In this article, we will touch on the IDO method that was used on Solana in the past, explain the advantages and disadvantages of each IDO, and why UXD Protocol chose the Mango Markets type IDO with a small modification.
IDO Link: https://ido.uxd.fi
We are excited to finally launch our governance token UXP!
The IDO will be held on November 12th, HKT 12PM; November 11th, PST 8PM; November 11th, EST 11PM. The IDO will last for a total of 48 hours. During the IDO, anyone will be able to deposit/withdraw USDC and participate in the IDO. At the end of the IDO, the number of tokens you receive is proportional to the USDC you contributed to the vault. A total of 300,000,000 UXP tokens(3% of total supply) will be available. You can find more information regarding the token distribution and how the UXP token functions here.
$UXP Vesting Schedule
What is UXD Protocol?
UXD Protocol is an algorithmic stablecoin backed 100% by a delta-neutral position using perpetual swaps. We intend on solving the stablecoin trilemma, which is decentralization, stability, and capital efficiency. Current stablecoin iterations can only achieve 2 out of 3. We intend on creating a stablecoin that achieves all 3.
The stablecoin market is huge, with a total market cap of $130 billion and trading volume of up to $100 billion/day. But more than 85% of the market cap of stablecoins is composed of centralized stablecoins such as USDT, USDC, BUSD and are at risk of being censored by hostile third parties. The market needs a decentralized, crypto-native stablecoin that is uncensorable, stable and scalable — at all times. UXD Protocol seeks to become that for the market.
You can find more information about our investors here and an investment thesis by our lead investor Multicoin Capital.
Lottery type IDO
This is the most common type of IDO. The project that is raising funds sets a fixed price for the token and sells X tokens to the public. If there is more demand than supply, there is a lottery and only participants who win the lottery get to participate in the IDO. There is usually a max allocation per participant and sometimes participants have to buy the launch pad tokens to participate.
The obvious advantage of this approach is that usually the price of the tokens is set at a low price to entice people to participate and the winners of the IDO are likely to make a short term profit.
There are several disadvantages of this approach.
1. There is a very low probability that you get allocation.
2. Even if you do get an allocation, the allocation is too small.
3. Participants have to stake the platform token and take the price risk of said token.
First come first served
Another relatively common way of doing an IDO is the first come first served approach. This type of IDO is heavily favorable towards people who participate with bots and they tend to get most of the allocation. Projects want people who are committed to the project for the long term, but it is questionable if the first come first served model attracts long term investors.
Mango Markets IDO
The Mango Markets IDO was a huge success. They were able to raise $70 million for the insurance fund and participants were able to acquire as many token as they wanted to at a reasonable price.
The Mango Markets IDO works as follows: There is first a 24 hour sale period in which participants are able to deposit/withdraw USDC. Then there isa 24 hour grace period in which participants are able to only withdraw the USDC.
After the grace period, the number of tokens you receive is proportional to the USDC you contributed to the vault.
This method has several advantages.
1. You will be able to buy the tokens at the price you are willing to pay.
2. You can get a bigger allocation than lottery types.
3. You don’t have to create a bot or be in front of the computer at the exact moment the IDO starts.
Why UXD Protocol will have a IDO similar to Mango Markets
“We take the view that token sales should be simple, fully transparent and minimize randomness and luck in the distribution. Simple mechanisms are easier to build, explain, understand and are harder to exploit. A transparent mechanism increases participation because buyers are more confident there are no hidden tricks that could harm them. Elements of luck engineered into the mechanism distribute value randomly or to those who are most willing to do the arbitrary, worthless tasks to get the free value. We believe all "excess" value should be captured by token holders in the DAO. Removing the casino aspects of token sales selectively encourages participants who are focused on contributing and governing in the long term.
Other mechanisms we've looked at don't live up to this standard. For example a sale on a bonding curve will give free value to those who buy a few milliseconds before others or have the good fortune of their transaction being accepted by validators before others. A capped sale of tokens with a fixed price has similar issues. A sale of tokens to market makers who sell the tokens on the open market is not fully transparent and the agreement between the market maker and the dev team may be quite complex. There are various "fair" launch mechanisms that are transparent and minimize luck, but ultimately end up being very complex (e.g. Mesa Offering) and difficult to build.”
Quote from Mango Markets litepaper
We 100% agree with Mango Markets and believe a simple and fair IDO is best for all stakeholders involved.
UXD protocol is the first delta-neutral position backed algo stablecoin. We want to attract token holders who believe in our vision and want to contribute to the governance with a long term perspective.
Other types of IDOs can achieve very high profit margins for a small number of people in the short term but it is questionable whether they add value for the protocol long term.
We have carefully observed the Mango Markets community after the token IDO. Mango Markets has passed various proposals such as listings of a wide range of crypto assets and perpetual swaps, and liquidity mining incentives. From the proposals we can infer that the community is intelligent, rational and making progress.
UXD Protocol also intends on becoming an indispensable decentralized infrastructure protocol on Solana, similar to Mango Markets.
Once small difference with the Mango Markets IDO is that UXD Protocol’s IDO will not have a grace period. There will only be a 48 hour sale period in which anyone can deposit/withdraw USDC. We think this mechanism is even more simple and better than having a grace period.
We are super excited to build the next gen algo stablecoin on Solana and contribute to the DeFi ecosystem! See you guys at the IDO!