I was listening to the AMA this morning, and I thought I would write a post of how I interpret the discussion on the mechanics of the IDO process. This is my interpretation, and doesn't replace any information that LEO finance may post about this topic. Ok enough disclaimers so lets get into it.
How the deposit process will likely work
There is a $250k ask for the first IDO ($125k in BUSD, and $125k in CUB). I understand that to participate you will need to deposit BUSD and CUB to receive LP tokens on the Version 2 pancake swap liquidity pool. At the moment, the only way to do that is through the pancakeswap user interface (Not cubdefi.com), or interacting with the contracts directly (for the brave)
What isn't clear to me, is how the $250k is determined, because the value of a token will go up and down with swap transactions in the pool. I am going to presume, there is a snapshot date, which at this instant $250k of LP tokens are withdrawn from the pool by the Cakepop team and immediately withdrawn and converted into BUSD, and CUB. We all know the BUSD will be deposited into the Cakepop liquidity pool and the CUB will be burned.
What happens on over subscription
So what happens if there is more than $250k of value in the LP pool in the IDO vault?
My guess based on the AMA conversations is that the remaining LP tokens are sent back to the contributors in the portion they contributed.
For example (assuming no price changes in the pool, as this complicates matters)
- Person A deposits $100k ($50k BUSD, and $50k worth of CUB) into the IDO Vault, lets assume this buys 100 LP token (it will be a different amount, but this assumption makes the maths easier)
- The total liquidity pool has $1m ($500k BUSD, and $500k worth of CUB) with a total of 1000 LP tokens
On the snapshot day/time, the Cake Pool team is allocated 250 LP tokens (i.e. $250k worth), and they immediately convert this back to BUSD and CUB to avoid any price movements.
This leaves 750 LP tokens remaining because of the over subscription.
The 750k of LP tokens is shared among contributors, so person A will receive 100/1000 * 750 or 75 tokens. Upon converting this back to CUB/BUSD they will receive $37.5k of BUSD and $37.5k of CUB.
Person A will also receive its portion of Cakepop, as there are 250m cakepop available from the IDO, they will receive their portion of the cake pop which is 250m * 100/1000 = 25m Cake pop.
The initial price of this Cakepop is 125k/250m = 0.0005 USD
Total Value of person A's Cakepop is 0.0005 * 25m = $12.5k
Overall person A spent $100k, received $12.5k of cakepop and was refunded $75k.
The question you may ask, is where is the missing $12.5k? that's the CUB burn (which ultimately is giving value to all CUB holders), and investors are expecting that the price of cakepop must at least 2X, for them to want to invest, and whilst I am not going to give financial advice, but coin launches are often very volatile and this gives fair access to a coin pre-launch.
What happens if it is under subscribed
The calculations are much simpler, all the funds are provided to the investor, without a refund. This still means that half their investment goes to the CUB burn, but same dynamics will exist on receiving a fair pre-launch price.
Let me know if you have questions on this, and I will try to answer it below, keeping in mind I am just interpreting the discussion this morning on the AMA, so some aspects might change slight, and this is my best guess of how it will happen.