From Token Burn to Lock Instrument
While DeFi is developing, structural shortcomings, such as the instability of liquidity and revenue, are becoming more visible. So, DeFi 2.0 projects seek to use new approaches to ensure the stability and development of the ecosystem, which go far beyond just burning tokens.
There are other tools that DeFi projects consider to provide stability, manage risks, and encourage users' participation, such as:
- Smart management of tokenomics;
- Usage of lock instruments;
- Decentralized funds;
- Automatic backup protocols.
Integrating a token lock mechanism, meaning BSW Investment Pool, will encourage participants to hold BSW tokens for a certain period, ensuring greater price stability and eliminating short-term speculative behavior. Also, creating an innovative protocol-owned liquidity (POL) model at Biswap will address the liquidity instability.
Like any growing project, the Biswap DEX prioritizes new tools to power up its ecosystem and native token value. We aim to reduce BSW circulation and create the protocol's liquidity, which meets the DeFi 2.0 concept.
Burn as a tool for reducing the total supply is effective when more tokens are burned relative to the tokens that enter the market through emission. The current BSW token burn reduces BSW circulating supply but does not affect the liquidity of the DEX.
Therefore burning contradicts our aim to reduce BSW circulation and create the protocol's liquidity (POL), which entails the goal of moving away from inflationary models to a self-sufficiency one.
Reducing the BSW emission by launching the BSW Investment Pool and pausing a regular BSW token burn (sending tokens to the dead address) is necessary to change the current state. This burning pause will continue until BSW emission gradually decreases to 0. Once BSW gets to the point, turning the BSW burn mechanism back will be efficient, directly reducing the token's total supply.
In the case of executing a burn along with token minting enabled, the circulating supply grows faster than the total supply decreases, ultimately leading to this model's inefficiency at the current stage of the project's development.
Instead, the best option is to reduce the circulation supply (part of the total supply) by using token lock mechanisms (BSW Investment Pool) and building deflationary models based on Real Yield and Protocol Owned Liquidity. Instead of burning the intended tokens, which causes token inflation, these instruments solve the problem of token value dilution.
Biswap reserves the right in its sole discretion to change or amend the burning schedule at any time and for any reason.