Raredrop
Bootstrapping is the ignition event where rare, illiquid, and difficult-to-price real-world assets become tradable, composable, and yield-bearing on-chain. It's the moment a curated collection of authenticated RWAs meets DeFi liquidity—transparent, auditable, and programmatically accessible.
The design goal is straightforward: transform physical or financial assets into liquid on-chain representations that interact with DeFi primitives (AMMs, lending markets, yield optimizers) while preserving authenticity, auditability, and compliance. Bootstrapping achieves this through a controlled, market-driven launch mechanism that establishes initial liquidity and price discovery.
The mechanism
Bootstrapping follows a four-phase process that bridges the gap between off-chain assets and on-chain markets:
1. Collection creation
The issuer acquires authenticated assets (luxury watches, collectibles, real-estate, etc) and mints the corresponding on-chain tokens. The collection defines the economic scope of tokenization—what assets back the tokens, how supply scales, and what pricing mechanisms apply.
Documentation and custody: The issuer must provide complete documentation about the assets being tokenized: authentication certificates, provenance records, custody arrangements, and any relevant legal or regulatory documentation. This ensures transparency and auditability—all information is on-chain or verifiably linked, enabling participants to verify what they're buying.
Issuer identification and whitelisting: The issuer must provide identification and credentials to demonstrate reputation and legitimacy. The protocol maintains a whitelist of approved issuers who have passed due diligence checks, ensuring that only reputable parties can launch collections. This permissioned issuance layer protects participants while maintaining the permissionless trading that follows.
2. Raredrop (initial offer)
The newly issued token is listed at a fixed price equal to the acquisition value of the underlying assets on a CL AMM (concentrated liquidity automated market maker). During this window, the token's issued supply is the only liquidity in the pool, creating a controlled launch environment where early participants can acquire exposure at the objective acquisition cost.
Bootstrapping fee: When participants purchase tokens during the Raredrop, they pay the acquisition price. The protocol takes a one-time bootstrapping fee (typically 0.5–2.0% of the primary raise) from the issuer's proceeds to cover setup costs—legal structuring, vault onboarding, initial audits, and attestation infrastructure. This fee is split between the protocol treasury (for facilitating the launch) and the issuer (to offset upfront costs). It's only charged once during the initial offering, never on subsequent minting or trading.
Example: If assets were acquired for 5,000 each, buyers pay 50k), the issuer receives 50k fee. The buyer's cost is transparent: exactly the acquisition value.
Fair pricing: The Raredrop price is anchored to acquisition value, not market speculation or hidden markups. This ensures that initial participants acquire tokens at a price that reflects the real cost basis of the underlying assets, creating a fair launch mechanism that aligns issuer and participant interests. The bootstrapping fee covers unavoidable coordination overhead but is taken from the issuer's side, not added to the buyer's price.
For comprehensive information about bootstrapping fees and how they fit into the protocol's overall economic model, see Fees & Yield Routing.
Transition conditions: The Raredrop transitions to permissionless trading when on-chain conditions are met:
- Sufficient distribution: a minimum percentage of the issued tokens must be sold (ensuring broad distribution and initial liquidity depth)
- Time threshold: a minimum time period must have elapsed (ensuring adequate opportunity for participation)
- Issuer reserve deployment: the issuer's liquidity reserves must be deployed into the pool (confirming market-making commitment)
These conditions ensure that the collection has sufficient initial distribution, adequate time for market participation, and committed liquidity before opening to unrestricted trading. The transition is programmatic and transparent—conditions are encoded in smart contracts, removing governance bottlenecks.
Participation constraints: Collections can require participants to immediately provide LP (tokens + stablecoins) upon purchase. This transforms early buyers into market makers, ensuring that initial capital supports liquidity depth rather than extracting short-term profit. Participants benefit from discounted acquisition prices but commit to supporting the market for a period of time.
