Trainer Joe: Get DeFit — Rocket Joe
Welcome to DeFit, with Trainer Joe
This is Session 5a of a 5 part series to help you bulk out your DeFit knowledge and get some serious kudos amongst the community.
Those who train with Joe will be rewarded with an exclusive Discord badge of honor: ‘DeFit Champion’
Today you will learn to navigate the four main phases of Rocket Joe’s launch events; Deposit, Withdraw, Launch and Farm.
Rocket Joe is a liquidity launch platform, with a fair market price discovery mechanism, protecting users from front-running bots and raising organic and sustainable liquidity for protocols. Users of Rocket Joe will gain access to newly issued tokens, before they enter the open market. Users also participating in Rocket Joe will often be rewarded with ‘Bonus incentive tokens’.
🏃♂️Rep 1: Rocket Joe is a Liquidity Launch Platform that facilitates a fair and organic market price discovery for newly issued tokens
The article below is made up of examples and is not meant to represent a ‘typical’ launch, as each event will have its own parameters and market conditions. This session does however aim to give a realistic insight into the process of Rocket Joe’s phases and the general rewards and risks associated with entering Launch events.
Stake JOE for rJOE
Volly wants to participate in XYZ’s launch on Rocket Joe. First, they need to stake JOE for rJOE in the Launch page. rJOE accumulates over time, so Volly will need to claim any pending rJOE before they are able to enter the launch event.
- Volly’s accumulated rJOE balance: 700 rJOE
- 100 rJOE entitles Volly to deposit 1 AVAX
🏃♂️Rep 2: Stake JOE to accumulate rJOE, the allocation credit for Rocket Joe.
100 rJOE will allow you to deposit 1 AVAX
🏃♂️Deposit (48 hrs)
Volly enters the XYZ token launch event during the deposit phase and deposits 5 AVAX, saving 200 rJOE (2 AVAX), which they can use at any time.
- Total AVAX currently in the pool: 10,000 ($700,000)
- 1 AVAX: $70
- No. of issuing XYZ tokens = 2,000,000
- Implied price XYZ Token: $0.35.
- (Total AVAX $ / No. of issuing tokens) = XYZ Token price
- ($700,000 / 2,000,000) = $0.35.
- Total Issuing Tokens / Total AVAX = XYZ Tokens per AVAX
- 1 AVAX: 200 XYZ tokens
🏃♂️Rep 3: The implied price of an issuing token is calculated by…
(Total AVAX $ / No. of issuing tokens) = XYZ Token price
As it stands, Volly will have a 0.05% share of the Pool when the LP is released, however, if the amount of AVAX deposited changes, Volly’s share of the Pool will also change. In Rocket Joe, the issuing token price will increase or decrease depending on the amount of AVAX that is deposited or withdrawn.
- (User Deposited AVAX / Total Deposited AVAX) * Share = LP Share (not including incentives)
- Volly’s share: (5 AVAX / 10,000 AVAX) * 100 = 0.05%
Is Volly is unhappy with the current XYZ Token Price, Volly can withdraw during this deposit phase. Withdrawal fees are 0% during the first 24 hours and on a linear scale in the remaining 24 hours, up to a max of 50%.
🏃♂️Rep 4: A user’s share of the pool will increase or decrease depending on the amount of AVAX that is deposited or withdrawn.
🏃♂️Rep 5: A user can withdraw during the deposit phase, depending on the time remaining, there may be a charge to withdraw.
🏃♂️Rep 6: Users can withdraw and deposit as many times as they like, providing the deposit phase is still active.
🏃♂️Withdraw (24 hrs)
The deposit phase ends and the total AVAX currently in the pool has increased and the price of AVAX has also increased:
- Total AVAX currently in the pool: 17,000 ($1,275,000)
- Price of AVAX: $75
- No. of issuing XYZ tokens: 2,000,000
- Implied price XYZ Token: $0.6375
- 1 AVAX: 117.647 XYZ token
🏃♂️Rep 7: The Deposit phase lasts 48 hrs and the Withdraw phase, 24 hrs.
In the Withdraw phase, participants may withdraw their AVAX for a fixed penalty of 20%. If Volly were to withdraw their full AVAX deposit before the LP creation they would lose 1 AVAX (0.2 * 5 AVAX).
