What Is Liquidity Bootstrapping Pools (LBPs)?

Liquidity Bootstrapping Pools (LBPs) are pools that can dynamically change token weighting (e.g 1/99 to 99/1 for TokenA/TokenB). LBPs use Weighted Math with time-dependent weights. The starting and end weights and times are selected by the pool owner, who also has the power to pause swaps.

Mental Model

You can think of the starting price of your LBP as the ceiling you would want to set for the token sale. This may seem counterintuitive, but since LBPs work differently than other token sales, your starting price should be set much higher than what you believe is the fair price.

What Are the Advantages of Liquidity Bootstrapping Pools (LBPs)?

• Sell Pressure

During a weight shift, the token price of one token experiences sell pressure while the other experiences buy pressure. When this is mixed with modest trading volume, the price approaches the generally agreed-upon market price.

• Fair Market

LBPs often start with intentionally high prices. This strongly disincentivizes whales and bots from snatching up much of the pool liquidity at the get-go. When LBPs are used for early-stage tokens, this can help increase how widespread the token distribution is.

• Starting Capital Can Be Small

Teams who use LBPs to kickstart the liquidity of a token that has not been well distributed yet can do so with minimal starting capital. For a team running an LBP with their TOKEN and DAI, starting with 10% or 20% DAI, as opposed to 50% DAI like they might need on another platform, significantly reduces their starting capital requirements. Shifting from 80/20 TOKEN/DAI to 20/80. and would ultimately result in the team holding far more DAI at the end of their LBP while reducing the (sometimes extreme) price volatility that teams experience when just launching a 50/50 pool.

Balancer LBPs Community

• Twitter: https://twitter.com/BalancerLabs
• Medium: https://medium.com/balancer-protocol