🔥Token Burns

Why are there Token Burns?

The Pool Party Protocol includes several mechanisms to manage the supply and demand of $PARTY tokens. One of these mechanisms is token burns, which remove tokens from circulation, reducing the overall supply of $PARTY.

The Pool Party protocol includes several types of token burns that are applied when users interact with the protocol. These token burns are designed to align the incentives of users with the goals of the protocol, while also providing a source of value capture for the protocol's governance and development.

Staking Burns

The first type of token burn is applied when users stake or unstake tokens from Pools 1 and 2. When users stake or unstake tokens, they are charged a 1% fee, which is automatically burned. This fee incentivizes users to think carefully about their decisions to stake or unstake tokens, as they will incur a cost for doing so. At the same time, the fee provides a source of revenue for the protocol's governance and development, as the tokens are burned and removed from circulation.

Pool Hopping

The second type of token burn is applied when users hop from Pool 1 or Pool 2, and vice versa. When users hop from one Pool to another during the lockup period, they are also charged a 1% fee, which is automatically burned. This fee incentivizes users to carefully consider their decisions to switch Pools, as they will incur a cost for doing so. At the same time, the fee provides a source of revenue for the protocol's governance and development, as the tokens are burned and removed from circulation.

Favor Purchases

The third type of token burn is applied when users buy Favor. As we saw in the previous tabs, Favor can be used to influence a Pool's win rate and increase the potential rewards for users who stake in that Pool. However, to buy Favor, users must pay a certain amount of $PARTY tokens according to a VRGDA. These tokens are automatically burned, reducing the overall supply of $PARTY.

Motivation

By including these types of token burns in the Pool Party protocol, we have created a system that incentivizes users to interact with the protocol in ways that benefit the overall ecosystem. At the same time, the token burns provide a source of value capture for the protocol's governance and development, which can be used to fund future development and improve the protocol over time.