Minswap $MIN Token Burn

Episode by Peter Bui on December 30th, 2023

The biggest decentralised exchange (DEX) on Cardano is considering a token burn to reduces the total supply of the governance token $MIN.

This particular proposal looks at 3 different options in regards to burning the MIN tokens with the fourth option to keep things how they are.

You can read the full proposal and vote to have it on chain via the Minswap forums.

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Text Transcript

00:00
This is a really interesting proposal around token burning in the Minswap ecosystem. So if you’re providing liquidity on Minswap, if you’re a MIN Token holder, this is a very important one for you to look into in regards to whether or not we should look into burning the MIN Token. This will reduce the entire circulating supply of MIN Tokens and also reduce the amount of time it will take to release all the MIN Tokens into the crypto space.

00:27
So let’s have a look at this proposal here and find out exactly what it’s all about. So this tweet here only came out a few hours ago is provided by Chicken, one of the community members in the Minswap ecosystem. If you look through the article here, it goes through all of the MINonomics, the economics around the MIN token, as well as why a burning would benefit the whole Minswap ecosystem. So let me take you through this so you have a better understanding of what’s all involved.

00:55
So if we have a look at the background of the MIN token, there has been some work around the MINonomics. If you look at this article here, the MINonomics V2, you can look into everything that they’ve gone into exploring around the governance token and what they can do to make it more beneficial for users to hold onto the MIN token itself. I’ll put the links down below for you guys so you can read into that. This was released earlier this year. But if we go through here, we’ll give you a quick summary of what’s been done.

01:24
So there’s a redirect of this fee switch. So people that were staking their min tokens will be able to earn ADA. There’s also a redirect of the batch of fees. So 50% of the batch of fees in the ecosystem. So anytime someone does a trade on Minswap, there is that batch of fee there to ADA batch of fee. Half of that goes back to the DAO Treasury. They’ve also cut down emissions significantly from 670,000 min tokens daily.

01:50
to 335,000 mint tokens daily. So that’s a big drop, almost 50% drop in the daily mint swap rewards. Now the long-term aim of the DEX is not to rely on the emissions from the liquidity pools and reward tokens, but mainly rely on the trading fees of the various pools out there. And there are some really successful ones at the moment. And in Minswap V2, we’ll see a new feature of dynamic fees.

02:19
which will enable LPs to adapt better to market conditions. We’re going to see some really cool features in Minswap V2 and I can’t wait for that to come out early next year. Now here are some of the reasons of why they are looking into the MIN burn itself. So at the moment there is 20.4% circulating supply of the Min tokens and that’s a relatively low amount of tokens in the ecosystem compared to other DEX tokens. And now with the emissions decreasing steadily,

02:46
relying less and less on those Minswap farming incentives. Now the other really interesting here is the amount of tokens that will be released into the ecosystem from farming. So at the current rate it will take approximately 25 years for the MIN token to be completely distributed into the ecosystem. I could be dead by then. That’s a very long time to see the fulfilment and the finality.

03:13
of a successful DEX especially the top tier DEX in the Cardano ecosystem. So if we have a look at how other DEXs have arranged their timelines, the industry averages around nine years. So maybe, maybe aiming for that nine year mark would be a good idea. So this chart here gives you a really good visual representation of all the platforms out there and the time that will take to distribute the tokens. So here we got Wingriders at 2.8 years, we got MuesliSwap 3.6,

03:43
Sunday Swap at 5.3, Curve at 5.7, Quick Swap at 6 years, and then we have Minswap here at 23 years. But reducing this down to a more manageable and industry standard 9 years may be more appealing. So we may see the end of this in the next couple of Bitcoin halvenings and this bull cycle. Now it would be nice to see the distribution of those tokens before I pass away. You know, I’m not going to live forever.

04:11
The last thing they point out here of why community sentiment has expressed that they need to do something about this to fix the tokenomics of Minswap in general. So all of these ideas and sentiments from the community lead to the reasons why the burning mechanism might be introduced. Now, here is some information about the burn mechanisms itself. It will be a one time burn. Significant burn is more effective rather than burning multiple times.

04:39
over a few years. So this is a one-time burn and then they can concentrate their efforts on other things such as protocol-owned liquidity management, CEX listings, that’s super exciting, catalyst voting and MIN rewards and MIN staking and so on and so on. So they’ve got a lot of things to concentrate on other than burning tokens every few months or every few years. Now this is something that I thought was quite interesting. So in regards to burning the tokens,

05:08
It should be scarce for everyone, not just for the farming wards, so community members such as ourselves that provide liquidity to the decks. What about the team? They shouldn’t have that huge allocation left. Let’s burn their tokens too. Great. Now some other points they put out here. No tokens owned by VCs or private investors, which makes this a lot easier. You don’t have to talk to your VCs about this. You can just go ahead and do it based on community votes. Now some other things I wanted to point out.

05:37
Not a topic that we foresee revisiting again in the near future, so we do this once, we do it properly, and we get on with our lives. The open policy ID for the MIN tokens shall not remain as standard, so it may be locked in the future so that no more burning can be done. Further burns, if implemented, should follow the model where burning of MIN is correlated to economic activity on the DEX. So if for some reason the DEX isn’t doing too well or it’s doing really well,

06:07
then maybe we shouldn’t burn, maybe we should release more tokens, whatever it is, it should be flexible in regards to what happens. Now these are the options for voting. So there’s four options for voting. And if we vote yes on this proposal, these are the options that will go through. And now’s the time if you don’t like these ideas or proposals for the vote, you give some feedback now so it can be adjusted. So the first option here, no burns. That is 22.8 more years to get all the tokens out in the ecosystem.

06:36
The next option is to burn 20%, 8% from yield farming and 2% from the Dev Fund. And that’s 15 more years to distribute all the tokens. Now if we go down further, we got a 30% burn, 20%, 27% from yield farming, 3% from the Dev Fund. That equals 12.3 more years. And then the last option here is to burn 40%, overall 36% from yield farming, 4% from the Dev Fund.

07:02
that will reduce it down to 8.9 years until fully used. So some interesting options there. I’ll be voting for this one to be placed as an on-chain vote and put into the hands of the DAO to make a decision. So pretty interesting. Let me know in the comments down below what you guys think and how you may be voting for this one here. I am looking forward to a burn actually for this one.

07:28
I am a liquidity provider for Minswap in general and I do love the protocol. I do love the DEX. I love what the team are bringing out and I can’t wait for V2 where more of the utility comes into play of the Mint token itself as well. So I can’t wait for what they bring out next year in 2024. But first off, let’s get this vote, this Mint burning mechanism passed through and a really good burning option put in.

07:54
to reduce the amount of years to get all those mint tokens out in the ecosystem. If you enjoyed this episode, please consider give me that thumbs up, click subscribe, click that notification bell and I’ll see you in the next video.

 

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