“This is your mission: Make the bootstrap a collaborative coordination game where everyone has a say in what the MGX price is going to be. Put everyone in the same boat. They should all receive the same deal. Low initial valuation leads to fair distribution. Fair distributon leads to a community-owned DEX.” - The Airwhale
The Mangata X Ecosystem Development Fund has committed 17% of the TGE supply to the MGX-KSM Liquidity Bootstrapping Event. We expect that this offer will make the bootstrap less competitive and more collaborative within the Kusama community. The bounty creates a low initial valuation/FDV/MC, which will lead to a fairer, more accessible distribution and eventually to achieve our goal of a community-owned DEX.
In this article, we explain the game theory behind this move.
Bootstraps are games
Liquidity Bootstrapping is a coordination game. What is the fair price of a new token? Nobody knows, because there is no price history yet and everyone has different expectations: Should it be 0.0001$? 1$? 100,000$? We also don’t know what other players think. This makes it hard to come to the first conclusions about the price. And nobody wants to make the first move. Because being the first mover always could mean being the first loser.
To level the playing field, liquidity bootstrapping freezes the liquidity pool for some time and allows everyone to make a move without being immediately punished. Instead, players can make small moves in the frozen pool and watch other players react. The whole process becomes a back and forth between all players until the time is over and trading can finally begin.
Bootstraps are competitions
But what sounds like a nice game turns out to give many players really bad experiences. Our user experience interviews have shown one result time and time again: Liquidity pools are a new and complex concept for many and the dynamics take time to understand. Many new players make the wrong bets and regret participating. And even once you understand the process, players with more information will often make better choices.
In many cases, one side of the pool in the bootstrap was seen as the winners, the other as the losers, creating competition and discord within the community. This has sparked the search for better models.
Mangata X’s quest to make the bootstrap collaborative
Mangata Finance will try out a new variant of this coordination game by making a very high bid on the side of the new token. The Ecosystem Development Fund has provided 168 million MGX, 17% of the TGE supply, to the MGX-KSM Liquidity Bootstrapping Event. The result is that MGX is having a very low ratio and could become very cheap for KSM contributors.
This acts as a huge bounty: Anyone participating with KSM can grab a portion of this bounty!
We want to turn the bootstrap into a collaborative coordination game: Can we put all players on the same team? The task is to collaboratively figure out the fair price of MGX by contributing KSM. In the end, everyone participating with KSM will contribute the same ratio as everyone else, so no one loses out against other contributors: Everyone receives the same deal.
There are still many unknowns and first movers will remain in a position where they have the least information. But they can enjoy the safety of knowing that other players will sit in the same boat as they do, thus sitting on a level playing field.
The 168 million MGX bounty is here to put all Kusama ecosystem users on the same team and allow them to agree on the initial fair price of MGX together. At the same time, it will make all participants co-owners of a large portion of Mangata X.
DeFi is still in its infancy and many games have to be played to figure out the perfect way to do things. On the way there, we build on proven processes and add a bet that might turn out to become an improvement to the game.
Kusama asks us to expect chaos. Mangata X will tame the chaos!
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May the Airwhale bless you with infinite rewards!
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