Liquorice Gen: Initial Bonding Curve Offering (IBCO)

Veronica Coutts
Jun 4, 2020 · 7 min read

TLDR; Getting liquidity to launch a token is a non-trivial feat. Either you foot the bill and put up your personal funds as liquidity for your token, or you raise funding and use a part of that as the liquidity. There is, however, a different way. If you are unfamiliar with bonding curves, you can check out this article about curves and use cases to get caught up.

Liquorice Gen (v1) allows a user to create a token bonded to a curve (aka a token bonding curve). The price of the token is determined by the curve, and the collateral being paid into the curve (to buy a token) is stored within the token contract.

Once the predetermined token threshold (and thus collateral threshold as the price is predetermined) is met, the token will then call the MarketTransition contract, and the collateral will be moved out of the token and into Uniswap V2, along with some newly minted tokens. The price of the tokens in Uniswap will be the end price of the bonding curve, ensuring a level of continuity for investors.

What is Liquorice Gen

In early-stage DeFi products there is a liquidity shortage. this is particularly pronounced at hackathons, where most DeFi products start. The products need to get funding before they can launch a product. The funding goes towards food on the table, liquidity for the token sale, and (hopefully) an audit of the smart contracts.

Let’s run through an example of the lifespan of a token created with Liquorice Gen.

Project walkthrough

Emilia creates an epic project at a hackathon. Her project needs a utility token (Awesome Token (AWT)). She wants to put her token on Uniswap and have the price set by the free market, but she does not have any cash (or Dai) to spare to seed the liquidity herself.

Emilia then finds Liquorice Gen, and decides to launch her token through it.

Design your Token

Advanced Token Setup

The token threshold is for how many tokens Emilia wants to sell before the token should transition from the bonding curve to a Uniswap market. It is automatically scaled by 1e18 (the standard decimal accuracy for ERC20 tokens). In Liquorice Gen V1 no more tokens will be able to be minted after this transition is complete, so Emilia chooses a high number of tokens.

The minimum number of tokens will only be checked against once the token has expired (i.e not reached the token threshold before the timeout). The timeout is in months and automatically converted into a Unix timestamp of now + your_time_in_months.

Curve Parameters

Summary

And here is the summary:

Full Results

Here we can see the end price of the market, as well as how much collateral the bonding curve will need to accumulate before the market will transition. Emilia can see that her number is very high, and she is not sure if she will be able to reach it within her timeframe.

Note: The max token start price already has the 1e18 scaling for decimals removed. This means the last token sold on Emilia’s bonding curve will cost 990,005,000,000.00 in her chosen collateral token!

She has some options to fix this:

  1. Set her minimum and maximum threshold significantly lower
  2. Reduce the steepness of her curve as to make the token prices lower, with the biggest impact being the lowering of the exponential factor (a).

Emilia chooses to lower the number of tokens as well as reduce the steepness of the curve.

Now we can see that Emilia's token price and collected collateral is much lower.

Now that Emilia is happy with her token prices and collateral, she can make her AWT tokens by scrolling to the bottom and clicking shes ready!

Once Emilia has signed the transaction and it has mined, she will be presented with her tokens’ address.

During the hackathon we did not have time to create a front end for Emilia to sell her token on, so she will need to sort that out.

Below is Emilia’s AWT loaded onto Remix. As there is no Front end right now for the token, this is the easiest way to buy tokens.

Here we can see the price of a token changing after a buy and sell:

Getting the buy price for 100.000000000000000000 tokens:

This means that 100 tokens in the beginning of the curve will cost you:

(collateral) 20 000.000000000000002000

Buying some tokens:

Let's buy that 100 tokens. Don't forget to approve the contract as a spender if you are manually following along.

Getting the new buy price:

100 tokens will now cost you:

(collateral) 60 000.000000000000002000

Say Emilia impressed a crypto whale while presenting her hackathon. This whale makes their way to Emilia's token and buys the entire supply.

0 is the max collateral threshold that the whale is going to buy
The whale now buys the entire market

This buy will push AWT well over the threshold. The contract will only let the whale buy up until the threshold.

Once the whale's transaction has mined, we can see that the market has transitioned.

These boolean values represent the tokens transition status

We can get the address of the Uniswap pair from the events of the AWT contract.

Here we can see the tokens being moved into Uniswap V2, and creating a market.

In the events, we can see that the pair was created, and we can get its address.

Here we can see the token on Unsiwap. We can see the start price being very close to the end price originally predicted by the Liquorice Gen dApp.

Liquorice Gen originally predicted 4 000 collateral tokens, on Uniswap its 3 980.06 collateral tokens

And, as below, the whale can sell some of their tokens on the Uniswap pair.

Of course, as the whale bought the entire supply, their selling of tokens will move the market. They also have the option of adding liquidity to the pool, which would decrease the movement of the price, as well as earning the whale interest in being a liquidity provider.

Conclusion

Linum Labs Blog

At Linum Labs, we are a global team of developers…

Linum Labs Blog

At Linum Labs, we are a global team of developers, entrepreneurs, and change-makers, building decentralized systems in healthcare and identity.

Veronica Coutts

Written by

A blockchain believer & Ethereum developer. Trying to spread knowledge, peace and critical thinking.

Linum Labs Blog

At Linum Labs, we are a global team of developers, entrepreneurs, and change-makers, building decentralized systems in healthcare and identity.