Comment on page
Liquidity Bootstrapping Event (LBE)
LBPs increase trust in the token launch by eliminating bot manipulation and creating a fair launch for everyone regardless of their portfolio size. They’re designed to safeguard the reputation of new projects, gain a competitive edge over bots and prevent whales to profit through rug pulls or other manipulation techniques.
The operating mechanism of LBPs entails adjusting the weight of the two tokens in the pool. In other liquidity pools, tokens are required to maintain a set ratio of 50:50. A weighted pool proves advantageous as it allows for a high initial price with minimal up-front capital. LBP controller needs to provide the new tokens and a small portion of a second asset (mostly a stablecoin) to start the pool and initiate distribution.
The programmatic adjusting of weight over time facilitates the lowering of the price slowly thereby elongating the price discovery period and enabling participants to wait for the price they think is fair to buy at.