Recommendation by Artis to Shutter DAO 0x36 regarding LBP Parameters

Shutter DAO DAO Proposals
1

Forum Post Authors:

  • Cornelis van der Klooster, Artis Global LTD

  • Hendo Verbeek, Director at Artis Global LTD

Forum Post Created: 6 Feb 2024

Summary

Recommendation by Artis to Shutter DAO 0x36 regarding LBP Parameters

Objectives

  1. Raise Liquidity Collateral of $2,000,000 - $5,000,000 USDC

  2. Token Price Discovery

  3. Set Up for Healthy Liquid Markets

  4. Token Distribution & Shutter DAO 0x36 Decentralization

Key Parameters

Project / Collateral Token Quantity

Recommendation:

  • Project Token: 40,000,000 SHU

  • Collateral Token: 100,000 USDC

Rationale - SHU and USDC in the LBP impacts all four objectives:

  • Raise Liquidity Collateral: 40,000,000 SHU in the LBP ensures that there are sufficient tokens for sale to raise $2,000,000 - $5,000,000 in liquidity collateral at a reasonable token price: $0.05 - $0.125.

  • Token Price Discovery: 40,000,000 SHU and 100,000 USDC in the LBP sets the theoretical token price range at $0.247543 - $0.000048. Setting the initial token price at an artificially high price is an inherent part of the LBP format. It allows for fair price discovery and distribution. The token price will fall along a predetermined curve until token purchases/sales create price action and result in token price discovery. 40,000,000 SHU and 100,000 USDC in the LBP will create an initial token price of $0.247543 will create a predetermined curve that will reach $0.05 in 4.5 hours - assuming no token purchases/sales - which is in line with past successful LBPs. Furthermore, Fjord Foundry recommends that projects set the initial token price in the range of 5-2x the anticipated market price.

  • Set Up for Healthy Liquid Markets: 40,000,000 SHU will lead to a reasonable SHU circulating supply after the LBP. 100,000 SHU (0.01% of total supply) held by the DAO 0x36 deployer is currently unlocked. An additional 42,000,000 SHU (4.2% of total supply) held by Genesis Allocation holders will become unlocked on 18 March 2024. And roughly an additional 15,750,000 SHU (1.575% of total supply) held by Genesis Allocation holders will unlock each month for 24 months. 40,000,000 SHU (4% of total supply) in the LBP will create a maximum circulating supply of 82,100,000 (8.21% of total supply) on 18 March 2024. Note that the circulating supply may be slightly higher due to SHU allocations for market making purposes and grants to service providers. The circulating supply may be slightly lower if Genesis Allocation holders do not claim (or are unable to claim) all their SHU tokens immediately.

  • Token Distribution & Shutter DAO 0x36 Decentralization: 40,000,000 SHU (4% of total supply) in the LBP - if close to 100% is sold - will result in a significant increase in the number and diversity of SHU holders and therefore Shutter DAO 0x36 participants. 455 of addresses have already claimed their SHU Genesis Allocations of which 75 are participating in DAO discussions and votes. Successful Fjord Foundry LBPs have 1,000 - 3,000 participants. (It is highly unlikely that all of the LBP participants will be active in Shutter DAO 0x36.)

Start / End Weights

Recommendation:

  • Start Weights: 99% SHU / 1% USDC

  • End Weights: 1% SHU / 99% USDC

Rationale - Start and End Weights impacts three objectives:

  • Token Price Discovery - Initial Token Price: The Start Weights determine the initial token price. Fjord Foundry recommends setting the Start Weights at 99% Project Token / 1% Collateral Token. This creates a reasonably high initial token price of $0.247543 and deters bots at the beginning of the LBP. Even a small change to the Start Weights would have a significant and undesirable impact on the initial token price. (For example: all else being the same, setting the Start Weights at 98% Project Token / 2% Collateral Token would result in an initial token price of $0.122521 - down from $0.247543.)

  • Token Price Discovery - Floor Token Price: The End Weights determine the floor token price. However, even a large change to the End Weights do not have a significant impact on the floor token price. (For example: all else being the same, setting the End Weights at 50% Project Token / 50% Collateral Token would result in a floor token price of $0.002545 - up from $0.000048, but still well below a reasonable market price.)