Issuer liquidity reserves: The issuer reserves a percentage of the issued assets and funds raised during the Raredrop to provide liquidity during the trading phase. By default, this is 10% of the assets and 10% of the funds raised (denominated in a USD-stablecoin). These reserves ensure that the issuer can actively market make post-launch, maintaining tight spreads and sufficient depth for composability with other DeFi protocols.
Raredrop configurations
The Raredrop is modular and programmable, allowing collections to adopt different configurations based on their asset profile, audience, or regulatory posture. Collections can customize transition conditions, access rules, and participation constraints to shape how the launch unfolds and who can participate.
All parameters are encoded in smart contracts and execute automatically—no governance votes, no admin keys, no discretionary decisions. The configuration is transparent and verifiable on-chain, creating predictable and fair launch dynamics.
Example: Anchored early participation with auto-LP
A collection might launch its Raredrop at an acquisition-anchored price of $120k per asset, while the anticipated secondary market equilibrium is closer to $155k. This creates an opportunity for early participants to acquire tokens at a discount relative to expected trading prices—but with a catch.
Participants can purchase up to $1k of tokens each, but must immediately provide LP (tokens + stablecoins) into the same pool. This design:
- Promotes broad participation while capping whales
- Instantly recycles capital into on-chain liquidity
- Ensures early buyers help stabilize the market rather than extract short-term profit
It's an incentivized distribution structure that blends fair launch dynamics with strong post-launch liquidity health. Early participants benefit from the discount, but only if they commit to supporting the market for a period of time. This aligns incentives between early buyers, later participants, and the protocol itself.
3. Liquidity activation
After transition conditions are met, the same pool becomes the live trading venue—no migration or relaunch required. The transition is seamless: no new contracts, no liquidity fragmentation, no governance votes.
Issuers typically deploy liquidity reserves (e.g., 10% of assets and 10% of raised stablecoins) into the pool to deepen liquidity. This ensures sufficient market depth and composability with DeFi primitives like lending, vaults, and derivatives. The pool that launched the collection becomes the permanent trading venue.
4. Active market stewardship
Once trading is permissionless, issuers are expected to act as active market makers—rebalancing liquidity, maintaining healthy spreads, and supporting long-term price discovery. This isn't passive custody—it's programmatic stewardship that ensures the token maintains tight spreads and sufficient liquidity for composability with other DeFi protocols.
This transforms bootstrapping from a one-time event into an ongoing stewardship process.
Why it matters
Bootstrapping isn't just a launch—it's a trust-formation event. It defines how real-world value first becomes programmable, how fair value is established, and how early liquidity is structured for sustainable market growth.
By encoding transparency, price discipline, and controlled participation, bootstrapping ensures that DeFi markets for real assets begin on credible, auditable foundations. The mechanisms described here—fixed pricing, transition conditions, configurable parameters, and auto-LP incentives—work together to create markets that are fair from day one and sustainable for the long term.
Recap on Collection models
Collections are the foundation of tokenization. The collection model determines how tokens map to assets, how supply scales with acquisitions, and what pricing mechanisms ensure prices reflect real asset value.
Rarity supports two issuance models, each optimized for different asset classes, portfolio structures, and trust requirements:
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Asset-backed token: fixed issuance per asset, ideal for equivalent items where assets are economically interchangeable (e.g., investment-grade FP Journe watches). Supply scales transparently with item count, and mark-to-truth auctions ensure spot prices converge to fundamentals.
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Fund with variable issuance: NAV-based minting, ideal for heterogeneous portfolios or evolving collections where assets have varying valuations. Minting aligns with contributed value, producing fund-like behavior that adapts to diverse asset mixes. Requires higher trust on the issuer for NAV inputs and valuation processes.
The choice of model shapes how the collection interacts with DeFi primitives—from spot trading and lending to futures and yield optimization. See the Collections page for a comprehensive overview, then dive into detailed mechanics, examples, and tradeoffs for each model.