What is a Balancer LBP (Liquidity Bootstrapping Pool)?

1: What is a Balancer LBP?

Balancer is a decentralized exchange (DEX) that mainly provides two services, decentralized trading and liquidity pool.
LBP (Liquidity Bootstrapping Pools) is a liquidity pool on Balancer that allows items to issue tokens through it. During the issuance period, users can exchange USDC with project tokens with just one click.

2: Advantages of LBP

In Balancer’s liquidity guide pool, that is, LBP, a fund pool can be established by project parties or individuals. The issuance time of the liquidity guide pool is generally 3 days and the maximum deviation ratio is 2:98, that is, the composition of the fund pool will be 2% of reserve assets 2% and 98% of the project tokens.

The liquidity guide pool also provides the project party with the ability to quickly adjust the weight, which can reduce the value of the tokens in the pool by adjusting the proportion of reserve assets, and prevent the eventual price surge due to early speculation. Under such a design mechanism, the opening price is usually deliberately set higher, and the lower price may appear in the later stage of the event. So the users who want to participate in LBP need to pay attention to this risk, and when the project is popular enough, this risk will be reduced.

When users put different assets into the pool, the market price of the assets changes and the resulting price difference will induce arbitrageurs to exchange in the fund pool. The price change will cause the weight to change so that the total pool is balanced. Arbitrageurs obtain benefits through arbitrage, and fund owners balance the value of their assets.

In general, participating in the project LBP issuance probably has the following advantages:

1. The price is relatively stable, not easy to lose control

2. Reduce the “front-running” of advanced trading bots and experts.

3. Some projects can support multiple tokens to participate in exchange

So far, projects such as APY.Finance (APY), Perpetual Protocol (PREP), and Furucombo (COMBO) have been issued through Balancer LBP, and MASK Network (MASK) will also start the LBP round on February 24.

3. LBP participation tutorial

1 Locate the project LBP page

In general, projects participating in LBP will publish the address link on the official website. After entering the Balancer LBP page, you will see a page similar to the following.

2 Bind wallet
Balancer currently supports the following five wallets. MetaMask (little fox) wallets are commonly used and support browser plug-ins such as Chrome, IOS, Android and other terminals

3 Exchange

Prepare the assets of the account, the ETH to pay the Gas fee, and the subscription currency used to participate in the LBP exchange. For example, the subscription currency of MASK is USDC.
If it is the first time to participate in exchange on Balancer, you need to click the unlock button and then confirm through the wallet to continue. At the same time, a certain amount of ETH is required as a Gas fee.

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