> For the complete documentation index, see [llms.txt](https://daofair.gitbook.io/doc/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://daofair.gitbook.io/doc/daofair-use-case.md).

# DAOFAIR Use Case

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**1. Use case:**

Suppose you are a blockchain developer and want to build a community-driven project. You can issue 10 million tokens, of which 1% or 100 thousand is for yourself. The rest (i.e. 9.9 million tokens) is distributed to the community and let’s say you set the token price to $1. If you want to create a liquidity market for all 9.9 million tokens on an AMM, you need another $9.9 million as the bid-side liquidity to do it, which is obviously a huge amount of money that you probably don’t have, and therefore this project becomes infeasible.

Your alternative is to create a simple AMM pool with much fewer tokens and less liquidity in it, say $1,000 and 1,000 tokens, but if someone wants to invest $100,000 in your project token, he will have to pay $100,000 and receive only 1,000 tokens in return, which amounts to $100 per token, 100x the market price you set! This is, of course, not desirable, and this market is definitely not an efficient market.

However, you can choose to build a DAOFAIR Vending Machine with these 9.9 million tokens at an initial price of $1 and with k value set to 1 (which means the pricing curve is a bonding curve, as discussed above). If a community member is bullish on your project and buys 100,000 tokens, his average price is only $1.005 per token! Much more desirable.

#### 2. Use case:

You are a project team with a need to maintain and manage the price of your token. DAOFAIR Vending Machine can help you buy and set up liquidity in a flexible manner to achieve your objectives.

Let us use an algorithmic stablecoin that is meant to be pegged to 1 DAI as an example. Call the token X. If X’s token price dips below 1 DAI, then you, the project team, need to raise bid-side liquidity as soon as possible to counter the selling pressure to avoid the death spiral, a vicious cycle where tokens are dumped continuously as the price decreases. If the dumping can be stopped at 1 X = 0.9 DAI, then you will instill confidence in your project’s investors and users, convincing them that you can be trusted to maintain the peg. Conversely, if the dumping stopped at 1 X =0.5 DAI, the consequences could be catastrophic — the lack of liquidity might have already triggered an irreversible death spiral.

So here’s what you can do. You can use DAOFAIR Vending Machine to set up a DAI-X pool, set the initial price to 1 X = 1 DAI, and set k to a very small value, say 0.01. In addition, you incentivize liquidity providers to deposit their LP tokens into this pool with rewards in X. This way, you can ensure ample bid-side liquidity that is allocated near 1 X = 1 DAI, which is much more capital-efficient funding than traditional AMMs.

Even if it’s not an algorithmic stablecoin project, you can still raise funds for your token at key support price levels with DAOFAIR Vending Machine, coupled with reward incentive program to encourage liquidity provision.


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