Why do some buybacks feel like “taking off your pants to fart”?
If a project burns 10 million tokens, but at the same time unlocks or mints 100 million more
it sounds like a burn, but in reality there’s no deflation at all.
It’s just using a “good news” headline to mask sell pressure.
For example, this year’s $FLOW
burned more than 50 million $FLOW ,
which looks like a very bullish move.
But this round of burns happened to deal with abnormal supply created after a fake-coin incident, not tokens that were normally circulating in the market.
At the same time, $FLOW continues to mint tokens to pay validator rewards.
Burning on one side while minting on the other means the net issuance rate is still close to 5% per year.
Of course, there are healthier examples too.
In August this year, $CAKE burned 2.746 million $CAKE tokens and also added 674,000 tokens.
With this basic math, I believe everyone can work it out:
after accounting for the additional minting, the net amount burned is about 2.072 million.
This also marks the 36th consecutive month that $CAKE achieved a net supply decrease.
There’s also $LIT that I mentioned earlier.
And Lighter will take its earnings to buy back $LIT in the market, then permanently burn the tokens it buys.
However, by the end of this year, there will also be linear unlocks for both the team and investors.
Whether the burn speed can keep up with (or exceed) the unlock speed is still an unknown.
So when you see the words “burn,” don’t immediately get overly excited 😂
If they’re minting and burning at the same time,
then it’s better not to burn at all.
If a project burns 10 million tokens, but at the same time unlocks or mints 100 million more
it sounds like a burn, but in reality there’s no deflation at all.
It’s just using a “good news” headline to mask sell pressure.
For example, this year’s $FLOW
burned more than 50 million $FLOW ,
which looks like a very bullish move.
But this round of burns happened to deal with abnormal supply created after a fake-coin incident, not tokens that were normally circulating in the market.
At the same time, $FLOW continues to mint tokens to pay validator rewards.
Burning on one side while minting on the other means the net issuance rate is still close to 5% per year.
Of course, there are healthier examples too.
In August this year, $CAKE burned 2.746 million $CAKE tokens and also added 674,000 tokens.
With this basic math, I believe everyone can work it out:
after accounting for the additional minting, the net amount burned is about 2.072 million.
This also marks the 36th consecutive month that $CAKE achieved a net supply decrease.
There’s also $LIT that I mentioned earlier.
And Lighter will take its earnings to buy back $LIT in the market, then permanently burn the tokens it buys.
However, by the end of this year, there will also be linear unlocks for both the team and investors.
Whether the burn speed can keep up with (or exceed) the unlock speed is still an unknown.
So when you see the words “burn,” don’t immediately get overly excited 😂
If they’re minting and burning at the same time,
then it’s better not to burn at all.