Indigo Initial Bootstrapping Event (LBE in partnership with Minswap)

Important note: Dates and times that follow are anticipated dates and not guaranteed.

Summary:

  • LBE Discovery Phase Start: November 14th, 5am UTC / 12am ET
  • LBE Withdrawal Penalty Starts: November 19th, 5am UTC / 12am ET
  • LBE Discovery Phase End: November 20th, 11pm UTC / 6pm ET
  • Indigo launch and INDY trading: November 21st, 3pm UTC / 10am ET

The Indigo DAO Token (INDY) will serve as Indigo’s utility token with a total supply of 35M. One of INDY’s purposes is to allow voting on-chain, as described further in the Indigo DAO Constitution and Voting Procedures. Users who stake their INDY in Indigo’s governance become DAO Members (Members) and can also participate in Indigo’s profit-sharing model plus earn governance staking rewards.

Indigo has been committed to a Fair Launch to bootstrap the protocol from the ground up. As part of this initiative, no minting, pre-sale, or distribution of INDY has been undertaken. This ensures that starting from launch Indigo will be community managed.

In partnership with Minswap, Indigo will begin a Liquidity Bootstrapping Event (LBE) on November 14th 5am UTC. The LBE will end on November 20th 11pm UTC. The goal of the LBE is to use a community-driven and transparent process to discover a fair price for INDY. After the LBE starts, users can deposit ADA into the Minswap Launch Bowl. Deposited ADA will be used to create INDY/ADA Liquidity Pools (a LP) after launch of the protocol. No ADA deposited into the LBE will pass through Indigo or the Indigo team.

Users can deposit any amount of ADA up until the LBE end date. For each ADA deposited, the user will receive one goADA. goADA can be redeemed for ADA by returning the goADA to Minswap until the end of the LBE; however, beginning November 19th 5am UTC, 2022, each goADA may be redeemed for only 0.75 ADA. The 25% late-withdrawal fee will be assessed as a disincentive for users to manipulate the LBE. After November 20th, 2022, goADA will no longer be directly redeemable for ADA.

Indigo’s Token Generation Event (TGE, i.e., the minting of INDY) will occur on November 20th, 2022 at the end of the LBE. On November 21st, 2022, 3PM UTC, Indigo will become available for all users, INDY will begin live trading, and the Indigo airdrop will commence. More information about the TGE will be published in the coming weeks.

350,000 INDY is allocated to bootstrapping liquidity, of which 262,500 INDY is allocated for Minswap. The resultant Minswap LP will consist of 75% of deposited ADA in the LBE paired with 75% of the allocated INDY (262,500). Depending on slippage analysis at the time of the LBE end date, 25% of deposited ADA in the LBE paired with 25% of the allocated INDY (87,500) will be used to create LPs on either one or two DEXs.

Current analysis suggests that if a minimum of 10M ADA is deposited during the LBE, then INDY will be distributed to three Cardano DEXs (Minswap, SundaeSwap, and WingRiders). If less than 10M ADA is deposited, then INDY will only go live on two Cardano DEXs (Minswap and SundaeSwap).

For those who want to know the nitty-gritty details of how the process will work, read on.

Calculating Expected Market Price

During the LBE, the expected market price for INDY can be calculated using:

Where:

  • p is the expected market price of INDY
  • a is the amount of ADA deposited into the LBE
  • b is the current market price of ADA
  • c is the total amount of INDY allocated for liquidity bootstrapping (i.e., 350,000)

Minswap Liquidity Pool Creation on November 20th

At the end of the LBE, on November 20th, 2022, Indigo will transfer 262,500 INDY to Minswap. Upon receiving INDY, Minswap will create an INDY/ADA Liquidity Pool (a “LP”) and generate Liquidity Provider Tokens (a “LPT”) in the amount of:

Where:

  • t is the number of Liquidity Provider Tokens generated
  • a is the total amount of ADA retained within the LBE
  • c is the total amount of INDY allocated for liquidity bootstrapping (i.e., 350,000)

Minswap Liquidity Pool going Live on November 21st

Beginning November 21st, 2022, users will be able to redeem goADA for LPT. The amount of LPT each goADA can be redeemed for can be calculated using:

Where:

  • x is the number of LPT redeemable per goADA
  • d is the total supply of goADA distributed to users of the LBE
  • t is the number of Liquidity Provider Tokens generated

