Disclaimer: Participation in any SNS is at your own risk.
A decentralization swap is the process by which an SNS DAO becomes decentralized and where users can purchase SNS tokens by participating. After the swap, each participant receives a basket of neurons. These neurons hold SNS tokens and therefore a share of the DAO's voting power. It is one of multiple ways you can get SNS tokens for a particular SNS DAO.
Where does a decentralization swap take place?
A decentralization swap is run entirely on chain. The swap is initiated by the NNS. Through this approach, every aspect of the swap, from its initiation to execution, is completely decentralized and not controlled by any centralized entity. Even the decision to create the SNS and its token is made by the NNS (a DAO) and not the developer in order to avoid undesirable legal implications for the developer who wants to decentralize their app.
A decentralization swap follows a list of configurable parameters:
- The amount of SNS tokens to be sold
- The amount of ICP a decentralization swap must receive to be successful. If the goal is not reached, participants get their ICP refunded and the swap fails.
- The maximum amount of ICP a decentralization swap can receive before it concludes. If the maximum ICP is reached, the swap is over and the control of the dapp is turned over to the token holders. As the number of tokens to be sold is fixed, it is amount of ICP raised that determines the initial price of the SNS tokens.
- Minimum and maximum commitment of ICP per participant
If I am asked to send ICP to an address to participate in a decentralization swap, what should I do?
If you want to participate in the swap, do not send ICP directly to addresses! An SNS swap will never initiate contact with you, e.g. via chat or email. You will never be asked to manually enter an ICP address to participate in a decentralization swap. If you find yourself entering an ICP address to participate in an SNS swap, then STOP. Your swap address is specific to your identity, and you should only interact with that address when participating in a swap through the NNS or other ICP based dapps that support the swap like ICLighthouse.
What do I get from a swap?
If the decentralization swap is successful, you will receive a basket of neurons that hold your SNS tokens. Depending on the SNS configuration, the basket may contain multiple neurons, each with a different dissolve delay. You can use your tokens to participate in governance or, once neurons have dissolved, sell the liquid tokens on an exchange.
The number of SNS tokens you receive, and the price paid for each token, depends on the amount of ICP raised during the swap. The more ICP raised, the fewer SNS tokens you receive, however their price will be higher.