Architecture

Basic architecture of Swift AI LBP

The sonic launchpad backend follows the factory design pattern, there is a factory canister called Registry in charge of deploying new fundraising pool canisters for dev teams, investors can then participate in the pool they want by directly interacting with the individual pool canister.

Swift AI liquidity bootstrapping pool (LBP) involves a combination of canister smart contracts, DEX, and token distribution mechanisms. Here's an overview of the typical architecture:

Smart Contract: The LBP is powered by a smart contract deployed on a canister. The smart contract governs the rules and processes of the LBP, including token distribution, price discovery, and participation criteria.

Initial Token Price: The LBP contract determines the initial token price. This price is typically set at a premium to incentivize early participants and gradually decreases over time according to a predetermined schedule.

Participant Contributions: Participants in the LBP contribute both an existing base token (e.g., ICP, ckBTC, stable coins) and the newly issued token from the project. These contributions are made through the LBP smart contract.

Token Distribution: As participants contribute funds, the LBP smart contract allocates and distributes the project's tokens to them based on the predefined distribution schedule. Initially, participants receive fewer tokens per unit of base token contributed, but the token-to-base token ratio gradually improves over time.

Price Discovery: The LBP employs a gradually decreasing token price mechanism to encourage price discovery. This process helps find an equilibrium price based on supply and demand dynamics and prevents abrupt price fluctuations.

Trading on DEXs: Once the LBP concludes, participants receive their allocated tokens, and the newly launched token becomes tradable on decentralized exchanges (DEXs) or other compatible platforms. The liquidity established during the LBP enables initial trading and market-making activities.

Post-LBP Market Dynamics: After the LBP, the token's price and liquidity will be determined by the market based on supply and demand. Participants and other market participants can freely trade the token on DEXs and participate in further market activities.