Why Liquidity Pools for Creator Tokens Are a Trap

Liquidity providers (LPs) are not fans; they are profit-seeking algorithms. They provide capital solely for fee arbitrage and will withdraw at the first sign of volatility, causing catastrophic price impact. This creates a fragile facade of liquidity that disappears when needed most.

• TVL is a vanity metric, not a stability guarantee.
• LP incentives are misaligned with long-term creator success.

The bonding curve model creates a pyramid-like structure where early buyers profit at the expense of late entrants. Price is driven by speculative key purchases, not creator utility. This leads to inevitable pump-and-dump cycles that erode community trust and leave the creator holding the bag of a depreciated asset.

• Value accrual is to key traders, not the creator.
• The model incentivizes churn, not loyalty.

Replace extractive LPs with non-transferable utility. Creator token value should be backed by direct access, governance, and real-world perks, not a speculative pool. Think token-gated experiences, revenue shares, and co-creation rights that burn or lock tokens, creating organic buy pressure and aligning holder incentives with the creator's growth.

• Shifts model from financial speculation to community membership.
• Creates sustainable, non-inflationary demand loops.

AMMs incentivize creators to become the primary liquidity provider, creating a direct conflict of interest. The creator's exit is the only rational move.

• Creator LP Position becomes a $500K+ exit liquidity pool for themselves.
• Impermanent Loss guarantees token price suppression, punishing loyal holders.
• Ponzi Dynamics: New buyers are directly subsidizing earlier investors' exits.

A deterministic, on-chain pricing function that mints/burns tokens against a reserve asset. It aligns creator and holder incentives by making the treasury the only counterparty.

• Predictable Slippage: Price is a function of total supply, not opportunistic LPs.
• Protocol-Owned Liquidity: Treasury accumulates reserves, funding community initiatives.
• Anti-Fragile: No LP to flee; price discovery is purely demand-driven. See Uniswap's Factory v1 for the original model.

Central Limit Order Books (CLOBs) on high-throughput L2s (e.g., dYdX, Hyperliquid) or Solana (Phoenix, OpenBook) enable efficient, intent-based trading without mandatory LP risk.

• Zero Slippage for limit orders, protecting large holders.
• Professional Market Making: Incentivizes competitive, capital-efficient liquidity.
• Real Price Discovery: Reflects true bid/ask sentiment, not AMM formula distortion.

Bypass secondary markets entirely. Use non-transferable points or staking mechanisms to gate access and rewards, deferring liquidity questions until network effects are proven.

• Aligns Utility & Speculation: Value accrues from access, not exit liquidity.
• Eliminates Front-Running: No toxic flow for bots to exploit.
• Builds Community Equity: Mirrors successful models from friend.tech (keys) and EigenLayer (restaking).

Liquidity pools for creator tokens are a Ponzi structure disguised as infrastructure. The model demands constant new buyers to offset sell pressure, creating a negative-sum game for all but the earliest entrants.

• Impermanent Loss is permanent: LPs are guaranteed to underperform vs. holding the token.
• Permanent Sell Pressure: Every fan interaction (e.g., buying a token for access) creates a sell order for the creator, diluting holders.
• TVL is a Vanity Metric: A pool with $1M TVL can collapse on a $10k sell due to the bonding curve.

Replace speculative AMMs with direct, utility-driven mint/burn mechanics. A bonding curve controlled by the creator mints tokens for fiat and burns them for utility redemption, decoupling token price from speculative liquidity.

• Zero Slippage for Fans: Fans buy at a predictable, algorithmically set price for access, not speculation.
• Creator-Controlled Treasury: Revenue from mints goes to a vault for community projects, not to mercenary LPs.
• See It Live: This is the core model behind Roll's Social Money and Friend.tech's key system, which bypassed AMMs initially.

The token must be a key to a locked room of value, not a casino chip. Design a clear, non-speculative utility ladder that burns tokens, creating sustainable demand.

• Tier 1: Access: Burn token for gated content/chat (e.g., BitClout, Friend.tech).
• Tier 2: Governance: Stake token for voting on community fund allocations.
• Tier 3: Redemption: Burn token for physical/digital merch, 1:1 calls, or unique experiences.
• Result: Demand is driven by consumption, not price speculation, creating a positive feedback loop.

Current tooling (Uniswap v3, Sushiswap) is built for degen farming, not creator economies. We need new primitives.

• Non-Custodial Vaults: Smart contracts that hold revenue and allow token-gated withdrawals (see Superfluid streams).
• Minimal AMMs: If secondary liquidity is needed, use low-fee, single-sided staking pools that don't punish holders (e.g., Curve-style for pegged assets).
• Social Wallets: Embedded wallets (Privy, Dynamic) for frictionless, in-app token purchases without Metamask.