Initial Farm Offerings: Explanation and Examples
Current as of 30 October 2024
Disclaimer: This is NOT financial advice…
As the name suggests, Initial Farming Offerings (IFOs) are a brand new type of fundraising activity that uses farming to generate funds for participating projects.
The IFO process allows someone to sell access to farm a new or discounted token. That way a new team building can receive building capital and users can get early access to a new token at a discounted rate.
Adding icing to the cake, IFOs earn 5% in fees and those fees go directly to the Crunchy DAO treasury.
Well….How does this work?
Lets dive into it! Say you find a IFO you wish to participate in. You would head to the projects page and deposit a certain amount of XTZ you are willing to spend to participate in that IFO. At that point, our UI will show you the projected amount of tokens you can farm and your percentage share of the farm. That percentage share is very important as it determines how many tokens you will earn from farming. Throughout the IFO, anyone can stake and commit $XTZ so your percentage share of the pool will vary throughout the farming period.
When the staking time period has ended, you will be able to start harvest your share of the IFO tokens being offered. When you harvest your IFO tokens, the corresponding value from the $XTZ you staked is deducted and any remaining $XTZ is returned to you (if any).
So this farm isn’t a normal farm? Nope! You are paying to participate in a exclusive farm to earn tokens before they have been released or listed on a DEX. The more $XTZ you add to the farm, the higher the share of the IFO you will have and therefore the more tokens you will have a claim to when you harvest.
Confused? Don’t worry, it can sound confusing but can make a lot more sense when you see the numbers. Here are some examples to help out.
Example 1:
IFO project funding goal: $10,000
Total actual XTZ value staked: $200,000
This IFO was 2x over subscribed so users will only be able to farm half the amount they staked.
User 1 staked value: $1,000
User 1 buys: $500
User 1 returned XTZ value: $500
User 1 will farm $500 worth of the IFO token while having $500 returned since the IFO was over subscribed.
User 2 staked value: $500
User 2 pays: $250
User 2 returned XTZ value: $250
User 2 will farm $250 worth of the IFO token while having $250 returned since the IFO was over subscribed.
Example 2:
IFO project funding goal: $100,000
Total actual XTZ value staked: $50,000
This IFO was 50% under subscribed so users will be able to farm all of the value they staked.
User 1 staked value: $10,000
User 1 pays: $10,000
User 1 returned XTZ value: $0
User 1 will farm $10,000 worth of the IFO token..
User 2 staked value: $1,000
User 2 fee: $1,000
User 2 returned XTZ value: $0
User 2 will farm $1,000 worth of the IFO token.
Immediately after the IFO completes, liquidity will be added. At that point, all tokens will be distributed to users over a 15 to 90 day farm. During this period, you may harvest tokens as they accrue. The entire allocation a user purchased during the IFO phase will be distributed over those 15 to 90 days.
Lets break it down some more!
Before the IFO:
- You will need $XTZ to participate.
- We set the amount of $XTZ a project wants to raise and a time period.
During the IFO:
- Anyone can commit their $XTZ.
- You can add more $XTZ tokens at any time throughout the IFO.
- Only dedicate $XTZ you are willing to spend. All $XTZ added is locked and cannot be removed. If the IFO is oversubscribed, you will have some of your $XTZ sent back to you as outlined above.
After the IFO:
- Your farming tokens will start to accrue and you can start claiming your tokens as many times as you want throughout the 15 to 90 day farm process.
Okay that was confusing as hell…so what makes IFOs so great and why should I care? For one, IFOs are a great way to widely spread tokens to many individuals as anyone can participate with no minimum or maximum commitment limits. The farm process also ensures tokens are steadily distributed to users while teams build their products out.
Still have questions? No worries. Jump in our Discord and ask away.
Discord: https://discord.gg/cWPMenAX2e
