Recently, the ace projects in the Merlin Chain ecosystem have gradually gained momentum and taken action one after another. Among them, Dragonverse Neo developed by the MOBOX team, the leader of chain games, launched the fair launch of the token MDBL on March 29 for 10 days, attracting huge attention and discussion in the market.

MDBL adopts the LBP (Liquidity Bootstrapping Pool) launch method, aiming to achieve fair and efficient price discovery. For users, the benefits of this launch method include:

Purchase MDBL without any limit regardless of the amount of funds

Have a better chance to buy MDBL at a reasonable price without having to compete with others to buy it

However, there are some challenges:

It is necessary to weigh the timing of entry to avoid holding it at a high price or missing the best buying opportunity;

It is necessary to reasonably evaluate the project and observe whether the team has the strength and plan for long-term development.

This article will explain the principles of price changes in the MDBL fair launch in a simple and easy-to-understand way, and combine it with the current status of the MDBL fair launch as of now (April 3) to analyze different participation strategies and subsequent development directions, hoping to eliminate the information gap and allowing more people to formulate strategies based on their understanding of the mechanism.

TL;DR

The price of MDBL will be affected by “time weight” and “trading behaviour”.

The later it gets, the less likely it will be that price increases due to large purchases will fall back to low prices over time.

It is recommended to build positions in batches in the mid-term, adjust the average price according to market changes, avoid one-time large purchases, and avoid FOMO before the opening and closing.

What is LBP

LBP (Liquidity Bootstrapping Pool) is a decentralized token issuance method that evolved from Balancer’s weighted pool. Its emergence aims to solve a core problem: How to distribute tokens to community members at a relatively fair price?

Distribute tokens based on fund weight -> Users with small funds are almost unable to purchase tokens

Add tokens directly to the AMM pool -> A large number of robots rush to the front, the price soars instantly, and real users cannot compete with the robots.

LBP came into being, combining the characteristics of the Dutch auction (price from high to low) and the British auction (price from low to high), so that the price of the token can be continuously adjusted according to market demand during the launch process. If there are many buyers, the price will rise; if no one buys, the price will fall. This approach solves the problem related to the fairness of IDO to a large extent:

1. Buying first does not necessarily mean you will get the lowest price, so avoid front-running - realize fair purchasing time；

2. There is no limit on the purchase amount to prevent monopoly by large investors and robots——wider distribution of positions；

3. Prices can rise or fall, encouraging the establishment of positions at rational prices——efficient price consensus discovery.

How will the price of MDBL change?

Let’s sort out the existing information first:

The initial weight ratio of MDBL to BTC is 95:5;

The final weight ratio of MDBL to BTC is 50:50.

The concept of “weight” needs to be explained here. In LBP, an asset’s weight means the asset’s value as a proportion of the total pool. For example, the initial weight ratio between MDBL and BTC is 95:5, which can be understood as 95% of the value in the pool being contributed by MDBL, and 5% of the value being contributed by BTC.

The value is determined by (the number of tokens * the price of the token). Expressed as a formula, it is:

(Quantity of MDBLPrice of MDBL): (Quantity of BTCPrice of BTC) = Weight of MDBL: Weight of BTC

From this it can be deduced:

The USD - denominated price of MDBL = (weight of MDBL / weight of BTC) (number of BTC price of BTC) / number of MDBL);

The BTC pricing price of MDBL = (weight of MDBL / weight of BTC) * (number of BTC / number of MDBL).

Due to the fluctuations in BTC prices, we will use BTC pricing for explanations below. If you are used to denominated in USD, please multiply the real-time price of BTC accordingly.

During the 10 days of the fair launch of MDBL, the weight (quantity * price) of MDBL and BTC in the pool will gradually move from 95:5 to 50:50, the weight of MBDL will gradually decrease, and the weight of BTC will gradually increase. This is a preset parameter that won’t change for anything, meaning the weight will never reach 50:50 before the preset end time.

The BTC pricing price of MDBL = (weight of MDBL / weight of BTC) * (number of BTC / number of MDBL).

