Proposal name: Deploy Liquidity Bootstrapping Pools to BNB Chain
Deploy Liquidity Bootstrapping Pools to BNB Chain in order to facilitate fair token launches
Co-authors: BNB Chain foundation, Fjord Team, and Orb Collective
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.
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.
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.
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.