I. Introduction | II. Fair Token Offering Strategy | III. Conclusion
Since our announcement of the upcoming fair token offering event (FTO), there has been a flood of questions about the mechanics and details of the event. These questions have come from CBLP token holders who were concerned about the price impact of such a large influx of tokens entering the market, as well as from interested participants who were hoping to participate in the FTO for short-term or long-term monetary gain.
The team has remained silent on these inquiries, simply stating that the mechanisms of the FTO are still being finalized, but will be similar to the NFBO. In this blog post, we will discuss the team’s strategy for the FTO, as well as the rationale behind those choices. We will not be providing specific details about the time or duration of the event, but we will discuss the underlying process and incentive structure here. The exact details of the FTO will be released in a separate blog post closer to the date of the event itself.
II. Fair Token Offering Strategy
The FTO is an important milestone in the launch of the Yamfore protocol. As the sole lender for any issued loans on the platform, it is important that the protocol has a sufficient amount of capital to attract users, provide liquidity in the CBLP market, and generate growth momentum from launch. However, the team is also aware that a significant number of current CBLP holders exist, and these individuals should not be adversely affected by the influx of tokens. After all, these are the individuals who have supported Yamfore since day one.
As a team, we faced a difficult challenge. On the one hand, we wanted to maximize the amount raised through the FTO event for the benefit of the protocol and CBLP holders in the long term. On the other hand, we had a duty to protect our current CBLP holders from any negative price impact due to the influx of tokens entering the market.
As we have unfortunately seen with other protocols in the space, recklessly releasing a large amount of tokens without a plan can have a devastating impact on the price of said token and significantly hurt token holders. We wanted to avoid this outcome at all costs.
Fortunately, we were able to come up with a solution that benefits both sides of the equation. The incentives for individuals participating in the FTO are maximized, while the price action of CBLP remains neutral to positive for current CBLP token holders. This was only possible due to the mechanisms of Yamfore itself. The first key element of this is that the FTO will run concurrently with the protocol’s mainnet launch. This has two primary implications:
- First: Individuals participating in the FTO are investing in a working protocol that is ready to use from day one. This offers a more compelling narrative to potential investors and drives natural growth from day 1.
- Second: All revenue generated from the FTO event is immediately utilized by the protocol, facilitating immediate growth for the native governance and utility token of the protocol, CBLP. Specifically, with the lending parameters of the protocol set at a 25% CBLP flat fee and a 50% loan-to-value ratio for the mainnet launch, a 50% return on investment (ROI) is received for any capital lent by the protocol. In other words, 50% of any amount raised by the FTO event is translated into direct buying pressure in the CBLP market. For example, if 5 million ADA is raised through the FTO, this would result in 2.5 million ADA of direct buying pressure in the CBLP market. This buying pressure is occurring from individuals purchasing CBLP from the open market to initiate loan positions from the protocol, and borrow against the available funds in the protocol’s treasury.
This strategy presents a win-win for both FTO participants and current CBLP token holders, striking a balance between the interests of both parties, and ultimately benefiting all parties involved.
The Fair Token Offering (FTO) event will take place on the “Market” section of the protocol upon mainnet launch. It will be conducted through the CBLP Auction portal, utilizing the exact mechanisms of the CBLP Auction portal as described in the Litepaper.
In conclusion, the FTO represents the fairest and most transparent token distribution process for the Yamfore community. It is a win-win for all parties involved, striking a balance between the interests of existing CBLP token holders and interested FTO participants, ultimately benefiting everyone.
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