Analysis of MDBL emission LBP mechanism that can also be read by IQ50

Recently, the flagship projects in the Merlin Chain ecosystem have gradually gained momentum and taken action one after another. Among them, Dragonverse Neo developed by the MOBOX team, the leader of chain games, launched the fair launch of the token MDBL on March 29 for 10 days, attracting enthusiastic attention and discussion in the market.

MDBL adopts the LBP (Liquidity Bootstrapping Pool) launch method to achieve fair and efficient price discovery. For users, the benefits of this launch method include:

No matter the amount of funds, MDBL can be purchased without limit

More chances to buy MDBL at a reasonable price without having to compete with others

However, there are also some tests:

It is necessary to weigh the timing of entry to avoid hanging on the top of the mountain or missing the best opportunity. Time to buy;

It is necessary to conduct a reasonable valuation for the project and observe whether the team has the strength and plan for long-term development.

This article will explain the principle of price changes in MDBL fair launch in a simple and easy-to-understand way, and combine it with the MDBL fair launch so far (April 3 Japan), analyze different participation strategies and subsequent development directions, hoping to eliminate the information gap and allow more people to formulate strategies based on understanding the mechanism.

TL;DR

The price of MDBL will be affected by "time weight" and The impact of "trading behavior"

The later the period, the higher the price caused by large-scale purchases, the less likely it is to fall back to lows over time. Price

It is recommended to build positions in batches in the mid-term, adjust the average price according to market changes, avoid one-time large purchases, and avoid opening and closing positions. FOMO before the end

What is LBP

LBP (Liquidity Bootstrapping Pool , Liquidity Boot Pool) is a decentralized token issuance method that evolved from Balancer's weighted pool. It emerged to solve a core problem:How to distribute tokens to community members at a relatively fair price?

Allocation based on fund weight-> It is almost impossible for users with small funds to purchase tokens

Send tokens directly Add to AMM pool -> A large number of robots jumped the gun, the price soared instantly, and real users were unable to compete with the robots

LBP came into being, combining the Dutch auction ( The characteristics of the price from high to low) and British auction (price from low to high) allow the token price to be continuously adjusted according to market demand during the launch process. If there are many buyers, the price will rise; if no one buys, the price will fall. This method solves the fairness problem of IDO to a large extent:

1. Buying first will not necessarily buy the lowest price, avoiding front-running—— Achieve fairness in purchase time;

2. No limit on purchase volume to prevent monopoly by large players and robots - Broader Position distribution;

3. Prices can rise or fall, encouraging the establishment of positions at rational prices - Efficient price consensus discovery.

How will the price of MDBL change?

First, let’s sort out the existing information:

The initial weight ratio of MDBL to BTC is 95:5;

The final weight ratio of MDBL to BTC is 50:50.

The concept of "weight" needs to be explained here. In LBP, an asset's weight means the asset's value as a proportion of the total pool. For example, the initial weight ratio between MDBL and BTC is 95:5, which can be understood as 95% of the value in the pool is contributed by MDBL, and 5% of the value is contributed by BTC.

The value is determined by (the number of tokens * the price of the token). Expressed as a formula, it is:

(Quantity of MDBL*Price of MDBL): (Quantity of BTC*Price of BTC) = Weight of MDBL: Weight of BTC

This can be deduced:

MDBL’s USD price = (weight of MDBL/weight of BTC) * (amount of BTC*price of BTC) )/number of MDBL);

The BTC price of MDBL = (weight of MDBL / weight of BTC) * (number of BTC / number of MDBL).

Due to the fluctuation of BTC price, we will use BTC to explain below. If you are used to pricing in USD, please multiply it by the real-time price of BTC accordingly.

During the 10 days of MDBL fair launch, the weight (quantity * price) of MDBL and BTC in the pool will gradually move from 95:5 to 50:50, the weight of MBDL will gradually decrease, and the weight of BTC will gradually increase. This is a pre-set parameter and will not change due to anything, that is, the weight will never reach 50:50 before the preset end time.

