Within the CTPSB project, there is a small under project that burns CTPSB tokens on a weekly basis. It works as follows:
The account @ctpsb.pal is delegating out it's Hive Power to the @liotes.voter and for that gets daily dividends in the form of LEN tokens. At the end of the week these LEN tokens are used to purchase CTPSB tokens that will be burnt.
This burning mechanism has a weekly income that is used directly to burn tokens. However, there is a weakness to it because the income is kind of unchanging in terms of Hive value but the CTPSB token is going up in value over time. This means that the more we go forward, the less CTPSB tokens will be burnt every week. A fresh income source would be needed to constantly burn a similar amount of CTPSB tokens.
Making it scalable
For a couple of days, I've tried to come up with a solution to make this burning scalable. The idea is that over time, the amount of CTPSB burnt every week will remain constant or even increase, even if the price of CTPSB goes up. Unfortunately, there is no income source that we could tap into to make this true but I came up with a solution all the same.
Why burning tokens is important?
The value of CTPSB is defined by the Hive Power on the account @ctpsb divided by the number of tokens in circulation. So when we reduce the number of tokens, we actually increase the value of CTPSB and the return for investors. If we manage to increase the burn rate, the APR of CTPSB will actually climb faster than it would by adding additional Hive Power.
The solution
The solution that I came up with is the following. The income generated with the delegation of Hive Power will be used not to buy CTPSB tokens anymore. Instead, we will use this money to build a liquidity position in the pool LEN:LENM. When doing that, we will get a return of about 20 – 30% APR that is paid out partially in CTPSB tokens. So we will simply burn our CTPSB dividends from this liquidity position. The other tokens that we will get, will be used to increase this liquidity position over time.
Basically, this position will increase on a weekly basis and hopefully it will grow faster than the overall liquidity in this pool. This means that we would get an increasing reward and therefore we would be able to burn more and more CTPSB tokens.
The transition
At the moment, we managed to burn between 0.2 and 0.3 CTPSB per week. For the next weeks, we will burn a steady 0.3 per week from our token stock. During this time, we will use the income from delegation to build the liquidity position in the pool. Once the return from this liquidity position is big enough, we will burn the income from the liquidity position.
It will probably take a couple of months until we are at a similar burn level but once we reach it, little by little the burning rate might increase.
The positive side effect
The more CTPSB tokens we burn, the higher the APR for CTPSB will be. Since the liquidity pool, where we will build our position, pays its dividends in the form of CTPSB, by pushing the APR of CTPSB, we will actually increase the return of this liquidity pool and thereby also our return. The effect will be rather small but still, it's a kind of win-win.
Learn more about the CTP Swarm Booster:
Posted Using InLeo Alpha