The problems of initial liquidity and liquidity reward program for VNTW token and Value Network project
An Old era of utility tokens listings (2017–2018)
The initial liquidity of the token was one of the hardest things to solve throughout the hype of 2017–2018.
Investors were willing to see the token on the exchanges right after the ICO’s to trade them, and projects were forced to buy listings for 10–100k USD to put their token on unknown exchanges. On top of the hype, listings on Tier-1 exchanges could cost up to 300k USD. Just enormous sums, which you can spend to build the new startup! Plus that, most of the exchanges told crypto startups to have marketmaking bots, fake volumes.
DEXes were the option, but the trading volume was so low that listing didn’t make any significant results.
One of the things that we tried to fundraise way back in 2018 was listing on the exchanges to make our token liquid. You can go through our presentation and Whitepaper from 2018 in this post.
The second wave — IEO (2019)
As a lot of inefficiency was in the process during 2017–2018, exchanges realized that they could offer customers IEO — Initial Exchange offering instead of ICO. This method gives liquidity to the token right after that tokensale as the project is making a selling in collaboration with an exchange.
One of the most successful cases was Matic project; with real product and partnerships with Binance, they succeeded to fundraise and give their backers liquidity of the token.
Criticism about IEO was applied to the conflict of interest of the exchange during the IEO process. And also, the same as with ICO projects, the price of the token dropped lower than initial price of the token in 99% of the projects.
Modern State of initial liquidity problem — DeFi (2020)
During the summer and autumn of 2020, we’ve seen the enormous growth of the Decentralized Finance niche and Decentralized exchanges either. Boosted by the growth of BTC, in gave users a number of possibilities, including:
- Money markets investing
- Leveraging of the crypto portfolio through crypto-backed loans
- Decentralized insurance
And also, placing the token on platforms like Uniswap and Sushiswap, which are now considered as major exchanges.
Tactics look as follows:
- The token is placed on the platform with a near-zero price
- Liquidity providers put liquidity to the pool and are rewarded based on the amount of liquidity provided
- Token of the project goes live and liquid
- Trustless mechanism of token listing
- Trustless mechanism of liquidity reward
- Liquidity providers can enter the pool with few cents or even a hundred thousand dollars.
- Liquidity providing IS NOT PURCHASING of the token (It means, you can withdraw your liquidity later but still have the reward)
- The price of the token doesn’t smash down, but starts from 0 and identifies the real trust of the community to the project. Also, it has a huge potential for further price gains.
How is the liquidity reward program looks in the Value Network project?
- We create an ERC-20 token and list it on Uniswap
- Liquidity reward for the Liquidity providers equals: 500 VNTW tokens for 1 ETH in the pool
- The liquidity should be in the pool for one month to get the reward
- The reward is distributed by the smart-contract itself, not the team.
- 10% of the total supply will be allocated to the liquidity reward program
Why is Value Network is the community-backed project?
It is so because we start the project in a bootstrapping style, financed by the founders themselves. To maintain the project and sustain product development and releases we have a Development pool, which equals 51% of tokens of the project and which is unlocked in equal parts throughout three years — for the development of the project. Please read more on our token economy in one of the previous posts.
Also, as all tokens are voting, the decision-making process steadily goes from the founders of the project to the community.
Let’s drive the decentralized technology together!
Artem Levin, 2020
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