Here are some reasons why Volly may wish to withdraw
- Their LP share will be diluted to 0.029% which may yield fewer rewards
- They may be concerned with the chance of impermanent loss
- They need to withdraw AVAX to make other investments
- They are uncertain about the prospects of the Token price at launch
🏃♂️Rep 8: A withdraw penalty is set to deter ‘sell pressure’ which may come about through market manipulation.
Volly decides to not withdraw their deposit because they speculate token XYZ will continue to appreciate in value after the unlock and they do not want to lose the 1 AVAX to the Withdrawal fee. Furthermore, there is an additional 10% of XYZ tokens which will be claimable to participants as bonus rewards, based on their share of the pool.
- 10% of 2,000,000 XYZ = 200,000 XYZ
- Volly’s share: 0.029%
- User share % * Incentives = Rewards Share
- 0.002910 * 200,000 = 58 XYZ
- 1 XYZ = $0.6375
- 58 * $0.6375 = $36.975
Volly’s share of the rewards will likely offset any impermanent loss and is more attractive than losing 1 AVAX worth $75 as a withdrawal penalty.
🏃♂️Rep 9: As well as receiving a share of the LP, users will receive a share of the launch event incentives.
🏃♂️Launch (Up to 7 days)
The launch day arrives, meaning that Volly’s 5 AVAX will be turned into an LP. Volly now receives a 50:50 LP token, where AVAX is equally split into AVAX and issuing token. This LP is locked for up to 7 days.
The amount of AVAX tokens in the pool has decreased and the price of AVAX has changed again.
- Total AVAX currently in the pool = 16,000 ($1,152,000)
- Price of AVAX = $72
- No. of issuing XYZ tokens = 2,000,000
- Implied price XYZ Token: $0.576
- 1 AVAX: 125 XYZ token
🏃♂️Rep 10: LP tokens are created by ‘selling’ 50% of the AVAX for the issuing tokens, to create an equal ratio AVAX / Token LP.
Volly’s final share of the pool is 0.03125% and they will receive a share of the additional incentives worth 62.5 XYZ ($36).
🏃♂️Rep 11: Additional bonus incentives, can be claimed on the Launch page as soon as the Launch engages
The LP is now created from Volly’s 5 AVAX.
- AVAX: $72
- XYZ Token: $0.576
- 1 AVAX: 125 XYZ token
- 2.5 AVAX : 312.5 XYZ Tokens
Volly’s tokens are now locked in the pool and the price of 1 XYZ has been established at $0.576. The token is now available for trading. During this time, the price of XYZ will either increase or decrease based on market activity.
Volly waits until the LP tokens unlock, at which time Volly can Farm for additional incentives or withdraw their LP. During this time the XYZ / AVAX LP may experience impermanent loss.
- Price of AVAX: Remained at $72
- Price of XYZ: Decreased to $0.477
- Previous Ratio: 2.5 AVAX : 312.5 XYZ
- New Ratio: 2.275 AVAX : 343.4 XYZ
- Value of LP: $327.60
If Volly had held the 5 AVAX in their wallet, the AVAX tokens would have been worth $360. Assuming the prices remain the same (which in DeFi is unlikely), and Volly decides to dispose of the LP upon unlock, Volly would realize a loss of $32.4.
- Value of AVAX — Value of LP = IL
- $360 — $327.60 = $32.4
Luckily, Volly still has $36 from the pool incentives, so they have still made a profit of $3.60.
🏃♂️Rep 12: Once the double rewards farm is deployed, users can stake their LPs in the farm for additional rewards.
Congratulations — Session Complete 🥇
Now it’s time to flex your muscles and lock in those gains.
Take on the challenge and get DeFit.
Complete the Quiz to build your progress towards the DeFit badge of honor.
🧠 Good luck! : Quiz Link ← — — — — — —
If you need to catch up on previous Sessions
- Session 1: Lending Part 1
- Session 2: Lending Part 2
- Session 3: Yield Farming
- Session 4: Impermanent Loss
About Trader Joe
Trader Joe is a one-stop-shop decentralized trading platform native to the Avalanche blockchain. Trader Joe builds fast, securely and aims to serve the community at the frontier of DeFi. Maximize your yield generating activities under one fully integrated roof, providing you with a unique, innovative, and highly accessible DeFi experience.