Initial Liquidity Offering (ILO)
Attracting liquidity from other networks into Moonbeam
StellaSwap is proud to be the thought-leader and the first to implement the highly successful Initial Liquidity Offering (ILO) model to incentivize capital inflows from external blockchain networks into Moonbeam network.
The first Initial Liquidity Offering (ILO) on Moonbeam network by StellaSwap was extremely successful, with an oversubscription rate of more than 4,342%! The ILO was held on 19 January, and lasted only 24 hours. A total of 51,073 AVAX, approximately $4.4 Million USD, was committed towards the ILO, The AVAX ILO was the first of its kind in the recently-released Moonbeam network, which represents the first and biggest parachain on Polkadot.
Initial Liquidity Offering (ILO) is a novel mechanism to facilitate liquidity towards the newly-launched Moonbeam network. Being the first to launch on Moonbeam, StellaSwap is one of the leading DEXs with the main aim of attracting liquidity towards Moonbeam. With an ILO, liquidity and capital from other blockchain networks — such as AVAX, Polygon and more — can easily be accumulated in Moonbeam network, facilitating more efficient market pricing that will ultimately mean better prices of tokens for end users.
StellaSwap’s ILO will allow users to bridge the native protocol token (e.g. AVAX) from an external ain netwrk (e.g. Avalanche blockchain) and commit those native protocol tokens into buying $STELLA at a 20% discount. After the ILO ends, StellaSwap will launch 2 native protocol tokens pools for users to earn massive APR returns: [Native protocol token]— GLMR pool and [Native protocol token]-STELLA pool.
Attracting capital inflows represents a core element in a vibrant ecosystem, especially one that is new. Moonbeam’s recent released has been eagerly-awaited, with the blueprint of Polkadot being conceptualized since 2016. Being the first and largest parachain on Polkadot, there is a constant need to attract new liquidity towards Moonbeam. This is aligned to the objective of StellaSwap, the first and leading AMM DEX on Moonbeam. The shared goal has always been attracting capital inflows.
In order to achieve that, the modus operandi of DeFi protocols is to incentivize new liquidity by offering incentives for locked/staked liquidity; liquidity providers are rewarded with the DEX native tokens as well as sharing in the cumulative trade fees. The main issue with liquidity incentivization is the effect of inflationary emissions towards the native tokens; too much emissions will cause an oversupply of native tokens, which increases selling pressure. This would dilute tokenholder value in the long run.
Therefore, the StellaSwap team had to calibrate a method to attract cross-chain capital inflows from external blockchain networks whilst maintaining emissions (that could erode tokenholder value if reckless). After much deliberation, we conceived the ILO model to achieve that: ILO.
Another design decisions that we’re bent on solving is enhancing native STELLA liquidity. A simple way to do it is increase the emission rate of native-STELLA LP farms. However, that represents a superficial way that is focused on a short-term fix since increasing emissions leads to stronger selling pressure and value dilution. What we focused on was calibrating variables to attract ‘new money’, rather than existing funds in Moonbeam. Therefore, we settled on incentivizing new money via an ILO which facilitates direct investments into STELLA token itself, and thereafter maintaining the incentive of staking through high initial APR (due to low TVL at first). This dual approach would create a higher ‘stickiness’ within our system, therefore boosting tokenholder value.
Initial Liquidity Offering (ILO) is a novel mechanism to facilitate liquidity towards the newly-launched Moonbeam network. Being the first to launch on Moonbeam, StellaSwap is one of the leading DEXs with the main aim of attracting liquidity towards Moonbeam. With an ILO, liquidity and capital from other blockchain networks — such as Avalanche, Polygon and more — can easily be accumulated in Moonbeam network, facilitating more efficient market pricing that will ultimately mean better prices of tokens for end users.
StellaSwap’s ILO will allow users to bridge [Protocol Coin] (for e.g. AVAX) from [External Blockchain Network] (for e.g. Avalanche) and commit those [Protocol Coin] into buying $STELLA at a 20% discount. After the ILO ends, the [Protocol Coin] — GLMR and [Protocol Coin] — STELLA would be launched. The ILO is predicated on an overflow method, with excess [Protocol Coin] over the initial STELLA allocation to be refunded back to users.
In the case of our AVAX ILO, there was a cap of $100,000 worth of STELLA for the ILO. The excess of $4.3 Million was the overflow that was refunded. The overflow model is vital in ensuring that the excess subscription value permeated the entire Moonbeam ecosystem, ensuring a net overall liquidity towards the network. Therefore, rather than having an uncapped ILO and potentially putting the entire $4.4 million into our treasury, the StellaSwap team opted for enhancing ecosystem liquidity depth > fundraising.
The funds raised for AVAX will be accrued to the Treasury. Since StellaSwap was launched under a Fair Launch model, there is no presale, private sale or investor allocation, ensuring that emissions are geared wholly around incentivizing the community. In order to maximize tokenholder value for the long-run, StellaSwap must accrue funds to the Treasury for grow the ecosystem and effectively manage market conditions, which include engaging in buy-backs to reduce token supply, establishing incentivization programs (e.g. Airdrops) that does not contribute to excess inflation, as well as reinvesting back into the ecosystem.
More importantly, managing operational overhead of running StellaSwap could be mitigated with ILO funds, rather than liquidating our team tokens, which could be misconstrued as “dumping”.