Overview

An Overview about sonic liquidity bootstrapping pool (LBP)

A liquidity bootstrapping pool (LBP) is a mechanism used in DeFi to facilitate the initial liquidity and price discovery for a newly launched token. It is designed to provide a fair and efficient way for projects to raise funds and establish liquidity for their tokens.

In a liquidity bootstrapping pool, participants contribute both an existing base token (such as ICP/ckBTC/stable token) and the newly issued token to the pool. The base token acts as the initial liquidity, while the new token represents the project's token being launched. The LBP contract determines the initial token price and gradually releases the tokens to the participants based on a predetermined schedule.

During the LBP, the token price starts high and gradually decreases over time, incentivizing early participants. This gradual price decline helps establish a fair market price for the token based on supply and demand dynamics. As more tokens are released into circulation, the market has an opportunity to adjust and find an equilibrium price.

LBP provides several benefits, such as ensuring a fair distribution of tokens among participants, reducing the risk of initial price manipulation, and allowing for price discovery in a controlled manner. It also helps projects bootstrap liquidity, making their tokens tradable on DEX from the moment they launch.

Swift AI's Liquidity Bootstrapping Pool aims to provide a platform for projects to raise funds and establish liquidity in a decentralized and transparent manner within the Internet Computer ecosystem.