Referendum to Launch BSX via XYK Pools
As you know, our initial plan was to mark the release of Basilisk v1 with our own BSX LBP event, and to unlock BSX transfers right after that. However, against the background of the general macroeconomic situation, we no longer believe that this strategy is in the best interest of our stakeholders (you).
For reasons which we further elaborate upon in this post, the Basilisk team would like to propose an alternative plan. Instead of conducting an LBP event for the launch of BSX, we suggest to unfreeze BSX transfers and to perform the launch by initializing 2 BSX XYK pools.
At this pivotal moment, we believe that the decision should be made in a decentralized and democratic way by the whole Basilisk community. In the upcoming weeks, we will set up the governance module of the Basilisk parachain, have Council members elected, and initiate a referendum on this topic.
Why not LBP?
Over the past weeks, the Basilisk team has been working hard to remove some of the final obstacles to the LBP event. We have successfully tested ERC-20 transfers using 2 different bridges, and also implemented Parity signer to keep your funds safe(r).
As our ecosystem matures and we inch ever closer to a working LBP product, however, we no longer believe that the BSX LBP launch strategy is best aligned with the interests of our community.
LBP is a great mechanism for performing a fair token launch in a decentralized and permissionless manner, and this is especially the case in a market environment which is characterized by high or reasonable buy pressure. This is where the strengths of the LBP approach become apparent: The mechanism of time-dependent weights is designed to prevent an overshooting initial valuation and to make it impossible for bots to frontrun other users. This results in a capital-efficient bootstrapping of liquidity with a fair share of the tokens being distributed to the community as opposed to funds, exchanges or market makers.
In the reality of the current market conditions, however, one can hardly speak of any buy pressure. The fall of the Terra ecosystem, the alleged insolvency of Celsius and some liquidity issues with the biggest crypto hedge fund - all of which has happened within just one month, have caused a huge distress on the markets.
Taking this macroeconomic background into account, and also the low trading activity within the Kusama ecosystem, we expect that the current dip in interest will propagate itself into the Basilisk LBP event. For this reason, we are no longer convinced that the BSX LBP event will achieve its inherent goals outlined above. Furthermore, a very low activity during the LBP could potentially anchor the initial price of BSX at a very low level, as the weights are programmed to continuously exert downward pressure on the price.
The perspective of a lousy LBP event which fails to attract sufficient attention is further amplified by the fact that right after the LBP has been conducted (for ~5% of the supply), another 15% of the BSX supply (crowdloan rewards) will become liquid. We expect that the prospect of crowdloaners dumping on LBP participants might have a deterrent effect which will withhold users from buying BSX during the LBP, thus turning the dynamics described above into a self-fulfilling prophecy.
Alternative Proposal: Launch with XYK Pools
Despite the LBP setback, the Basilisk team remains determined to keep its promise to our crowdloaners by making sure that Basilisk is launched and that BSX tokens are transferable. To achieve this, we would like to propose the following alternative plan.
Instead of performing a BSX LBP event, we could launch BSX by initiating 2 XYK pools: BSX-aUSD and BSX-KSM. The pools would have low initial liquidity which would be provided by the team (Galactic Council) - $ 22,222 ($ 11,111 worth of each aUSD and KSM).
This liquidity would be seeded against 1% of the BSX supply (500M BSX per pool) which would be taken from the 5% allocation reserved for the LBP. The remaining 4% of the BSX supply would be transferred to the Basilisk Treasury, thus decreasing the circulating supply at launch.
We believe that launching with a low FDV and shallow initial liquidity in these market conditions could lead to some interesting price action in both directions - please keep this in mind before placing your first orders. Kicking off with a low initial FDV is a return to the original spirit of Kusama, which also started from the bottom (anon, do you remember KSM for $1 and Kusama FDV at $10mil?). This provides lower entry barriers for arbitrageoooors and normal people who want to play with cross-chain DeFI without relying too much on centralized providers or paying high gas fees.
With the launch of the XYK pools everyone would be able to trade BSX, KSM and aUSD, and also have the possibility to become a liquidity provider and earn additional rewards under our liquidity mining scheme which incentivizes long-term participation.
After we have launched and extended our parachain slot, we will open the Basilisk XYK swap functionality to other projects, and shortly thereafter our unique LBP implementation will go live for anyone who would like to use it for bootstrapping liquidity. The process of adding new liquidity pairs will be accelerated by the rollout of other additional Basilisk features currently in the pipeline such as Curve-like stableswap pools and order matching. Also NFTs are around the corner - with additional utilities, not your average jpegs sitting uselessly in the cloud.
The decision on this important matter should be taken together by all Basilisk stakeholders in a decentralized and democratic manner. To facilitate this, we are now in the process of launching the governance module on the Basilisk parachain.
Once governance is up and running, the Basilisk Council will be elected. There will be 7 seats, 3 of which will be reserved for the Basilisk team. The remaining 4 members of the Council will be elected by the community.
After the Council has been elected, it will initiate a council motion which, once passed, will evolve into a public referendum. The subject of the motion and the referendum will be to place the following on-chain remark which will advise the further course of action:
Instead of conducting a BSX LBP event, unfreeze BSX transfers and launch 2 Basilisk XYK pools: BSX-aUSD and BSX-KSM. Seed the pools using a total of 1% of the BSX supply which is taken from the allocation for the LBP event. Transfer the remainder of the LBP allocation (4% of BSX supply) to the Basilisk Treasury.
The Basilisk team will abstain from voting.
We have updated the Basilisk documentation with a user-friendly explanation of the Democracy functionality in Substrate, as well as step-by-step guides for participating in Council elections and participating in referenda. We encourage you to read through this documents carefully and to get acquainted with the governance process.
We will notify you once the elections for Council are open, and also when the referendum has reached the public voting phase.
If you have any questions, please don’t hestitate to reach out to us. And in the meantime, remember the words of Nate Dogg:
Just hit the east side of the LBP
On a mission trying to find Mr. Jakub G
Seen a chain full of tx ain't no need to tweak
All you degens know what's up with the 3 weeks trip
– the Basilisk team