Bootstrap

Fees generated from the bootstrap phase deposits are used to kickstart the protocol.

During the bootstrap period (7 days) the Smart Contract will accept USDC and ETH, which will then be converted and temporarily locked as liquidity in exchange for BOOT.

BOOT tokens can be staked for a share of transaction fees and protocol acquired liquidity. Liquidity deposited in this phase will be unlocked and returned in full as USDC to depositors at the Exit stage.

Example:

Alice has $50,000 she would like to deposit in the bootstrap phase. Since the current price of ETH is $1,900 the protocol converts a portion of her USDC into ETH and adds it as liquidity to the Uniswap v3 pool.

Initial Deposit

USDC: $50,000

Liquidity Added After Conversion

USDC: ~$23,000

ETH: ~14.210

After 2 years of volatility Ether finally reaches $10,000. The protocol shuts down and Alice can finally unlock and withdraw her initial deposit. Since the initial funds were used to provide liquidity in the Uniswap pool when Ether was $1,900 her funds are now worth ~$84,000.

Claim

USDC: ~84,000

Deposit Yield

Transaction fees generated from the locked funds are used to incentivize initial bond creation.

Incentives

In order for Boostrappers to lock their funds for an unknown amount of time in the Uniswap position while also giving up the yield on their deposits they are incentivized. This incentive comes in two flavors:

1. Continuous Incentive

   10% of transaction fees from protocol TVL during the Bond & Stake phase are converted into ETH and continuously distributed to Bootstrappers.

2. Exit Rewards

   10% of the protocol acquired liquidity, paid in USDC, once Ether reaches $10K.

Incentives Continuation Example:

Alice owns 10% of all deposits in the bootstrap phase. During the Bond & Stake phase, which lasted 2 years, $120M were added as liquidity to the pool generating around $24M in tx fees. During those two years Alice was able to claim a total of $240,000 worth of ETH at different price ranges.

Continuous Incentive = Bonds * APR * Duration * BootShare * AliceShare

Continuous Incentive = 120,000,000 * 0.1 * 2 * 0.1 * 0.1

Continuous Incentive = $240,000

Since she decided to keep the ETH during the whole Bond & Stake period she now has over $240,000 worth of ETH that she could sell at $10K.

Roughly 10% of the $120M worth of bonds were acquired by the protocol during its lifetime from early bond converters. She can now claim her 10% share of the Exit Rewards.

Exit Rewards = ProtocolOwnedLiquidity * BootShare * AliceShare

Exit Rewards = 12,000,000 * 0.1 * 0.1

Exit Rewards = $120,000

Including her initial deposit, which has appreciated in value due to the increase in ETH price, Alice is able to claim over $444,000.

Added Considerations

There are many ways Alice could have spent her initial $50,000 from the bootstrap phase. Let’s take a look at some of the options she had.

LP in the Uniswap v3 directly

If she had simply added $50,000 worth of liquidity to the USD/ETH pool she would have made ~100,000 including fees and ETH price appreciation.

Initial Deposit = $50,000

Final LP Position = $84,000

Earned in Fees = InitialDeposit * APR * Duration

Earned in Fees = 50,000 * 0.1 * 2

Earned in Fees = $10,000

Total = $84,000 + $10,000 = $94,000

Buy and hold ETH

ETH Purchase = $50,000 / $1,900 = 26.31 ETH

Final ETH Price = $261,300

Disclaimer

It is very difficult to estimate how much Alice would have made in all these scenarios. Since we don’t know how long it will take or even if ETH will reach $10K there is the risk that her initial deposit stays in the pool longer than 2 years.

The current APR for the Uniswap v3 pool in the 500 - 10,000 range is around 9%. In these examples we estimate a 10% APR. According to The Block, during the last bear market in 2019 the total crypto exchange volume was around ~$100b per month while during the 2021 bull market the average volume was around ~$1.5t. That is 15 times higher, which puts our estimate as being quite conservative.

Given these unknowns, It is very difficult to estimate what the actual return value will end up being. Potential participants of the Bootstrap phase should take these points into consideration. This is by no means an exhaustive list of things to consider.