One of the most common questions we get from new members in our community is “What is a raiseToken?”
Well, the raiseToken is a pseudo-token that we engineered to be able to offer fair investment and raise opportunities within the Polygen dApp.
In short, a raiseToken is a distributed "I owe you" that an investor purchases during a raise of a project. After the raise, if the project collects enough funding, it meets the raise target or surpasses it. Then the investors will be able to trade in their raiseTokens for the tokens of the project. In turn, all raiseTokens that have been exchanged for project tokens are then burnt.
The raiseToken has no value or utility outside the raises on Polygen and cannot be traded publicly after a raise closes. However, since it is an “I owe you”, investors can claim their share of the token pool from their invested project. The raiseToken has two functions, which can be broken down into two different time windows, during and after their raise.
During the raise, raiseToken are sold in all our raise types. They serve slightly different functions depending on which raise type.
The “Polygen Fixed Price” implements our signature raiseToken. Our raiseToken will remain a consistent price throughout the raise, unlike our FLO, where the raiseToken’s price is in constant fluctuation.
Polygen Fixed Price is the standard raise mechanism found on most launchpads. The “Polygen Fixed Price” is a raise in which the price does not fluctuate in relation to demand. (eg. 1 USDC = 1 raiseToken)
All raises using the “Polygen Fixed Price” mechanism will have a purchase limit per wallet, this is to ensure no whales purchase the entire supply of raiseTokens. If investors are a holder of $PGEN and are a tiered members of the Polygen community, then the purchased quantity increases.
An optional feature that projects can decide on themselves is to reward tiered members with a discounted price for their raiseToken.
In a Fair Launch Offering (FLO) using Balancer’s Liquidity Bootstrapping Pool (LBP) or Polygen’s tailored liquidity pool. Since FLO is inspired by the Dutch Auction mechanism, when the raise begins, the price of the raiseToken declines until the raise ends.
But as the price declines and the demand for raiseToken increases, the price of raiseToken begins to increase in alignment with the quantity of raiseToken being sold.
Therefore, it is important to know that whenever an investor purchases the raiseToken in a raise period, the price of the raiseToken rebalances relatively to the number of raiseTokens purchased. This functions as our anti-whale system.
The reason why the price increases when the raiseTokens are purchased is to maintain the integrity of the pool and create an incentive for smaller purchases with time intervals between purchases. This allows investors with small capital to attempt to purchase at their preferred price point, while off-putting front-runners and whales.
Two scenarios can occur after the raise. The raise can either succeed or fail.
If the raise is successful, investors will be able to claim their portion of the project tokens in relation to the number of raiseTokens they had purchased. The more raiseTokens an investor owns, the larger the share of the project token pool the investor will receive.
If the raise fails, investors will be able to claim a refund based on the average price of all raiseTokens sold.
For example, investors "A" and "B" purchased raiseToken for an average price of 0.73 USDC and 0.65 USDC, respectively. However, the average price of all raiseToken sold was 0.69 USDC, investors "A" and "B" can receive a refund of 0.69 USDC per raiseToken owned.
Warning, this price can fluctuate and is dependent on many factors such as the investor's purchase quantity and price, and the quantity and price purchased by other investors.
Here is another example:
Maria truly believed in a project, and Maria purchased 100 raiseToken for 1000 USDC, and only one other person, John, bought 100 raiseToken for 400 USDC. The total pool value would be 1400 USDC, which would then be auto refunded to the two of them. The refund both Maria and John would receive is 700 USDC.
Taking this into consideration, it's essential to be strategic and take the time when investing in new projects on Polygen. That is why we here ate Polygen are big advocates of self-education and research. We encourage all investors to get familiar with our Fair Launch Offering and learn how to DYOR.