[BIP-92] Deploy Liquidity Bootstrapping Pools to BNB Chain

Proposal name: Deploy Liquidity Bootstrapping Pools to BNB Chain

Summary:

Deploy Liquidity Bootstrapping Pools to BNB Chain in order to facilitate fair token launches

Co-authors: BNB Chain foundation, Fjord Team, and Orb Collective

References/useful links:

Website

Documentation

Protocol Description:

BNB Chain comprises BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). BNB is the largest chain by users and transactions. BNB Smart Chain relies on a system of 23 active validators with Proof of Staked Authority (PoSA) consensus that supports short block time and lowers fees.

Introduction:

Market manipulation in token launch events is a well-known problem. Market manipulators and other players with malicious intentions or perverse incentives target launch events that occur in BNB Chain to profit through dishonest practices, causing great damage to the young projects that launch their token, retail users and consequently, to the chain.

Manipulation usually occurs with small projects that are launching their token with low liquidity of the collateral coin. In these cases, the project token has a very low starting price, which makes it fairly easy to manipulate the price and generate a price spike by buying in bulk. Once that spike is generated, manipulators only have to unload their tokens on the rest of the market participants.

The mechanisms to limit manipulation on token launches and during the first hours of existence of novel projects are limited as growing demand will easily drive the price up. Nevertheless, by launching a token on a Liquidity Bootstrapping Pool, the project token would support a tremendous selling pressure by setting up an extremely high starting price. The price is programmed to go lower and lower until demand manages to counterbalance the selling price. Therefore, incentives that a possible price spike could have on the price are limited and almost detached.

Balancer’s LBPs have proven effective in limiting price spikes during token launches and therefore the incentives to manipulate the market. We want to allow projects that launch a new token on BNB Chain to be able to protect themselves from this manipulation thanks to the technology developed by Balancer in the form of LBPs.

Purpose/Motivation:

The only option that small projects have to protect their token launch from manipulation is deploying huge amounts of liquidity in form of the collateral token, making manipulation much more costly. Small projects do not have the ability to bootstrap a large amount of liquidity at the time of launching their token, effectively hindering the success rate of small projects by being more vulnerable to manipulation.

BNB empowers both small and big developers to build in our chain, but the former does not currently have a specific tool to protect their launches in the same way as the latter. For this reason, we consider it crucial to allow all projects that decide to launch a token on our chain to use Balancer’s LBPs. Balancer would benefit from an increase in its fees by being deployed in the chain that today has more activity, while BNB would increase the degree of protection for both developers and users during launch events.

We believe that for example, it would be very attractive for GameFi, one of the strongest BNB verticals, so that the demand for the tokens in their launch becomes as organic as possible. Allowing a natural price discovery mechanism in which the price is determined by player demand and not by perverse incentives.

The implementation of the LBPs by Balancer in BNB Chain also represents the first collaboration between both entities and – if this proposal is approved by the governance – it could be used as a precedent to consider further Balancer applications. The engagement generated by this proposal, as well as the learnings of a hypothetical Balancer deployment for launching LBPs in BNB Chain could be leveraged by both parties for future collaborations in a mutually beneficial way.

Specification:

This proposal is to approve the deployment of LBPs in BNB Chain by Balancer. If the proposal goes ahead, both teams will start working as soon as possible to establish the necessary technical framework to make it possible for projects that launch a new token to use the Balancer service.

Requirements from Fjord Foundry & Fjord NFTs (Formerly Copper Launch):
The Fjord Team is prepared to lead LBPs on BNB for token launches and NFT collection drops. Launching projects in the past have been interested in direct LBPs on BNB and we would be excited to be part of this effort. Fjord would need the Balancer Protocol smart contracts deployed on BNB to include Vault, BNB subgraph indexing, and LBP 0 decimal factory.

8 Likes

Chiming in to share how excited the Fjord (formerly CopperLaunch) team is for the opportunity to grow via BNB. We have had plenty of conversations in the past with teams looking to deploy directly on BNB, so we have high expectations for growth in this direction.

5 Likes

I believe all is good to go on Balancer’s side as well. The “0 decimal” LBP factory noted in the OP refers to the NoProtocolFeeLiquidityBootstrappingPoolFactory which comes standard to new Balancer deployments. Thus this is a simple “deploy contracts and subgraph infra to BNB” which won’t take much time. Then Fjord and company can go do their thing :slight_smile:

4 Likes

Really excited by the BNB team rolling out this proposal for incorporating Balancer LBPs to the BNB Chain offering. It would not just bring in a wonderful and battle-tested product but also would be the first collaboration between us and one of the DeFi blue-chips outside the BNB Ecosystem.

From the BNB team we believe that LBPs would be specially interesting for young GameFi projects. BNB Chain is the reference chain for GameFi and therefore we could connect Balancer and the Fjord team with many exceptional and ambitious projects. Liquidity Bootstrapping Pools will definitely have a great impact on limiting market manipulation during launch events, with a more than positive impact to our community.

I also hope this proposal will just be one of many between BNB and Balancer. Looking forward the approval of this proposal by BAL Governance to start building together and for further joint initiatives.

4 Likes

I am not a fan of BNB chain and don’t see much value but I can live with the scope of the proposal.

4 Likes

Hey all. I’m from the Fjord team too and really excited at the prospect of launching on BNB Chain. Think there is especially a great opportunity on the NFTs side and introducing the fair launch mechanism to a new audience.

3 Likes

I think it is implied in the proposal. BNB could be a new source of income for the DAO’s treasury. LBPs were proven to be an incredible “fees machine” during the last bull market.

1 Like

With respect to subgraph indexing, note that metrics like volume and TVL on the subgraph are computed based on pricing information derived from the trades themselves. Basically on every network there’s a set of dollar-pegged assets and a set of pricing assets, and the prices of the tokens in those two sets is used to determine the prices of all other tokens and therefore estimates for TVL, volume and swap fees in dollar terms.

As a consequence of this design, these metrics will only be meaningful in a BNB Chain deployment if:

  • LBPs only raise dollar-pegged tokens; OR
  • Weighted pools are also created (and frequently interacted with) pairing against USD the tokens that are being raised in LBPs (eg, if it’s expected that projects will raise BNB, there needs to exist for example a BNB-BUSD pool so that the subgraph can determine the price of BNB)

The latter implies we’d need to also deploy the Weighted Pool Factory to the BNB
Chain, in which case OP should be amended accordingly.

As far as subgraph indexing goes, I just want to clarify that Balancer Labs nor any of the Balancer SPs provide subgraph indexing services. If this proposal is approved, Balancer Labs could update its deployment scripts so that a BNB Chain subgraph is deployed to TheGraph’s Hosted Service, and would be happy to assist the Fjord Team in setting up a deployment of their own if that’s convenient.

3 Likes

Thank you for the feedback @markus !
You are entirely correct.

We view it as a good thing to start with LBPs in dollar-pegged tokens.
Deploying the Weighted Pool Factory to the BNB Chain could definitely be the next step if the proposal is well-received by the community.