IDO Launchpad
Major Liquidity Offering Options
Bonding curve. Based on a set price curve, token price increases as the supply increases. Front-running leads to large price discrepancies among participants. Therefore, speculators are usually able to price out genuine investors who believe in the project vision.
AMM coupled with yield farming. Many token assets are issued on AMM platforms, which requires liquidity to be placed in half base tokens and half quote tokens. But the reality is that the majority of project teams simply cannot afford to lock the bid-side liquidity required to sustain the market. This AMM and yield farming combination is essentially an act of “renting” liquidity by constantly inflating the token supply. Rented liquidity cannot guarantee loyalty, so the situation of “farm and dump” occurs, which creates dramatic sell pressure on secondary markets.
Auction. Since participants can only buy tokens but cannot sell them, token auctions result in an inefficient market.
In short, mainstream DEX liquidity offering suffers from issues such as front-running, high cost of attracting liquidity, and insufficient liquidity.
Why PEPA IDO?
Unlike bonding curves, there is no front running on PEPA IDO. Compared to AMM with yield farming, token assets are more likely to go into the hands of genuine investors rather than speculators or “dumping farmers”. Compared to simple auctions, PEPA IDO is much more than mere fund-raising.
Proceeds raised from PEPA IDO participants are not misused, and are instead used to create a liquidity market. For new assets, PEPA IDO is a one-stop token distribution solution. It builds a solid foundation for a future influx of interest and capital, even if the bid size is small. For token assets that are already available for trading elsewhere but with limited liquidity, PEPA IDO provides significant ask-side liquidity and can act as a price source and guidance for external markets.
IDO Steps at PEPA
The user distributes token asset by supplying a number of tokens and setting a soft cap. A portion of the tokens supplied will be used for IDO and the rest will be used for ask-side liquidity in the pool. The user sets the initial offering price and a start and end time for the IDO campaign. After that, anyone can participate in the offering by staking their capital.
Once the IDO campaign ends, participants can claim the tokens based on their stakes at the pre-defined initial offering price. If there is more capital in the pool than the user's soft cap, all participants claim the tokens proportional to their shares of the pool, at the initial offering price. Any difference between the amount participants staked and the actual cost of the tokens is then refunded back to participants.
After the IDO phase ends, new public liquidity pools will be automatically set up with the capital raised and the tokens reserved for ask-side liquidity and trading becomes available. The starting market price is the initial offering price.
Liquidity Protection
There is also a liquidity protection period to prevent the project team from "rug-pulling", that is, draining pool liquidity, immediately.
The bid-side liquidity is established by proceeds from IDO participants, and the ask-side liquidity is established by tokens reserved for the pool when the campaign was first set up. This initial liquidity belongs to creator of this IDO campaign, but the creator cannot remove this liquidity during the liquidity protection period. Anyone is able to provide liquidity to these pools AMM-style, with the added benefit of higher capital efficiency given by PMM.
This resulting spot market follows the bonding curve method: when a trader buys tokens, the token price goes up, and when a trade sells tokens, the token price goes down.
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