DefiDollar: Initial Liquidity Mining Offering (ILMO)
DefiDollar ($DUSD) aspires to be a risk-insured stablecoin layer for DeFi. It aims to provide a safe and stable way for users to hold their assets. In the shorter term, $DUSD is a stablecoin optimized for peg safety, yield and diversification. Just recently, we shared our vision, roadmap and DFD — the DefiDollar Governance token and details around the retroactive token distribution.
Introducing the DFD Liquidity Mining
We have been working on a new mechanism to ensure a balanced and healthy distribution of the $DFD token.
TL;DR
Honest farmers need to deposit $DUSD to participate in the initial liquidity distribution. $DUSD can be minted with DAI, USDC, USDT, TUSD, yCRV and yUSD from our app. This is not a token sale! At the end of the 4 day period (TGE), $DUSD will be auto-converted into an equal number of balancer pool tokens (BPT) that have exposure to both the contributed $DUSD and a proportional share in the pool of 3mil DFD tokens (3% of the token supply). The BPTs will also be auto-staked. The staked BPTs will unlock linearly over a month and will farm an additional 1mil DFD during this period.
Additional distribution details will accompany the ILMO launch blog with participation instructions.
The mechanism ensures the following:
- No gas wars to participate
- Parity in DFD mined irrespective of when you contribute DUSD.
- Everyone starts DFD farming simultaneously, no action required after the initial contribution
So let’s dive deeper into the mechanics of the ILMO:
The DefiDollar team will be launching the liquidity mining of the DFD token via a genesis ceremony that will start on Oct 30, 2020–1400 UTC. The ceremony will be the following sequence of events:
- Team deposits 3mil (3% supply) DFD tokens in a contract.
- Users can make a claim on the 3% initial supply by depositing $DUSD in the same contract. This will remain live for 4 days and will end on Nov 3, 2020–1600 UTC. This is a new approach to liquidity mining. The team does not receive any funds contributed during the ILMO.
- At the end of the period, 3mil DFD and accumulated DUSD are put together in a y:z ratio Bal pool.
- The contributed amount of DUSD will determine the weights of the genesis pool. %weight (y) for DFD in the Bal pool will be a function of DUSD collected determined as follows.
y = 93 – 5x; constraint at 50 <= y <= 90
where x is the DUSD collected denoted in million unitsThis means that the pool will start off in the following ratio based on the amount of $DUSD deposited during the ceremony period:
The balancer pool weights are dynamic — lower interest in the genesis ceremony makes the balancer pool more bullish on the DFD token. This makes it favorable for the initial liquidity providers by minimizing their impermanent loss. This is in line with creating a healthy ecosystem by aligning and incentivizing the early believers of the project.
5. After the pool has been initialized, everyone who contributed liquidity in the genesis period will receive an equal number of Balancer Pool Tokens (BPTs) to the DUSD they contributed. This BPT is representative of the initial liquidity contributed in $DUSD and a corresponding share in the 3mil DFD tokens. 10% of these BPTs will be available immediately to be released and the remaining 90% will vest over 1 month.
6. The interesting part here is that the BPTs for all users will be staked immediately and begin farming more DFD exactly at the same time — The users do not need to make a claim or stake transaction. LPs of the genesis balancer pool will remain incentivized with an additional 1% tokens (1 mil) over one month (the entire vesting period).
At the end of 1 month, the holding of the initial LPs would look like:
1. Vested BPTs (Share in the initial 3% DFD + DUSD which could more or less than what was originally contributed).
2. Share in 1% additional DFD farmed during this period.
3. 0.1% swap fees from the DFD:DUSD Balancer pool.
4. Balancer liquidity mining rewards on DFD* and DUSD.
*subject to DFD getting whitelisted for BAL rewards
Retroactive Distribution
- 1.5 mil DFD tokens (1.5% of total supply) is being distributed retroactively to early $DUSD believers. Following users are being considered for the distribution:
The distributions have been considered from the time the $DUSD cap was raised (Sep 4, 2020 — 1630 UTC).
A. $DUSD holders and stakers until Sep 22, 2020 — 1600 UTC
B. $swDUSD (The swervy fork) holders and stakers until Oct 7, 2020 — 1600 UTC.
The following incentives have been considered from Sep 22, 2020 — 1600 UTC.
C. DUSD <> USDC Balancer pool liquidity provider.
D. DUSD <> ETH uniswap liquidity providers
E. Wallets that trade $DUSD from the above pools. To filter out sybil attack wallets, we have only considered trades ≥ $10 in value.
Furthermore, we have assigned a minimum of 500 DFD tokens to all participating wallets.
- You may check the calculation script and your retroactive token rewards here.
- The tokens will have 30% immediate unlock at TGE and the rest 70% will vest linearly every block over 6 months. Eligible users will be able to claim their tokens from the LP rewards page on our app just a bit after the 4 day genesis period has concluded.
A User-Centric Token Distribution Strategy
While designing our liquidity mining genesis ceremony, we were inspired by the brilliant piece on Liquidity Mining: A User-Centric Token Distribution Strategy by Dmitriy Berenzon and believe have tackled the most pressing issues plaguing the current liquidity mining landscape. For instance,
- Technical Risk: Our liquidity mining contract has been audited by PeckShield.
- Rug pulling: Our team is public and has been iterating on the product for 6 months and is backed by a brilliant set of investors.
- Information asymmetry: The way we have designed our liquidity mining scheme, does not favor whales or early participants. All big and small farmers start farming DFD at the same time without the need for active involvement post genesis.
- Gas costs: Users can get in anytime when the gas costs are favorable during the 4 day genesis period thereby countering gas-guzzling behavior.
- Retroactive token distribution for early supporters.
Risks
Please note that the DUSD contributed will be vesting over one month in form of the BPT tokens becoming eligible for withdrawals. This entails that the usual risks of providing liquidity to a Balancer pool apply. Case in point the impermanent loss:
As mentioned in the blog “With a 5x price change, the impermanent loss for a standard 50/50 pool would be 25.4% whereas in a 95/5 pool it would be only 3.88%, over 6.5 times smaller.”
So the risk of impermanent loss although reduced with a 95/5 pool, is not entirely eliminated. The greater the interest in the genesis ceremony the closer the weights tend towards 50:50 DFD:DUSD pool. We believe that instead of defining the weights ourselves it is prudent to let the market determine the proper equilibrium.
Another risk is that if there is a tremendous sell pressure, then LPs who do not remove liquidity from the pool will end up holding a large amount of DFD tokens having paid for them with their initial investment.
Concluding remarks
- ~5.5% of the token supply is being released to the community during the first month (3% genesis + 1% genesis pool mining + 0.625% for retroactive participants + ~0.86% will be utilized for incentivizing other pools as in when they make sense).
- The initial liquidity mining offering is not a token sale, the contributors will get their contribution amounts back gradually as the BPTs vest — This however does not guarantee that they will get back 100% of the contributed amount. This varies depending on a multitude of market forces and participant behaviors.
- We are working on some final touches on our app and preparing to initiate the genesis ceremony on Oct 30, 2020–1400 UTC. We hope that our community finds merit in this exciting new mechanism which we believe is also a step towards a fairer token distribution.
- The address of the DFD contract is: 0x20c36f062a31865bED8a5B1e512D9a1A20AA333A.
It’s not possible to buy the token. No liquidity has been added to any Uniswap or balancer pools. Please exercise caution and
beware of scammers trying to con you. - Please join our Discord and Telegram, we’ll be very happy to answer queries and follow us on Twitter for updates.
