To Our DeFi Community,
The Initial DEX Offering (IDO) is here. And while it’s not perfect, it’s a substantial improvement from the token distribution models back in 2017 and 2018.
While the evolution has been slow, DeFi tokens have taken small steps over the past few years to improve incentive designs, distribution methods, and more. The Initial DEX Offering is another step in this evolution as it provides investors with permissionless access to token offerings. The movement was initially marked with UMA depositing 2% of the token supply into Uniswap for what many are calling the first IDO. What’s interesting to note with leveraging Uniswap and other similar AMMs for these offerings is that these tokens are priced on a curve. They’re effectively primed for a pump and dump as everyone’s buying and no one is selling (because no one actually holds the token yet).
just to clear up some misconceptions…
yes, @UMAprotocol *listing* price = seed round price. but, token also being sold on a curve
$30k UMA purchase, buyers paying 10% premium
$56k = $20% premium
$237k = 77.% premium
$513k = 156% premium
$1m = 300% premium pic.twitter.com/mTNbCkxi8L
— Matteo Leibowitz (@teo_leibowitz) April 29, 2020
The key difference here between Initial DEX Offering and token sales in the ICO era is that the motive isn’t for the developers to cash out big on the token offering (well..sort of). Since the teams have to put up another liquid asset as collateral in addition to their tokens (mostly ETH) and liquidity can’t easily be removed without destroying price discovery, the token sales tend to not drive a massive profit for developer teams. Instead, these types of offerings allow the market to discover an accurate valuation for the protocol while the primary distribution mechanism for the public is through value-added participation like liquidity mining (also known as yield farming).