Say goodbye to sniping? How does Gavel solve the dilemma of token distribution and liquidity guidance?

Gavel platform test coin IBRL publicly raised over 30,000 SOL, with a market capitalization reaching 66 million USD at one point.

Written by: KarenZ, Foresight News

In the crypto world, token distribution and liquidity guidance have always been critical aspects of determining the success or failure of a project, often accompanied by multiple shackles such as lack of transparency, market manipulation, sniping, and “sandwich” attacks. Most of the current token offerings on Solana follow a joint curve model. While this mechanism enables initial price discovery, it has given rise to the phenomenon of “token sniping”, where bots buy tokens at a low price in front of real users at lightning speed, and then resell them to retail investors at a high price.

Gavel is committed to addressing these pain points through on-chain mechanisms, bringing a fairer and more efficient token issuance experience to the Web3 ecosystem. This article will detail the background and mechanisms of Gavel.

What is Gavel?

Gavel, a platform focused on on-chain token distribution and liquidity onboarding, was developed by Ellipsis Labs and went live on Solana on May 20th. Gavel aims to help project parties issue tokens at a lower cost and in a more transparent way, while protecting users from malicious behaviors in the market, such as clipping attacks and sniping. Gavel also helps direct initial liquidity for tokens and ensures the fairness and security of transactions through its unique anti-clamping AMM mechanism.

Ellipsis Labs is also the core developer of Solana’s eco-limit order book DEX Phoenix, with a cumulative funding of $47.3 million.

In August 2023, Ellipsis Labs completed a $3.3 million seed round of financing, led by Electric Capital, with participation from Robot Ventures and Anagram. Angel investors included Solana co-founder Anatoly Yakovenko (Toly), Polygon Labs CEO Marc Boiron, and Monad Labs CEO Keone Hon. This funding aims to accelerate the development of innovative DeFi protocols such as Phoenix.

In April and October 2024, Ellipsis Labs closed two rounds of funding, including a $20 million Series A funding round led by Paradigm in April. At the end of October, Ellipsis Labs closed a $21 million funding round led by Haun Ventures, with continued participation from existing investors Electric Capital, Toly, and Paradigm. This funding round is dedicated to accelerating the development of Atlas, a blockchain for verifiable finance.

The Gavel AMM is a productization of Ellipsis Labs’ early research efforts. At the time, Ellipsis Labs co-founders Jarry Xiao and @0xShitTrader, along with Paradigm partner frankie and general partner Dan Robinson, co-authored A Sandwich-Resistant AMM, proposing an anti-“sandwich” AMM (sr-AMM) application-layer mitigation that extends the constant product by enforcing an invariant AMM: Any exchange transaction will not be filled at a better price than at the beginning of the slot window, protecting traders from front-running attacks. It’s also an extension of Vitalik Buterin’s anti-front-loading idea in 2018.

How does the Gavel mechanism work?

The core mechanism of Gavel is divided into the following stages:

Initial Token Distribution: Project parties can flexibly choose the issuance methods such as Dutch auctions, fixed price first-come, first-served, and licensing mechanisms. During the open token distribution period, users deposit SOL and receive the token distribution at the end of the token distribution period. Regardless of the model, Gavel ensures that the closing price of the public sale is exactly the same as the opening price of the subsequent AMM, eliminating arbitrage and sniping space at the source. Take the test token IBRL as an example, 70% of its total supply is distributed through a 24-hour public sale, and users can get a proportional amount of tokens when they deposit SOL.

Anti-“Sandwich” AMM**: When the initial distribution period ends, a portion of the token supply (not sure whether it is all or part of the remaining tokens) and part of the SOL raised will be deposited into Gavel’s Anti-Sandwich AMM, where the selection of the amount of SOL will ensure that the opening price of the AMM is in line with the liquidation price of the public sale. Anti-mezzanine AMMs are better suited to channel liquidity and facilitate early price discovery, while protecting traders from front-running attacks.

Temporary Liquidity Management and Liquidity Withdrawal: AMMs are used to channel initial liquidity, not permanent support. When the token trading volume is sufficient, the liquidity can be gradually withdrawn to avoid permanent lock-up loss. LPs in Gavel withdraw a portion of liquidity on a fixed schedule, exchange it for tokens, and then burn tokens (this schedule is configurable). This design not only satisfies the initial liquidity needs, but also avoids the problem of asset retention caused by long-term lock-up, and can also maintain the stability of the token’s value through a continuous deflationary mechanism.

Currently, permission is required to launch a project on Gavel, which allows project parties to adjust distribution parameters according to demand, such as token distribution ratio, distribution mechanism, etc., but participation on the platform does not require permission, and is fully managed by on-chain smart contracts.

Case: Gavel tests the token IBRL

To demonstrate the effectiveness of its mechanism, Gavel launched the test token IBRL. It is important to note that Gavel stated that IBRL is only used to demonstrate how well the Gavel protocol works, and has no actual or future utility. Its distribution and fee mechanisms are as follows:

• Total supply: 1 billion coins.
• 100% of the funds raised and 100% of the token supply are allocated to the Gavel mechanism.
• Among them, public sale: 700 million tokens will be distributed through a 24-hour public sale, and users will receive tokens according to the proportion of their deposits.
• 3/7 of the raised SOL paired with the remaining 300 million IBRL will be injected into the AMM to ensure that the initial price is consistent with the clearing price of the public sale.
• The remaining 4/7 of SOL buys IBRL on an exponential decay schedule and burns, buying 0.01% of the remaining SOL for every 1000 Solana slots (about 6.5 minutes). This process is autonomously managed by on-chain smart contracts.
• The liquidity on the AMM is also reduced according to an exponential decay plan. Starting from 7 days after the public sale, 0.01% of the liquidity is extracted every 2000 slots (approximately 13 minutes), with a maximum of 20,000 extractions. The extracted SOL will be immediately used to directly purchase IBRL, which will then be destroyed. This process is autonomously managed by an on-chain smart contract.
• The team does not keep any IBRL tokens and collected SOL.
• In terms of fees, there are no charges for the initial token distribution. Gavel charges a fee of 30 basis points (0.3%) on AMM exchange transactions.

On the evening of May 21st, Gavel closed the IBRL token sale, with 2,480 participants contributing a total of 30,747 SOL. IBRL’s market capitalization reached $66 million in the early hours of May 22, and IBRL’s market capitalization has now fallen back to around $30 million.

Summary

Gavel helps project parties raise funds at a low cost through innovative mechanism design, striving to achieve fair distribution, eliminate sniper opportunities, and create a fair, efficient, and user-friendly token distribution and liquidity guidance ecosystem through liquidity management and token burn mechanisms.

For project parties, Gavel can maximize fundraising efficiency and avoid value interception by intermediaries; for ordinary users, it provides a fair participation channel, protecting them from price exploitation by bots; in addition, all operations are fully on-chain and auditable, strongly promoting the transparency process in the industry.

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