Rover’s RGFL — Revenue Generating Fair Launch
https://rovercapital.medium.com/roverdao-improving-defi-fair-launch-c8a41467b727
DEX Recap Example
Say DEX starts out with near 0 Liquidity Depth (LD) of some new token with, say, 1 USD.
DEX liquidity and price growth is illustrated below:
100 USD sent to Rover Fetch by user, to get RTR — Rover Transaction Rewards tokens.
Normally, DEX price and liquidity would work as below. First, recall DEX’s normally use:
DEX Constant Product Model
DEX “constant product model” means the amount of
A * B = K
K is constant after all trades, but changes on LD add/remove. More explicitly:
A amount of token type1 in pool reserves * B amount of token type1 in pool reserves = K.
The spot price of A to B is just the number of A tokens divided by the number of B tokens.
The spot price of B to A is just the number of B tokens divided by the number of A tokens.
The “Constant Product Model” means K is constant in trades, while the 2 token amounts, A & B, in the pool, change when people send A or B to receive the other token — B or A — in return.
For our examples, we’ll use A & B as: some USD stable & our token, RTR, so that:
USD tokens in pool * RTR tokens in pool = K.
Say we start with just 1 USD and 1 RTR:
1 USD * 1 RTR = K = 1.
The spot price of USD to RTR is now 1, meaning sending a tiny bit of USD will return a near equal number of RTR, and vice versa.
Note that sending 1 USD would result in:
2 USD * 0.5 RTR = K =1
K must remain constant, so 0.5 of RTR would need to be sent back to a buyer, to bring RTR down from 1 to 0.5, so that this 0.5 would multiply to 1 K, when multiplied by 2 USD, instead of the previous 1 USD.
2 / 0.5 = 4, which is the spot price of getting a tiny bit more from the 0.5 RTR by sending USD.
The price of 4/1 is now 4x higher than the previous price of 1/1.
LD for the token grows only 2x, to 2 USD.
Price of tokens thus grows as LD². This leaves LD too low in early fair launch before funding.
Rover’s RGFL automatically creates more adequate liquidity from any initial LD while funding dev as price & volume grows. Buyers are incentivized to use the RGFL DEX-LGE split, which reduces the direct DEX slippage. Its RGFL also offers an APY program only via Rover Fetch.
