Radicle’s New Record Liquidity Bootstrapping Pool Sale Shows That LBPs Are Here To Stay
How Radicle made a splash by leveraging Balancer’s LBPs to ensure optimal initial token distribution and beat the previous record
Intro
An increasing number of projects are choosing Balancer’s Liquidity Bootstrapping Pools (LBP) as a means to distribute initial tokens fairly.
LBPs are preferred because they offer numerous advantages — a smooth price discovery process that discourages front-running, an even playing field of participation which results in an even token distribution, and a capital-efficient manner of bootstrapping liquidity.
Allowing for the pool’s token pair weighting (e.g 92.5%/7.5% USDC/TKN) to be skewed means projects can bootstrap liquidity with little investment; weighting changes throughout the sale gives average buyers the ability to participate in the project at a fair price. This is in contrast to traditional 50/50 initial DEX offerings (IDO), where large buyers (or bots) can bid up the price at the start of the sale at the expense of everybody else who comes later.
The community is noticing the benefits of using an LBP, as Balancer has been recording higher records of volumes in these pools.
The last record was set by HydraDX which raised 23M DAI during the first half of February.
Just two weeks later — that record was beaten!
Radicle’s Sale
Radicle, a project aiming to decentralize code collaboration, chose Balancer‘s LBP as the mechanism to sell a percentage of the token supply to the community.
Learning from past sales, the Radicle team was prudent in putting together a very straightforward tutorial on how to participate in the sale — “A Step-by-Step Guide for Participating in the Radicle LBP”. This helped educate novice users who were potentially stepping into DeFi for the first time and ensured the process went smoothly.
It was paired with USDC and the pool weight shifted from a 92.5%/7.5% RAD/USDC weighting to a 50%/50% RAD/USDC over the course of the two days, from February 25th to February 27th.
The sale was a smashing success! It sold 51% (1.9M) of the provided RAD tokens and raised a groundbreaking total of 24.73M USDC, beating the previous LBP record by 7.5% and recording an all-time high 24hr volume of ~$20M.
The LBP helped fairly distribute the token to a total of 1859 ETH addresses over the two days it was active.
Initially priced at 11.5 USDC, the sale spiked up to 28 USDC at the very start, presumably by eager buyers.
The shifting weight nature of the pool applied downward pressure on the price throughout, which counteracted the buy pressure and stabilized the price between 10–15 USDC throughout the sale period — giving any human buyer ample opportunity to participate at a fair price and showing that there is no benefit to front-running an LBP sale.
After it was over, the Radicle community chose to unpause the LBP and leave it running, essentially letting it function as a normal 50/50 DEX pool. This continues to provide liquidity for their token and earn fees for the liquidity providers.
In the successive weeks, the pool continued to provide deep liquidity for the token.
Summary
Balancer’s LBPs provide projects with a capital-efficient mechanism to carry out a sale that fairly distributes the token to the community and encourages non-exuberant price discovery which favors the average community member.
With just 3.5M USDC, Radicle managed to raise $24.73M when pricing their token at an initial 11.5 USDC and allowing the liquidity bootstrapping pool to foster price discovery that resulted in a stable price between 10–15 USDC.
To have achieved the same in a 50/50 AMM, they would have needed 1131% more initial capital (43.1M USDC) and it is highly unlikely that the price would have been as stable.
In this way, Liquidity Bootstrapping Pools turn out to be an optimal choice for both the project, since they can distribute their tokens with little investment, and the community, which has a straightforward way to buy the token at a fair price without pressure.
The result is a better-funded project whose governance token is more evenly distributed among the wider community members who care about the long-term vision of the project, not short-term players who are in it for quick profits.
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Resources
If you are interested in learning more about Balancer, we recommend any of the following resources:
- Balancer V2 — A One-Stop-Shop
- Introducing Balancer V2: Generalized AMMs
- The Balancer Report newsletter
LBP Resources
Or, if you are interested in learning more about LBPs and other projects’ experiences with them: