🏔️The Vertex LBA
Comprehensive guide to Vertex's Liquidity Bootstrapping Auction (LBA).
Last updated
Comprehensive guide to Vertex's Liquidity Bootstrapping Auction (LBA).
Last updated
LBA Dates: November 13th → November 20th, 2023
The LBA will run for 7 days to achieve a more gradual price discovery & help establish a fair market price for the VRTX token.
Users will be able to supply $VRTX trading rewards and/or $USDC.e to the auction up until Day 5 of the auction.
LP capital from the LBA will seed the initial VRTX-USDC.e pool on Vertex.
1% of token supply (10 million VRTX) is allocated as LP incentives for participants in the auction.
LP capital supplied to the LBA will be locked and vested linearly over 120 days. In return, participating LPs will benefit from dual rewards composed of both pool fees and VRTX incentives.
VRTX Token Launch: After the LBA
The VRTX Liquidity Bootstrapping Auction (LBA) is the token genesis mechanism designed to seed the initial VRTX market liquidity while promoting fairness, lower sensitivity to price volatility, and more accessible capital requirements.
Unlike more conventional pool-based launches where the token price is fixed at launch, an LBA determines the price more organically over a prescribed period while maintaining several distinct properties.
Primarily, the characteristics that differentiate an LBA from more traditional pool-based token launches include:
Elongated price discovery period utilizing a specific price curve.
2 Pool → 1 Pool model.
LP token vesting and incentives.
The Vertex LBA provides anyone with the opportunity to get involved in the launch process, acquire VRTX, and earn rewards for participating.
Lastly, the conclusion of the 7-day auction will be immediately followed by the official VRTX token launch!
How can you participate, anon? Let's dive in.
The Vertex LBA will occur over the course of 3 primary stages. Each stage has a unique purpose and mechanism.
Stage 1: The 7-Day Auction
Stage 2: VRTX Token Launch & Liquid Claiming
Stage 3: Post-LBA Vesting & VRTX Tokenomics
The 7-Day Auction (Stage 1) is the most important phase where users can actively participate in the LBA. It’s where the VRTX price is determined gradually over the course of 7 days.
The auction’s format in Stage 1 is simple. There are two pools:
Pool 1 (USDC.e)
Pool 2 (VRTX)
To participate in the LBA, users simply provide liquidity to either pool.
Both pools are single-sided liquidity pools, meaning you can only supply USDC.e to Pool 1 or VRTX to Pool 2.
Participating in the Vertex LBA means you are a liquidity provider (LP) to the auction.
Utilizing a fixed price curve (x * y = k), the implied price of the VRTX token is calculated via the final ratio between the collateral (USDC.e) & native token (VRTX) where:
Amount USDC / Amount VRTX in the pool = VRTX price
After Day 7, the final VRTX price is the initial price of the token upon its launch, which will be the token price when Pools 1 & 2 are fused to create the VRTX-USDC.e pool on the Vertex AMM in Stage 2.
Anyone can participate in the LBA.
However, only Vertex users that have traded on the DEX before the LBA begins are eligible to supply liquidity to Pool 2 (VRTX). This is because users that traded on Vertex before the auction have pending VRTX rewards from the first 7 epochs of the Trade & Earn program.
If you have pending VRTX eligible for the LBA, your VRTX tokens are displayed on the “Rewards” page of the Vertex app. As a benefit to being an early Vertex user, you are eligible to supply liquidity to both Pool 1 (USDC.e) and Pool 2 (VRTX) – meaning you’re not strictly limited to one or the other.
Anyone can provide USDC.e liquidity to Pool 1 – meaning even if you’ve never traded on Vertex before the LBA, you can still participate in the auction. If you’re not familiar with the differences between USDC and USDC.e on Arbitrum, you can find more information in the Arbitrum documentation here.
In summary:
Anyone: Provide USDC.e liquidity to Pool 1 – up until Day 5.
Pre-LBA Vertex Traders: Provide USDC.e liquidity to Pool 1 and/or VRTX liquidity to Pool 2 – up until Day 5.
LBA participants (i.e., LPs) are committing capital to the auction. Their LP capital is locked and vested linearly for 120 days starting after Day 7.
In return, LBA participants receive two compelling advantages:
VRTX Fair Price: Users looking to gain exposure to VRTX have an opportunity to acquire the token at a fair-market price during the LBA as the virtual price is gradually achieved over 7 days.
Dual Rewards: Users that LP one or both of the 2 Pools (VRTX & USDC.e) during the auction generate additional incentives, receiving dual rewards composed of:
Pool Fees
VRTX LP Incentives
The VRTX LP incentives consist of 1% of the VRTX token supply (10 million VRTX), specifically reserved for LBA participants.
Rewards are allocated to LPs of both pools – meaning everyone that participates in the auction earns dual rewards. The VRTX reward APRs are calculated pro-rata and based on trading fees relative to the total LP pool size.
You can find a table of APR projections at varying percentages of relative LP liquidity for Stage 1 auction participants below.
Distribution of VRTX incentives to LPs also occurs weekly – beginning after Day 7.
Weekly VRTX rewards are immediately claimable on the Vertex app once available for a given week, and distributions continue regularly each week throughout the entire 120-day vesting period.
Reviewing The LBA Parameters
Duration: 7 Days
LP Contribution Period Ends: Day 5
Price Curve (Fixed): (x * y = k)
Pools: Two Single-Side Pools
Pool 1 (USDC.e)
Pool 2 (VRTX)
Eligible Participants:
Anyone: Provide USDC.e liquidity to Pool 1 – up until Day 5.
Pre-LBA Vertex Traders: Provide USDC.e liquidity to Pool 1 and/or VRTX liquidity to Pool 2 – up until Day 5.
LP Rewards: 1% of the total VRTX token supply (10 million VRTX).
Overview of Steps to Participate:
Days 1 → 5: Supply USDC.e to Pool 1 and/or VRTX to Pool 2.
Day 7 → April 20th, 2024: Generate and claim weekly VRTX rewards while also accruing pool fees in return for supplying capital to one or both pools during the auction (i.e., LPs).
Post-LBA Vesting: LP capital supplied to Pool 1 and/or Pool 2 during the auction is locked and vested over the next 120 days. You can find more on the vesting schedule in the section below.
Lastly, if you would prefer to NOT participate in the LBA, you can simply wait until the end of Day 7 when the auction concludes and the VRTX token launches in Stage 2. For users with pending VRTX rewards, this means any VRTX that you do not pre-claim and supply to Pool 2 (VRTX).
Any user that supplied liquidity to either Pool 1 (USDC.e) or Pool 2 (VRTX) during the auction in Stage 1 will have their LP positions locked and vested. You can find a visual graphic of the vesting schedule for LP capital that joined the LBA below.
Key Lock-Up & Vesting Details:
⅓ of LP liquidity from the auction will unlock 60 days after the end of the LBA.
The remaining ⅔ of LP liquidity continues vesting linearly over the following 60 days, fully unlocking 120 days after the end of the LBA.
Unlocked LP liquidity will still earn dual rewards if not withdrawn from the VRTX-USDC.e pool. The choice of whether to withdraw your unlocked auction liquidity or let it continue earning dual rewards is up to you.
Users that withdraw vested LP capital will no longer earn dual pool fees + VRTX incentives on withdrawn portions of LP positions. Any remaining LP capital still vesting will still accrue dual rewards.
Example: Alice has VRTX trading rewards available before the LBA begins on November 13th. Alice chooses to supply VRTX liquidity to Pool 2 once the auction begins in Stage 1.
Alice’s LP Position for the Auction:
Pool 2 (VRTX): Alice contributes 600 VRTX.
After 60 days pass from the conclusion of the auction, Alice can claim ⅓ of her total LP capital in full, immediately.
Since Alice supplied 600 VRTX to Pool 2 during the auction, Alice can claim 200 of her total 600 locked and vested VRTX on Day 60.
However, Alice does not have to withdraw her 200 VRTX LP capital yet.
If she prefers, Alice can leave her unlocked 200 VRTX as an LP position in the VRTX-USDC.e pool on the Vertex AMM, and she will still earn dual rewards composed of both pool fees and VRTX rewards.
Dual rewards generated on Alice’s 200 VRTX will continue until she either withdraws the unlocked VRTX or the vesting period ends on Day 120 in April 2024.
Note: Once the locked LBA liquidity fully vests in April 2024, the 10 million VRTX rewards allocated to LPs during the Stage 1 auction will be exhausted. Dual rewards will cease to generate for LP positions that participated in the LBA and remain as active LPs in the VRTX-USDC.e pool.
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