We’re very excited to announce the upcoming REGEN-ATOM liquidity bootstrapping pool (LBP) on the Osmosis DEX, launching June 23, 2021, and running until June 28, 2021. This pool is extremely exciting for a couple of reasons; It will be the event that establishes a price and liquidity for the REGEN token, and it’s the first LBP on the Osmosis DEX. If you have been wanting to get your hands on some REGEN tokens, this finally gives you the opportunity to do so.
Details of the LBP:
Start: 12:00 pm EST (16:00 GMT) — June 23, 2021
End: 11:59 am EST (15:59 GMT) — June 28, 2021
Where: Osmosis Dex
Starting liquidity: somewhere between 600,000 and 1 Million REGEN paired with up to 10,000 ATOMs
Starting ratio: 90:10
Final ratio: 50:50
REGEN Price: starting between $4–6 USD (with a 0.5% swap fee), and gradually dropping as described below.
As mentioned in Part 1 of this two-part blog, TGI is proud to be supporting this effort. TGI is a Regen Network community member and a Public Benefit Corporation dedicated to the design, development, and implementation of regenerative systems, structures, and processes that grow the capacity and capability of producers, developers, brands, and communities to significantly improve collective ecological, socio-cultural and economic well-being. To learn more about TGI and its role with Regen Network read Part 1.
TGI is teaming up with two other early tokenholders to launch the first Liquidity Bootstrapping Pool (LBP) on the Osmosis Decentralized Exchange (DEX) on Cosmos. Osmosis offers a convenient design for LBPs, a special type of Automated Market Maker (AMM) designed for token sales. Together, we are committing 1 million REGEN tokens and 10,000 ATOMs into the LBP and subsequent liquidity pool to seed and enable the purchase of REGEN tokens by the community and initiate long term liquidity between the REGEN and ATOM tokens.
Liquidity pools are a commonly used tool in the crypto space as part of an automated market maker to provide an automated and decentralized mechanism for providing liquidity (i.e. trading, buying, and selling) for crypto assets. Learn more about the basics of liquidity pools here.
We’re incredibly excited to be partnering with Osmosis in their first LBP event. New protocols can use Osmosis’ LBP features to distribute tokens and achieve initial price discovery.
How does a Liquidity Bootstrapping Pool work?
LBPs differ from other liquidity pools (LPs) in terms of the ratio of assets within the pool. LPs traditionally require a 50–50 ratio. The total value of Asset A remains equal to the value of Asset B, even as people buy and sell from the pool. When a trade disrupts the balance between the pools, it results in what is called slippage, which effectively causes greater price distortion. Traders prefer deeply liquid pools for this reason. In small pools, a single order can cause dramatic price swings. Large pools have less slippage because each order tends to involve only a small percentage of liquidity within the pool.
In LBPs, the ratio between the two assets adjusts over time to facilitate price discovery. LBPs involve an initial ratio and an interval of time over which the ratio adjusts. These weights are engineered before launch. One can create an LBP with an initial ratio of 90–10, with the goal of reaching 50–50 over a few days, and is what the REGEN/ATOM LBP will be doing. The ratio continues to gradually adjust until the weights reach their target within the pool. Like traditional LPs, the price of assets within the pool is based on the ratio at the time of trade.
LBPs facilitate price discovery by demonstrating the acceptable market price of an asset. Ideally, LBPs will have very few buyers at the time of launch. As shown on the red line, the price slowly declines until traders are willing to step in and buy the asset. Arbitrage maintains this price for the remainder of the LBP. The process is shown by the blue line below. The price declines as the ratios adjust. Buyers step in until the acceptable price is again reached.
Choosing the correct parameters is very important to price discovery for an LBP. If the initial price is too low, the asset will get bought up as soon as the pool is launched. It is also possible that the targeted final price is too high, creating little demand for the asset. The green line to the left shows this scenario. A buyer places a large order, but afterward the price continues to decline as no additional buyers are willing to bite.
The parameters of the REGEN-ATOM LBP are as follows, but subject to change depending on the fast-moving conditions of the market. At the moment, the three initial liquidity providers, including TGI, anticipate placing 1 million REGEN tokens into the LBP and the subsequent LP, starting at or near a ratio of 1:10 REGEN to ATOMs and to have the initial implied price of the token be high enough as to ‘whale-proof’ the market (perhaps $4–6) and then gradually reduce in price until the price is discovered. In that way, the LBP mechanism plays out, reaches the sweet spot where the community begins to purchase, and the price will be organically discovered. This process will play out over the course of 5 days between June 23 and June 28, 2021.
If you are considering buying REGEN in the LBP, we want to make sure you understand that when the LBP starts it will start at a high price and will slowly come down. The idea is that price discovery will happen through individuals deciding for themselves which price is reasonable for them and buying in when the protocol reaches that level. Be sure to do your own research!
Osmosis aims to provide an intuitive, easy-to-use LBP design to give protocols the best chance of a successful sale. The REGEN-ATOM LBP will be a key moment for both Osmosis and Regen Network. Osmosis will have the opportunity to showcase its potential as a platform for this innovative token sale mechanism. And for Regen Network, the LBP will facilitate initial price discovery for REGEN and allow the network to fairly distribute tokens to all the community members that have been wanting to invest.
Follow on liquidity
Immediately following the completion of the LBP, we will be transferring our ATOMs and REGEN tokens over to a 50:50 LP on Osmosis as well, based on the price as determined in the LBP. At that point, all token holders are invited to participate in the LP either as a liquidity provider or by utilizing the pool for liquidity.
May this be yet another important and beneficial step in the Regen Network community journey!