As a seasoned crypto investor with a knack for spotting promising projects and understanding their underlying mechanics, I find Rune Christensen’s proposal for strictly deflationary tokenomics intriguing. Having witnessed the crypto market’s volatility firsthand, I appreciate the emphasis on long-term supply reduction and stability that this model promises.
Rune Christensen, a co-creator of Sky (previously known as MakerDAO), plans to submit a suggestion for a “completely deflationary monetary system” aimed at stopping the issuance of tokens and reducing the overall supply.
As a researcher, I’m focused on ensuring that token emissions don’t take place under regular circumstances, irrespective of whether the primary token remains as Maker (MKR) or transforms into SKY according to the latest branding.
The revised token setup will guarantee that the selected token is backed by a prolonged decrease in its circulation and an incineration system, which aligns with the initial economic structure of MakerDAO’s token model.
Under this fresh plan, we’ll build upon the initial structure by emphasizing the idea of reducing supply further, with the aim of achieving more balance and lessening inflation rates.
Strictly deflationary tokenomics
Christensen’s idea primarily focuses on establishing a “destructive-only” deflationary system, where the fundamental token stock is gradually decreased over time by means of a consistent burning process.
Generally speaking, under regular circumstances, there won’t be any new tokens produced. This means that the total number of tokens would decrease over time, except for one scenario: Extra tokens could be minted only in situations of extreme necessity or emergencies.
According to the co-founder of The Sky, an “emergency” situation might potentially threaten the solvency of stablecoins like USDS and Dai (DAI), such as when there’s a lack of adequate collateral to meet debt obligations. This means that if the value of the assets supporting these digital currencies drops below the amount of debt they are obliged to cover, it could lead to insolvency.
Value through rewards
Alongside his proposal for a deflationary model, Christensen further suggests a system of rewards aimed at encouraging engagement and enhancing the token’s worth.
Regardless if the main token stays as MKR or changes to SKY, the reward mechanism will enable token holders to garner “Star Token Rewards,” including Spark SPK, via the activation process.
The co-founder noted further that those actively involved in governance, utilizing the Seal Engine, could also expect enhanced rewards, including both Star Tokens and USDS rewards.
Upcoming governance vote
Christensen’s plan comes before the forthcoming governance vote scheduled from November 11th to 14th. During this period, participants will be voting on whether MKR or SKY should act as the primary token.
After contemplating a reversal, the community decided to cast a vote following their doubts about returning to their initial creator’s name, known as Maker, due to unfavorable responses and misunderstandings that arose from their rebranding in August to Sky.
In a recent post on November 4th, Christensen expressed that this new proposal could help the ecosystem progress by providing a clear pathway for the future development of the protocol, enabling it to concentrate on strengthening its core elements.
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2024-11-04 17:03