Each LPT will represent a stake of the LP. Upon the end of the LBE, the amount of ADA in the LP will be 75% of the total amount of ADA retained within the LBE. The amount of INDY in the LP will be 262,500. The total number of LPTs for the LP will be the square root of the product of the LP’s ADA and INDY:

Where:

  • t is the number of Liquidity Provider Tokens for the INDY/ADA Liquidity Pool
  • a is the total amount of ADA in the Liquidity Pool
  • c is the total amount of INDY in the Liquidity Pool (i.e., 262,500)

LPTs can be redeemed for a proportional share of the pool’s ADA and INDY. To calculate how much ADA and INDY each LPT can be redeemed for:

Where:

  • y is the amount of ADA that can be redeemed per LPT
  • z is the amount of INDY that can be redeemed per LPT
  • a is the total amount of ADA in the Liquidity Pool
  • b is the total amount of INDY in the Liquidity Pool (i.e., 262,500)
  • t is the number of Liquidity Provider Tokens generated

The value of a LPT is the sum of the ADA and INDY, therefore y+z, or alternatively:

Where:

  • v is the value of an LPT
  • b is the total amount of INDY in the Liquidity Pool (i.e., 262,500)
  • p is the market price of INDY
  • t is the number of Liquidity Provider Tokens for the INDY/ADA Liquidity Pool

Indigo Protocol Owned Liquidity

To calculate the value of a LPT denominated in INDY, omit the price (p):

Where:

  • u is the value of an LPT denominated in INDY
  • b is the total amount of INDY in the Liquidity Pool (i.e., 262,500)
  • t is the number of Liquidity Provider Tokens for the INDY/ADA Liquidity Pool

Minswap will transfer 28.3’% of LPTs to the DAO Treasury, representing a value of 148,750 INDY:

Or more simply:

Where:

  • i is the value denominated in INDY of the LPT transferred to the DAO Treasury
  • c is the total amount of INDY allocated for liquidity bootstrapping (i.e., 350,000)
  • f is the Minswap fee for providing the service (i.e., 5%)

The received LPTs will be locked in the DAO Treasury for a minimum of six months, accessible upon a protocol upgrade approved by the Members. These LPTs in the DAO Treasury will serve as Indigo’s Protocol Owned Liquidity, ensuring indefinite liquidity for the INDY token.

Determining How Many Pools to Create

At the end of the LBE, Minswap will create an INDY/ADA Liquidity Pool (a “LP”) to allow users to purchase INDY in exchange for ADA. An additional one or two LPs will also be created, depending on the amount of ADA deposited during the LBE. Indigo will transfer the remaining 87,500 INDY allocated to the LBE, and Minswap will transfer the remaining 25% of total ADA deposited in the LBE, to the corresponding DEXs.

To ensure a limited amount of slippage for users, a third LP will only be created if the expected slippage for a $10,000 purchase order of INDY on the third LP will be expected to be less than 2%. The amount of slippage for a third LP can be calculated using:

Where:

  • s is the percentage of slippage expected to be experienced
  • a is the target amount of INDY to purchase
  • c is the total amount of INDY allocated for liquidity bootstrapping (i.e., 350,000)

The total cost of the purchase can be calculated using:

Where:

  • v is the total cost of the purchase
  • d is the total amount of ADA retained within the LBE
  • p is the market price of ADA
  • a is the target amount of INDY to purchase
  • c is the total amount of INDY allocated for liquidity bootstrapping (i.e., 350,000)

To determine the amount of slippage from purchasing $10,000 worth of INDY from a third LP, find a where v equals 10,000, then calculate s. For example, if the amount of ADA retained within the LBE (d) was 10,000,000, and the price of ADA was $0.35, then a would be ~978. If a is 978, then s would be ~2.29%. Thus, in this example, the slippage would be above 2% and a third LP would not be created.

Assuming the same price of ADA ($0.35), if instead the amount of ADA retained by the LBE was 12,000,000, then a would be ~818. If a is 818, then s would be ~1.91%. Thus, in this example, the slippage would be below 2% and a third LP would be created.

All LPs will go live and begin public trading on November 21st, 2022. Generated LPTs will be transferred to the DAO Treasury, representing a total value of 323,750 INDY, consisting of 148,750 INDY worth of LPTs from Minswap, and a combined value of 175,000 INDY worth of LPTs from either one or two additional DEXs.

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Indigo

Indigo

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Indigo is a decentralized synthetic asset issuance protocol built on Cardano