  • Raise Liquidity Collateral & Token Distribution: The End Weights also determine the percentage of the Project Tokens solid during the LBP. As a general rule: Setting the End Weights to 1% Project Token / 99% Collateral Token ensures the vast majority of Project Tokens will be sold; setting the End Weights to 50% / 50% ensures roughly half of Project Tokens will be sold. However, it is also unlikely that the End Weights will be exactly 1% / 99% - it is more likely that it will be closer to 5% / 95%.

Start / End Date & Time

Recommendation:

  • Start Date & Time: Wednesday, 21 Feb 2024 - 12:00 UTC

  • End Date & Time: Sunday, 25 February 2024 - 23:59 UTC

Rationale:

  • The LBP will last for 4.5 days (70 hours).

  • 4.5 days is longer than the standard 3 day LBP. However, a longer LBP is beneficial for 2 reasons: First, it provides the Shutter Network the opportunity to make significant product, integration and partnership announcements during the LBP - which will bring in more value-aligned participants. Second, a longer LBP allows more time for organic price discovery during the LBP, thus reducing the risk of a “pump and dump” scenario immediately after the LBP, when SHU is available on liquid markets.

  • The dates and times are designed to maximize participation of both institutional and retail participants in all majors population and economic centers. The recommended period includes 2.5 week days (ideal for institutions) and 2 weekend days (ideal for retail). The Start Time 12:00 UTC is 20:00 China / 13:00 CET / 7:00 NYC / 4:00 SF - which gives most of the world’s population the opportunity to participate during normal hours on the first day. The End Time 00:00 UTC is 8:00 China (next day) / 1:00 CET (next day) / 19:00 NYC / 16:00 SF - which gives most of the world’s population the opportunity to participate during normal hours on the final day.

  • 21 - 25 February 2024 is after Lunar (Chinese) New Year and before EthDenver.

Other Parameters

Network

Setting: Ethereum Mainnet

Rationale: SHU currently only exists on Ethereum Mainnet.

LBP Type

Recommendation: Buy & Sell

Rationale: Allowing both buying and selling during the LBP has two advantages: First, Token Price Discovery can only be achieved if participants have the ability to buy and sell. Second, the LBP will be attractive to larger numbers and a more diverse selection (value-aligned, long/medium-term investors, speculators) of participants if they have the ability to buy and sell.

Token Vesting

Recommendation: None

Rationale: Vesting would reduce SHU purchase demand during the LBP and also reduce market liquidity after the LBP. It is best to move on to a DEX pool right after LBP, which means it is best to have more liquid tokens. (See analysis of SHU circulating supply, above.)

Geo-Blocked Countries

Recommendation: OFAC Restricted Countries

Rationale: Standard Setting

Owner Rights

Recommendation: Pause Swapping, Unpause Swapping

Rationale: Standard Setting

Swap Fee

Recommendation: 2%

Rationale: Standard Setting

3 Likes
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Great initiative, definitely support this!

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I think most of these parameters make sense. It is good to see thoughtfulness given to the timing of the start and end, and how they coincide with market activity.

However, I think it might be worth considering a shorter duration. That is, while a longer window CAN give more time to raise more funds, it can also soak all the potential buying pressure, and set the post-LBP chart up for some devastation.

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Heya Bob,

in theory I would side with that sentiment that is also why it doesn’t stretch any further than the current recommendation. We consciously have opted for these extra days due to them being in the weekend, which would allow for the final contenders to be a part of it. It plays a massive part in opening the doors to the target audience who isn’t as well versed or who simply have a packed working week due to jobs etc. If we are to look at max duration attempts such as 7 days, it absolutely would be too much of a stretch and has real potential to drown out any upside thereafter. We find this sentiment to be especially true for cases such as Launchpads where the activity afterwards is largely by people who have missed the boat on a ticket and now have to seriously hope they can be part of the project → it’s not entirely in line with the narrative there is surrounding Shutter as a concept/project. I.e. not trying to benefit of the little guy.

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