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Initial Liquidity Offering

The Initial Liquidity Offering is a bootstrapping procedure for dApps deployed on KIRA. It is designed to ensure that dApp tokens have sufficient liquidity, and that developers, users, verifiers, and executors are commonly aligned towards the dApps’ success.

The ILO procedure is as follows:

  1. dApp deployer creates a governance proposal for app submission.
  2. The minimum dApp bond must be committed within the proposal duration, set to 7 days by default. This value is set to 1,000,000 KEX by default.
  3. For the proposal to pass, 1% of the minimum dApp bond must be committed by the dApp deployer before 7 days have elapsed. The remaining 99% of the bond can be supplied by any other users.
  4. If the bonding conditions cannot be satisfied, all participants are refunded - otherwise, the dApp can be launched.
  5. Once the dApp has launched, dApp tokens representing stakeholders’ ownership of the dApp are minted according to the token supply specified in the app proposal. They are then paired with all the bonded KEX in a v2 Uniswap-style AMM pool defined by a simple x*y=k bonding curve.
  6. A spending pool is created for users who have bonded KEX. They are eligible to claim LP tokens from the spending pool, proportional to their respective bonded amounts. Depending on the dApp proposal, these LP tokens may be immediately claimable or progressively unlocked over time.

To make all classical forms of raising capital and launching dApps possible, KIRA allows for dApp proposals to define whether additional tokens may be issued during and/or after the dApp launch by the dApp deployer. These are referred to as premint and postmint. The unlock rate of the spending pool is also defined by the dApp proposal.

Here are a few examples of ways in which these configurable parameters can be used:

  • Fair Launch - no extra tokens may be issued and all LP coins are immediately unlocked. As an example use case, a lone developer creating a public good dApp might employ this parameter configuration, as the application will not need future emissions to incentivize users. It could also be used by applications funded by the KIRA treasury.
  • User-Assisted Launch - The LP Spending Pool is configured to slowly distribute LP tokens. The premint allowance is set to a small reasonable amount while the postmint function is not used. As an example use case, a small team that needs to hire a few developers could configure their token emissions like this. This would allow them to establish a token treasury and sell their stake to users that are locked in the LP.
  • Investor-Assisted Launch - The LP Spending Pool is configured to slowly distribute LP tokens; premint and postmint have allowances. As an example use case, a large-scale project with more complexity could configure its emissions like this. Premint and postmint would enable the creation of treasury and sale of SAFT agreements. The time when these investor tokens would be issued during the “postmint” event could be clearly defined. An address for postminted tokens could be set up by the dApp deployer as a vesting mechanism to easily distribute tokens to their rightful owners as well as configure an optional “drip” for the postmint if needed, so as to not damage investor confidence with an immediate increase of the token supply.

To align ILO participants' incentives with the dApp's success, a minimum threshold is defined for the amount of KEX collateral in the pool, set to 100,000 KEX by default. If the KEX collateral in the pool falls below this threshold, the dApp will enter a depreciation phase, set to around 28 days by default, after which dApp execution will be halted.

To make it worthwhile for validators to execute the dApp code, the dApp LP pool is utilized to create those incentives. Any swaps, deposits, and redemptions will incur a fee that is configurable by governance. The fixed fee will be applied after the swap from where 50% of the corresponding tokens must be burned (deminted), 25% given as a reward to liquidity providers and the remaining 25% will be split between active dApp executors, and verifiers (fishermen). This way pool can provide immediate incentives to the operators and LP providers. Additionally, the premint and postmint tokens can be used to incentivize operators before dApp starts to generate revenue.