Phase One Of Equilibrium’s PLO: How Our DOT/EQ Token Swap Works

March 29, 2021
Phase One Of Equilibrium’s PLO: How Our DOT/EQ Token Swap Works

We’re getting closer and closer to kicking off our parachain lease offering. As you know by now, our PLO will execute in two phases, a DOT/EQ token swap followed by a crowdloan. The crowdloan will only begin once the token swap has successfully finished, so let’s get into those initial details.

Here’s how our token swap will work for the first phase of our PLO.

Summary


DOT/EQ token swap mechanics

The mechanics behind the first phase of our PLO are pretty simple. Participants submit DOT and receive EQ tokens in exchange at an initial swap rate of 0.07 DOT per 1 EQ. They simultaneously get the right to swap their DOT back for EQ at the end of the parachain lease period for free, all while keeping any earned bonuses in EQ.

We will cover this and much more in this article, but let’s first walk through each of the four main points of the token swap. Take a look at this flowchart that describes how it will work:

  1. Participants undergo KYC

Just as every friendship starts from an introduction, we will require KYC from every user before they can participate in the swap.

2. They select a parachain lease period

Every participant will choose between 12- and 24-month periods for our parachain lease. They will decide how long they want to contribute their DOT for — if it turns out that they did not get the desired leasing period, they can either go along with the majority’s choice or return all EQ and withdraw their DOT completely.

3. Then they send DOT to the custodian and receive EQ

Token swap participants will send DOT to a dedicated Polkadot address. At the end of the swap, they will receive a respective amount of EQ tokens at their addresses, free of any lockup period.

4. Whitelisted participants have priority

If we run into the hardcap of 250,000 DOT during the PLO, whitelisted users will have priority over those who aren’t.

How do you get an EQ bonus?

Users exchanging their DOT for EQ will earn a bonus that depends on their swap size and selected parachain lease period. Those who swap over 10,000 DOT and commit to the maximum lease period of 24 months will earn a maximum bonus of 25%.
Let’s take a look at the bonus structure in more detail:


Why is this risk-free and safe?

Firstly, the swap doesn’t have an implied risk of an EQ/DOT price drop in case EQ doesn’t perform well. As mentioned earlier, every swap participant gets the right to reverse the swap at the initial swap rate for free. They can exercise this right at the end of the parachain lease period.

To do so, swap participants only need to send EQ tokens back within one week from the parachain lease ending. The initial amount of DOT will be sent to the initial Polkadot address. Note that they can keep their original EQ bonus.

Secondly, all the DOT collected during our token swap is kept absolutely safe. This DOT will live in a cold wallet by Copper, a reputable regulated custodian licensed in the UK. Copper is providing custody services during this portion of our PLO. When the token swap is over, Copper will submit the bid for our selected lease period by transferring DOT to the decentralized crowdloan module on the Polkadot relay chain.

The wallet is under multisignature permissions, and all DOT operations (like withdrawals and transfers) need to be authorized by all the participants. This refers to the Equilibrium team, as well as Signum Capital, a well-known Singapore-based ecosystem participant and investor who kindly committed to becoming a part of our multisig.

The diagram below illustrates the reverse swap mechanism executed by msig participants and the custodian:

Importantly, if Equilibrium fails to secure a parachain leasing slot after repeated attempts within five months, then swap participants will have the opportunity to swap back their EQ to DOT.

Don’t miss out on our referral program

We want to offer support to everyone who contributes, so we are pleased to offer a referral program that lets you earn more when you recruit new PLO participants. You need to register and to provide your Polkadot address where you will receive your bonuses in order to participate. Our system will generate a personalized referral link for you to share with your community.  Then you get credit when they sign up.

The referral bonus is 1% for every participant using your referral link. It’s denominated in EQ tokens and will be distributed to Polkadot addresses right after the swap ends.

All told, we expect to meet the lease period expiration by successfully raising $250,000 in DOT. Not only is strong liquidity a cornerstone of any worthwhile DeFi protocol, but this fresh inflow of funds raises our company capitalization and gives us a cushion for the next parachain slot bids.

Once the token swap is complete, it’ll be time to gear up for the phase two crowdloan after that. We’ll unpack the phase two crowdloan next, stay tuned!



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