Participate to LUM Liquidity Pool (2/2)
Details about the LUM Liquidity Bootstrapping Pool (OSMO/LUM pair) and how to make the most out of it.
This is the second part of a two parts tutorial:
1️⃣ Part 1 — Join Osmosis and get OSMO
2️⃣ Part 2 — Join LUM Liquidity Pool
Disclaimer
This article is a tutorial and was written for educational purposes.It should not be considered as an advice to purchase cryptocurrency, especially ATOM, OSMO or LUM.The platforms and tools displayed in this tutorial are dedicated to users with advanced knowledge regarding blockchain and cryptocurrencies.You are responsible to protect your wallet and nobody will be able to help you recover it in case of mismanagement.
LUM Liquidity Phases
As announced previously the LUM token will first be available on the Osmosis platform via a Liquidity Pool. And initially via a Liquidity Bootstrapping Pool, a special kind of pool dedicated to help price discovery.
Deposit of LUM to Osmosis will only be available once the LBP is over. This is a completely normal and intended behaviour since the LBP is here for people to acquire LUM and participate to its initial liquidity along the price discovery mechanism.
Phases:
1/ LBP for 3 days — upon that the LBP turns into a regular 50/50 pool
2/ Osmosis Gov proposal to incentivise the pool following the LBP
3/ New trading pairs added to the Osmosis
A classical journey would be:
- Acquire LUM during phase 1
- Provide Liquidity during phase 2
- Act according to your trading strategy during phase 3
To learn more about LBPs you can visit those links:
- https://coinmarketcap.com/alexandria/glossary/liquidity-bootstrapping-pool-lbp
- https://medium.com/balancer-protocol/building-liquidity-into-token-distribution-a49d4286e0d4
LBP Behaviour
Important disclaimer: Those are SIMULATIONS to help LBP participants understand a bit more about what happens during the balancer phase. Simulations DO NOT represent what will eventually happen but rather represent what those scenarios means and how to interpret them.
Now that we agree those simulations have literally no value outside the scope of the demonstration….
The LBP has two goals:
1/ Price discovery based on demand
2/ Increase initial liquidity depth
Participating to the LBP means you either want to:
1/ Buy-in early for trading/holding purpose
2/ Contribute to the project by showing support early-on
3/ Combine (1) and (2), because why not
LBP token price
1/ The LBP starts with an uneven asset balance, in our case 90/10 (90% LUM, 10% OSMO)
2/ The ratio (and therefore the price) adjusts over time until the end of the LBP, in our case 3 days with a starting price around ~0.02$
3/ Meaning that, if no buyer steps-in, the price falls down until the target ratio is reached, in our case 50/50
This mechanism allows more buyers to get access to a new asset at a similar price, and more importantly at a price they feel is justified, therefore the term “price discovery”.
Dummy example:
- There is only 2 buyers in the world, and one token
- Buyer 1 buys the token at $1
- The token price go up to $1.5 because of this huge buy-in
- Buyer 2 waits a bit because he wants the same price as Buyer 1
- The LBP ratio adjusts over time and the token gets back to $1
- Buyer 2 buys the token at $1
Scenarios
Here are three simulations one can expect as the outcome of running a Liquidity Bootstrapping Pool.
We cannot stress it enough: there is an infinite number of scenarios, and no one can predict what will happen!
Simulation #1
Straightforward scenario, the demand for the new asset is low enough for the price to fall down until the end of the LBP.
Simulation #2
This one is our favorite, LBP participants have a price in mind and check when others step-in frequently to get the most value out of the new asset. This scenario ensures a good liquidity and stability for the asset early-on.
Simulation #3
Everyone apes in... The asset demand is high during and after the LBP. During the LBP the price remains relatively stable since the ratio are adjusting, but as soon as the LBP ends the price rockets and chaos follows. This scenario can lead to high volume but high volatility early-on.
How to participate
As soon as the LBP is launched you will be able to see it on the Osmosis LBP page at https://app.osmosis.zone/bootstrap.
Or directly by accessing the pool https://app.osmosis.zone/pool/608.
If you followed the steps detailed in 1️⃣ Part 1 — Join Osmosis and get OSMO you should already have OSMO tokens available for the swap against LUM tokens.
At this point it is up to you! You simply have to decide the swap amount you feel comfortable with, the swap price that seems right to you and hit the swap button 🔥🔥🔥
Follow us on Twitter to get the latest news about the Liquidity Pool and the Lum Network
Join the community
- Medium: https://medium.com/lum-network
- Telegram: https://t.me/lum_network
- Twitter: https://twitter.com/lum_network
- Discord: https://discord.gg/KwyVvnBcXF
- Newsletter: https://lum.network
