USDC to “seed” the raise.
The raise token protects Polygen users.
Why? If we enabled “Bring Your Own” (BYO) raise tokens then the seeders could be rugged ( scammed ) by the raise.
For example, the raise creator could put 1% of their BYO token into the raise, ask for $1MM seed, then sell the remaining 99% of the token into the raise after it starts, draining most of the USDC seed in the process.
The raise would ultimately fail and auto-trigger our refund function. However, in this case, there would be little to no USDC left in the pool so the refund would fail — The creator of BYO token would have effectively stolen funds from the seeders.
Even if the raise fails to hit the target there will always be enough USDC in the pool to cover the seed costs. Seed funds are a critical part of Polygen FLO’s — and because the seeder doesn’t benefit from the raise in any way (other than the optional seed fee paid for a successful raise) we need to keep them safe.
What is my raise token rTKN worth?
Your raise token is worth its claim power (the % share you hold of all rTKN) on all future rewards the project behind the raise is offering. The raise token is NOT worth the value of the money raised. The raise token is frozen, cannot be transferred or traded, so it cannot have a price. The money raised is now owned by the project, who must now do something with it to provide you with future value., be that a token, NFT or the next big thing!
Projects must be very clear about what future value they aim to provide.
Just like traditional platforms such as KickStarter, GoFundMe, IndieGoGo, etc. the raise should be for something specific.
You GIVE money to the project and they CREATE something you want in the future. If you want to look at it objectively: The value of the raise token is not about what you put in, but the value you expect to get out of it.
NB: Also just like other platforms, the project may be wildly successful beyond your expectations or completely fail or even be a scam. In a decentralized context where anyone can post a raise, you must be extra vigilant and do your own research before you put money into anything.
For example, the PGEN token is associated with the platform itself (if you owned rPGEN you experienced our work yourself, so you know the project is real) and could feed into potential future governance (e.g. a DAO that can vote and help promote specific raises), as well as share in future revenue (such as “tips” from users buying into raises). These are currently ideas that we hope to realize in the future.
Your claim power is calculated only from the raise tokens that were actually sold in the raise. All unsold raise tokens are burned when the raise completes, regardless of whether it was a success or fail.
Technical notes: For projects that use the escrow contracts to distribute rewards:
Total tokens in escrow / total raise tokens sold = 1 raise token’s claim power.
Projects are not limited to using the escrow contracts. For example it would be relatively easy for a project to offer exclusive NFT mints to raise token holders that regular token holders are not eligible for. Holding the raise token is a hybrid between a claim on future rewards and a POAP style proof of participation in the raise event that can be referenced forever.
How much is rTKN and the project token worth?
rTKN is worth nothing because it is a frozen raise token so it can’t be transferred or traded and so has no primary or secondary market values. Raise tokens record participation, they have no value themselves.
It is harder to predict the value of project tokens. They CAN be traded so there will be some market value, but we don’t know what it is.
PGEN, for example, will derive its market value from the polygen.io platform activities, such as governance and revenue.
To see how other crypto tokens perform based on governance and fees you can use tokenterminal.com for a very detailed analysis.
How much did I pay per project token?
Calculation 1 — What is the value of 1 rTKN:
Amount of TKN in the pool / rTKN sold
Example below as per the PGEN sale on Polygen:
4,000,000 (TKN in the pool)/568,990 (rTKN sold) = 7.03 PGEN
1 rPGEN = 7.03 PGEN
Calculation 2 — How many TKNs will I receive?
Example below as per the PGEN sale on Polygen:
Example 1:
If Thao paid 500 USDC at a spot price of $2, that would give her 250 rPGEN
We multiply Thao’s 250 rPGEN by 7.03
= 1757.5 which is the total number of Thao’s PGEN
Example 2
If Kareem paid $500 at a spot price of $0.40, that would give him 1250 rPGEN
We multiply Kareem’s 1250 rPGEN by 7.03
= 8787.5 which is the total number of Kareem’s PGEN
Calculation 3 — How much did I pay per TKN
Example below as per the PGEN sale on Polygen:
So the price of each PGEN for Thao: 500 USDC/1757.5 = $0.284/PGEN
So the price of each PGEN for Kareem: 500 USDC/8787.5 = $0.056/PGEN
Kareem actually came out with a better price than Thao.
Everyone who participates in a raise receives a different price due to the underlying Balancer LBP mechanism.
Our goal is that everyone who participates feels like their purchase was “well worth it” as Polygen matures as a platform and the raise tokens accrue value. Of course, some people managed to snag a better deal than others in the short term.
How does the raise pricing work?
Warning this is highly technical! But we think you need to know it — we are working on an easy-to-understand version.
The main thing we’re trying to achieve is a high gini-coefficient. The more widely and evenly distributed a token is for any crypto project, the better.
- More people with real skin in the game means stronger markets and community
- More decentralization means a more resourceful and resilient platform
- More real stakeholders make governance attacks harder
Less inequality at launch is just fairer, and launch is both the most difficult and important (or only) time to get token distribution widely spread. Heavily centralized token launches tend to only increase quality over time.
Polygen currently uses Balancer Liquidity Bootstrapping Pools (LBP) under the hood. In the future, we will be offering more raise types, but this is a relatively battle-tested mechanism in the industry to achieve wide distributions.
The LBP is like a dutch auction in that the raised tokens are for sale, start at a high price and decrease their price over time, but is NOT exactly a dutch auction.
Balancer, is foremost a trading platform where price goes up when a token is purchased and drops when it is sold. It makes sense that their LBP is also based on active trading. They have a neat reweighting algorithm that allows prices of two tokens to change without any trades happening, this is what powers the LBP.
Internally we refer to the Balancer style raise as “flappy raise”… the price drops until somebody buys and pushes the price up… then it starts to drop again. If somebody sells it drops even faster. The “flappy-ness” is configured by the raise creator, they set how steeply the price drops and how quickly each buy pushes it back up again.
The “start high” strategy stops bots from scooping up all the cheap tokens in the first 5 seconds. It only takes one or two whale bots to completely destroy a token distribution.
The constant downward pressure on the token price stops the price from getting “stuck” due to many people buying and pushing the price too high. If this didn’t exist then the only way the price could come down to let in new participants after a spike would be if existing buyers sold the token. Why would anybody sell a token they just bought mid-raise? (other than to speculate by trying to take advantage).
However, this is NOT exactly a dutch auction. In a “real” dutch auction, everyone gets the same price, which is not how Balancer works. Whatever price you buy at, that’s the price you get. The best strategy is to be patient for a good entry point and buy the dips.
We hope this makes sense, and we will be providing more and more learning resources for our users. But at the end of the day, this is a new, exciting product that you can learn to use in the best way that fits you.
