Launchpad Liquidity
Launchpad Liquidity Addition Process: Based on the Bonding Curve Logic
Below is a detailed description of the process for adding liquidity on Launchpad using the Bonding Curve mechanism, along with examples and logic to help you better understand how the product works.
1. Select the Token for Adding Liquidity
On the Launchpad page, users first need to select the Token they want to use for adding liquidity.
The platform will automatically display the amount of Tokens allocated for liquidity during the Launch Token setup.
For example: If you specified 100,000 Tokens for liquidity addition during the Token launch, these Tokens will be used in the initial phase of the Bonding Curve.
2. Understanding the Bonding Curve Principle in Launchpad
The Bonding Curve is a mechanism that dynamically adjusts Token prices through algorithms. It addresses some of the issues in traditional AMM models, such as high liquidity thresholds and large capital requirements. Additionally, it allows the use of virtual assets (e.g., virtual USDT) as a pricing basis, reducing the initial funding pressure.
Core Logic of the Bonding Curve:
Formula: The Bonding Curve algorithm is still based on the AMM model’s M × N = K formula but with some key differences:
M: Virtual asset A, such as virtual USDT.
N: A combination of partially virtual and fully real asset B, such as the Token issued by the project (e.g., Memecoin).
K: A constant value ensuring the balance of the algorithm.
Phase 1: Dynamic Price Adjustment of Tokens
In the first phase of the Bonding Curve, all Tokens (asset B) allocated to Launchpad are used in the Bonding Curve. The system dynamically adjusts the price through the algorithm:
Lowest Initial Price: At the start, all Tokens (asset B) are within the Bonding Curve, and no one holds Tokens. Therefore, no one can sell Tokens to extract virtual asset A (e.g., virtual USDT), resulting in the lowest price.
Price Increases with Purchases: When users purchase Tokens (asset B), the quantity of virtual asset A (M) increases while the quantity of real asset B (N) decreases. The price rises dynamically based on the formula.
Phase 2: Adding Real Liquidity
When the Bonding Curve reaches the threshold set by the developer (e.g., after a certain amount of asset B is sold), the system enters the second phase:
The remaining Tokens (asset B) and the real assets (e.g., USDT) paid by users during purchases will be used to add liquidity on a DEX (Decentralized Exchange).
At this point, the price of asset B will be determined by market supply and demand, and users can freely trade on the DEX.
3. User Operation Process: Initial Buy
What is Initial Buy?
Initial Buy allows users to purchase Tokens at the lowest cost during the first phase of the Bonding Curve. The algorithm ensures that the initial price is the lowest, enabling early participants to acquire Tokens at a better price.
Steps to Operate:
Select Token and Enter Purchase Amount:
Users select the Token they want to buy and input the amount of virtual assets (e.g., virtual USDT) they wish to spend.
Algorithm Calculates the Number of Tokens:
Based on the Bonding Curve formula, the system calculates the amount of asset B (Token) the user can receive in exchange for the input asset A (e.g., USDT).
Confirm Purchase and Complete Transaction:
Once the user confirms the transaction, the system allocates the Tokens (asset B) to the user’s account, and the price dynamically adjusts according to the formula.
4. Advantages of the Bonding Curve
No Need for Prepaid Pricing:
The use of virtual assets (e.g., virtual USDT) for pricing reduces the initial funding pressure on the project team.
Incentivizing Early Participants:
The initial price is the lowest, encouraging users to participate early and support the project.
Automatic Liquidity Addition:
When the second phase threshold is reached, the system automatically adds the remaining Tokens and real assets to the liquidity pool, supporting subsequent trading.
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