During this process, the following situations will occur:

1. If no one trades, then:

a. (Number of BTC / Number of MDBL) remains unchanged

b. The weight of MDBL decreases, the weight of BTC increases, and (weight of MDBL / weight of BTC) gradually decreases

c. Resulting in a gradual decrease in the BTC-denominated price of MDBL

2. If someone buys MDBL, then:

a. The number of MDBL in the pool decreases, and (number of BTC / number of MDBL) increases

b. The weight of MDBL decreases, and the weight of BTC increases. c. If the increase in (the amount of BTC / the amount of MDBL) < the decrease in (the weight of MDBL / the weight of BTC) d. The decrease in the BTC-denominated price of MDBL decreases 3. Based on 2, if the purchase volume is too large, then: a. The increase in (the amount of BTC / the amount of MDBL) > the decrease in (the weight of MDBL / the weight of BTC)

b. MDBL’s BTC price rises instead of falling

4. If someone sells MDBL , then:

a. The number of MDBL in the pool increases, (the number of BTC/the number of MDBL) becomes smaller

b. The weight of MDBL decreases, the weight of BTC increases, (weight of MDBL/weight of BTC) becomes smaller

c. The decline in the BTC price of MDBL has increased

It can be understood that the price of MDBL will be affected by two dimensions:

1. "Time weight", that is, the preset weight change curve of MDBL and BTC (fixed price decline)

2. "Transaction behavior", that is, changes in the number of MDBL and BTC in the pool caused by users' transactions

Case

Next we select a recent transaction for verification. The trade occurred less than a minute apart from the time of writing, and the change in weighting was negligible.

The weight of MDBL and BTC The ratio is 72.18:27.82

There are currently 1,005,018,397 MDBL and 51.5364 BTC in the pool

Since MDBL’s BTC pricing price = (weight of MDBL/weight of BTC) * (amount of BTC/amount of MDBL)

The price of MDBL can be calculated =

And the price of this order is:

The slight difference is due to the impact of slippage.

The process of LBP reflects the spontaneous mechanism in the market economy, making prices more reasonable through trading activities, and reflecting the real supply and demand relationship in the market. This mechanism provides a good price discovery process, allowing participants to more accurately assess the value of assets during transactions and make appropriate decisions based on market changes.

Subsequent development direction and corresponding participation strategy

Under the influence of the preset weight changes and the changes in the number of MDBL and BTC in the pool, the price trend of MDBL is as follows:

Since the price curve of MDBL only shows the price in US dollars, it is necessary to consider the impact of Bitcoin price fluctuations.

Under a wave of FOMO after the opening, the price soared from the preset US$0.0024 (5 million FDV) to US$0.0364, and gradually fell back to the preset curve price. After four days of fermentation, the price seems to have stabilized in the range of US$0.006-0.008, but considering the impact of Bitcoin's dive, the price of MDBL denominated in Bitcoin has actually risen further.

Bitcoin price is $70,000: $0.006-0.008 is approximately 0.000000085-0.000000114 BTC (85-114 sat)

Bitcoin price is $66,000: $0.006-0.008 is approximately 0.000000091-0.000000121 BTC (91-121 sat)

Combining the price formula with past cases, and under the premise that the Bitcoin price is stable, we use the current price of $0.006-0.008 as the standard, and the corresponding overall FDV valuation of Dragonverse Neo is $12.6 million-16.8 million. The price of MDBL may appear in the following situations in the future: 1. Continue to fluctuate in the range of 0.006-0.008 US dollars, and FOMO rises before the end 2. Continue to fluctuate in the range of 0.006-0.008 US dollars until the end 3. Gradually fall back to the preset curve price, and FOMO rises before the end 4. Gradually fall back to the preset curve price until the end (extremely low possibility) 5. FOMO again in the middle, and the price soars (extremely low possibility) It should be noted that the (weight of MDBL / weight of BTC) part in the price formula will gradually approach 50/50 from 95/5 at the beginning. In other words, the later the time is, the smaller the impact of the change in weight on the price. When the price rises due to large-scale purchases, it is less likely to fall back to a low price over time.

Therefore, this article makes the following suggestions for subsequent participation strategies:

Build positions in batches in the medium term, adjust the average price according to market changes, and avoid one-time large purchases;

Avoid FOMO entry at the opening and near closing.

I hope that everyone can reasonably formulate strategies based on understanding the mechanism and purchase ideal chips at the desired price.