AVAX ILO Recap: A Successful Model for Cross-Chain Liquidity Incentivization

4 min readJan 21, 2022

Moonbeam’s first Initial Liquidity Offering (ILO) by StellaSwap has been a resounding success, charting the way forward with a novel way to attract cross-chain liquidity across different blockchain networks towards Moonbeam.

StellaSwap’s Successful AVAX ILO Metrics

Here’s a breakdown of the overall metrics of the ILO:

⭐️4,342% Oversubscription

⭐️USD $4.4 Million worth of $AVAX Bridged & Committed

⭐Overall Increase in StellaSwap TVL by 40% to $130 Million 🔼

⭐New Injection of $AVAX TVL of Over $4.5 Million 🔼

⭐Increased $STELLA holders by 34% 🔼

Why ILO in the First Place?

Attracting capital inflows represents a core element in a vibrant ecosystem, especially one that is new. Moonbeam’s recent released has been eagerly-awaited, with the blueprint of Polkadot being conceptualized since 2016. Being the first and largest parachain on Polkadot, there is a constant need to attract new liquidity towards Moonbeam. This is aligned to the objective of StellaSwap, the first and leading AMM DEX on Moonbeam. The shared goal has always been attracting capital inflows.

In order to achieve that, the modus operandi of DeFi protocols is to incentivize new liquidity by offering incentives for locked/staked liquidity; liquidity providers are rewarded with the DEX native tokens as well as sharing in the cumulative trade fees. The main issue with liquidity incentivization is the effect of inflationary emissions towards the native tokens; too much emissions will cause an oversupply of native tokens, which increases selling pressure. This would dilute tokenholder value in the long run.

Therefore, the StellaSwap team had to calibrate a method to attract cross-chain capital inflows from external blockchain networks whilst maintaining emissions (that could erode tokenholder value if reckless). After much deliberation, we conceived the ILO model to achieve that: ILO.

Another design decisions that we’re bent on solving is enhancing native STELLA liquidity. A simple way to do it is increase the emission rate of native-STELLA LP farms. However, that represents a superficial way that is focused on a short-term fix since increasing emissions leads to stronger selling pressure and value dilution. What we focused on was calibrating variables to attract ‘new money’, rather than existing funds in Moonbeam. Therefore, we settled on incentivizing new money via an ILO which facilitates direct investments into STELLA token itself, and thereafter maintaining the incentive of staking through high initial APR (due to low TVL at first). This dual approach would create a higher ‘stickiness’ within our system, therefore boosting tokenholder value.

How ILO Works

Initial Liquidity Offering (ILO) is a novel mechanism to facilitate liquidity towards the newly-launched Moonbeam network. Being the first to launch on Moonbeam, StellaSwap is one of the leading DEXs with the main aim of attracting liquidity towards Moonbeam. With an ILO, liquidity and capital from other blockchain networks — such as Avalanche, Polygon and more — can easily be accumulated in Moonbeam network, facilitating more efficient market pricing that will ultimately mean better prices of tokens for end users.

StellaSwap’s ILO will allow users to bridge [Protocol Coin] (for e.g. AVAX) from [External Blockchain Network] (for e.g. Avalanche) and commit those [Protocol Coin] into buying $STELLA at a 20% discount. After the ILO ends, the [Protocol Coin] — GLMR and [Protocol Coin] — STELLA would be launched. The ILO is predicated on an overflow method, with excess [Protocol Coin] over the initial STELLA allocation to be refunded back to users.

Why Overflow?

There was a cap of $100,000 worth of STELLA for the ILO. The excess of $4.3 Million was the overflow that was refunded. The overflow model is vital in ensuring that the excess subscription value permeated the entire Moonbeam ecosystem, ensuring a net overall liquidity towards the network. Therefore, rather than having an uncapped ILO and potentially putting the entire $4.4 million into our treasury, the StellaSwap team opted for enhancing ecosystem liquidity depth > fundraising.

What Happens to Funds Raised?

The funds raised for AVAX will be accrued to the Treasury. Since StellaSwap was launched under a Fair Launch model, there is no presale, private sale or investor allocation, ensuring that emissions are geared wholly around incentivizing the community. In order to maximize tokenholder value for the long-run, StellaSwap must accrue funds to the Treasury for grow the ecosystem and effectively manage market conditions, which include engaging in buy-backs to reduce token supply, establishing incentivization programs (e.g. Airdrops) that does not contribute to excess inflation, as well as reinvesting back into the ecosystem.

More importantly, managing operational overhead of running StellaSwap could be mitigated with ILO funds, rather than liquidating our team tokens, which could be misconstrued as “dumping”.

About StellaSwap

StellaSwap is the first and leading Moonbeam DEX that offers an integrated gateway to the DeFi world. Users can swap, earn, yield farm, bridge assets, explore new projects and engage in NFT trading all from a single unified platform. StellaSwap’s products are structured in such a way that facilitates decentralized governance of STELLA holders, while continuing to innovate on the collective foundations by design.