During this process, the following situations will occur:

1. If no one trades, then:

a. (Amount of BTC/Amount of MDBL) remains unchanged

b. The weight of MDBL decreases, the weight of BTC increases, and (weight of MDBL / weight of BTC) gradually becomes smaller.

c. Leading to a gradual decline in the BTC denominated price of MDBL

1. If someone buys MDBL, then:

a. The number of MDBL in the pool decreases, and (number of BTC / number of MDBL) becomes larger

b. The weight of MDBL decreases, the weight of BTC increases, and (weight of MDBL / weight of BTC) becomes smaller

c. If the increase in (number of BTC/number of MDBL) < the decrease in (weight of MDBL / weight of BTC).

d. The decline in the BTC denominated price of MDBL decreased.

1. Based on 2, if the buying volume is too large, then:

a. The increase in (Amount of BTC / Amount of MDBL) > the decrease in (The weight of MDBL / The weight of BTC)

b. MDBL’s BTC price rises instead of falling

1. If someone sells MDBL, then:

a. The number of MDBL in the pool increases and (the number of BTC / the number of MDBL) becomes smaller.

b. The weight of MDBL decreases, the weight of BTC increases, and (weight of MDBL / weight of BTC) becomes smaller.

c. The decline in MDBL’s BTC denominated price increased.

It can be understood that the price of MDBL will be affected by two dimensions:

1. “Time weight”, that is, the preset weight change curve of MDBL and BTC (fixed price decline rate).

2. “Trading behavior”, that is, the changes in the number of MDBL and BTC in the pool caused by users’ buying and selling.

Case

Next, we will select a recently occurred transaction for verification. The time of this transaction is less than a minute apart from the time of writing of this article, and the changes in weight can be disregarded.

The weight ratio of MDBL to BTC is 72.18:27.82.

There are currently 1,005,018,397 MDBL and 51.5364 BTC in the pool

because MDBL’s BTC pricing price = (MDBL’s weight / BTC’s weight) * (BTC’s quantity / MDBL’s quantity)

The price of MDBL can be calculated =

The price of this order is:

The slight difference is due to the impact of slippage.

The process of LBP reflects the spontaneous mechanism in the market economy, making prices more reasonable through trading activities, and reflecting the real supply and demand relationship in the market. This mechanism provides a good price discovery process, allowing participants to more accurately assess the value of assets during transactions and make appropriate decisions based on market changes.

Subsequent development directions and corresponding participation strategies

Under the influence of the preset weight changes and the changes in the number of MDBL and BTC in the pool, the price trend of MDBL so far is as follows:

Since MDBL’s price curve only shows USD pricing, the impact of Bitcoin price fluctuations needs to be considered.

Under a wave of FOMO after opening, the price soared from the preset $0.0024 (5 million FDV) to $0.0364, and gradually fell back to the preset curve price. After four days of fermentation, the price seemed to have stabilized in the range of $0.006-0.008. However, considering the impact of Bitcoin’s dive, the price of Bitcoin-denominated MDBL actually rose further.

Bitcoin price at $70,000: $0.006-0.008 is about 0.000000085-0.000000114 BTC (85-114 sat)

Bitcoin price at $66,000: $0.006-$0.008 is about 0.000000091-0.000000121 BTC (91-121 sat)

Combining the price formula and past cases, on the premise that the Bitcoin price is stable, we use the current price of 0.006-0.008 US dollars as the standard, corresponding to Dragonverse Neo’s overall FDV valuation of 12.6 million-16.8 million US dollars. The subsequent price of MDBL may occur in the following situations:

1. It continues to fluctuate in the range of 0.006-0.008 US dollars, and FOMO rises before the end.

2. Continue to fluctuate in the range of 0.006-0.008 US dollars until the end

3. Gradually fall back to the preset curve price, and FOMO will rise before the end.

4. Gradually fall back to the preset curve price until the end (the possibility is extremely low).

5. FOMO occurs again midway and prices soar (extremely low possibility).

It should be noted that the (weight of MDBL / weight of BTC) part of the price formula will gradually approach 50/50 from 95/5 at the beginning. In other words, the later the period, the less impact the weight change has on the price. When the price rises due to large purchases, it is less likely to fall back to the low price over time.

Therefore, this article makes the following suggestions for subsequent participation strategies:

Build positions in batches in the mid-term, adjust the average price according to market changes, and avoid large one-time purchases;

Avoid FOMO entry at the open and near the close.

I hope everyone can formulate a reasonable strategy based on the understanding of the mechanism and purchase the ideal chips at the price you want.

Disclaimer：

1. This article is reprinted from [Blockbeats], All copyrights belong to the original author [Chase Blu]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
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