Cryptocurrency markets are heavily correlated and full of downside tail risk. While there are many tokens competing to achieve the highest positive growth during these periods, virtually none of the projects plan for the opposite, extreme contraction during market cycles.
Blackswan maintains stability not only during market growth cycles but unleashes growth during contractionary market periods with the aim to move as an anti-fragile asset or uncertainty index.
Why are cryptocurrency projects fragile?
Decentralized finance is an industry in its infancy still trying to get a foothold in the most efficient way to do things. One of the cornerstones of a successful project is high market liquidity, which has caused the yield farming craze as projects fight for the very limited DeFi user base.
The issue with a majority of current liquidity incentive programs is the linear rate of return provided to investors in a market that is anything but linear. Why should a liquidity provider get paid the same amount in a sideways market as a market that is collapsing.
This leads to further downside risk and a lack of liquidity when it is needed most. Liquidity providers are happy to provide liquidity with extra incentives when the market is doing well, however as soon as uncertainty enters into the market, a 40% APY will no longer cover the potential risk and value of the service from the LP.
How does Blackswan solve this?
Blackswan solves this by incentivizing liquidity when it is needed most, during periods of uncertainty / low liquidity. $SWAN can be seen as a large decentralized insurance contract against itself.
Investors are willing to purchase Blackswan during periods of stability in order to hedge their portfolio and gain exposure to unique price action. During periods of uncertainty $SWAN provides value through aggressive staking rewards paid 50% in stablecoin (creating an artificial “stoploss” for liquidity providers) and an increase in demand for the token as people attempt to gain access to these staking rewards.
TLDR How Blackswan works
Expansionary supply will mean that passive staking rewards will be able to go on indefinitely, while a portion of the supply gets siphoned into the Blackswan Fund. The Blackswan Fund is the “rainy day” fund for Blackswan, where tokens are sold slowly over time into stablecoin.
Periods of uncertainty are defined by a significant dip in the average liquidity of $SWAN which will then trigger aggressive rewards given to the LPs who have staked their LP tokens.
Rewards given to liquidity providers during this time will be given in the form of additional LP tokens made up of 50% newly minted Blackswan 50% stablecoin over a 20 day period.
You can learn more about how Blackswan works here.
How will Blackswan get distributed?
We will be announcing the date for the LBP (liquidity bootstrapping pool) on Balancer in the next couple of weeks. This is similar to an IDO (initial dex offering), and will allow us to fairly distribute $SWAN tokens while gaining initial market liquidity.
We believe that building a strong community is essential in the success of this project, and that means distributing tokens significantly below what we believe could be the potential fair value for this project moving into the future.