---
type: claim
domain: internet-finance
description: "Proposers lock initial liquidity at a starting price, traders move price through swaps, then high fees incentivize LPs to provide depth at the new equilibrium"
confidence: speculative
source: "MetaDAO proposal #4 (joebuild, 2024-01-24)"
created: 2025-01-24
---

# Futarchy AMM liquidity bootstrapping follows swap-then-provide pattern

The proposed MetaDAO AMM architecture introduces a specific liquidity bootstrapping sequence:

1. **Proposer initialization**: Proposer locks up initial liquidity and sets starting price for pass/fail markets
2. **Price discovery through swaps**: Early traders swap to move the AMM price toward their preferred valuation
3. **LP provision at equilibrium**: High fees (3-5%) incentivize liquidity providers to add depth at the new price point
4. **Liquidity growth over time**: "Liquidity would increase over the duration of the proposal"

This is distinct from typical AMM launches where liquidity providers seed the pool at launch. Here, the proposer provides minimal initial liquidity, and the market builds depth organically through the swap-fee incentive.

The mechanism assumes that:
- Proposers can accurately estimate a reasonable starting price
- 3-5% fees are sufficient to attract LPs after initial price discovery
- Trading volume will be sufficient to generate meaningful LP returns

This is speculative because it's a proposed design without empirical validation. The proposal acknowledges uncertainty: "adoption within the DAO is not a certainty" and lists "Adoption/available liquidity" as a key risk.

## Evidence

- Proposal specifies: "These types of proposals would also require that the proposer lock-up some initial liquidity, and set the starting price for the pass/fail markets"
- Bootstrapping sequence: "someone would swap and move the AMM price to their preferred price, and then provide liquidity at that price since the fee incentives are high"
- Expected outcome: "Liquidity would increase over the duration of the proposal"
- Risk acknowledgment: "Adoption/available liquidity: similar to an orderbook, available liquidity will be decided by LPs"

---

Relevant Notes:
- [[MetaDAOs Autocrat program implements futarchy through conditional token markets where proposals create parallel pass and fail universes settled by time-weighted average price over a three-day window]]
- [[optimal token launch architecture is layered not monolithic because separating quality governance from price discovery from liquidity bootstrapping from community rewards lets each layer use the mechanism best suited to its objective]]

Topics:
- [[domains/internet-finance/_map]]
- [[core/mechanisms/_map]]
