[PROPOSAL] Anti inflation mecanism

Sanctum Governance
1

Hey, I’m Dave.
After reviewing the available information, it appears that $CLOUD currently lacks specific anti-inflation mechanisms, such as token burning or strict supply limits.

The existing token distribution is as follows:

  • Total Supply**: 1 billion tokens.
  • Initial Distribution:
    20% unlocked at launch:
    10% allocated for the initial airdrop.
    10% for providing liquidity in the launch pool.
  • Strategic and Community Reserves: 41% of the supply, intended to foster the growth of the Sanctum ecosystem.
  • Team and Investor Allocation: 38% of the supply, with a 3-year vesting period and a 1-year cliff.

While this distribution suggests a gradual release of tokens to prevent immediate oversupply, there are no explicit measures in place to control long-term inflation.

To address this gap and enhance the value of $CLOUD, the following strategies, inspired by successful projects, are proposed: (please note that I’m not proposing nothing “new” but replicating strategies that are proven to work in other projects)

  1. Token Burning Mechanism: Implement a systematic token burn process to reduce the total supply of $CLOUD, thereby increasing scarcity and potentially boosting its value. For instance, Binance conducts quarterly burns of its BNB tokens, utilizing 20% of its profits to repurchase and burn tokens, effectively decreasing the circulating supply.
  2. Buyback and Burn Strategy: Allocate a portion of the project’s revenue to repurchase $CLOUD tokens from the open market and subsequently burn them. This approach not only reduces supply but also demonstrates the project’s commitment to enhancing token value. Projects like MakerDAO have employed similar strategies, using excess funds to buy back and burn their tokens, positively impacting their market value.
  3. Staking with Controlled Rewards: Introduce a staking program that allows $CLOUD holders to lock their tokens in exchange for rewards. It’s crucial to calibrate the reward rates to prevent excessive token issuance, which could lead to inflation. Ethereum 2.0, for example, offers staking with rewards that adjust based on the total amount staked, maintaining a balance between incentivizing participants and controlling supply.
  4. Transaction Fee Burns: Incorporate a mechanism where a small percentage of each transaction fee is burned. This continuous reduction in supply can help counteract inflationary pressures. Ethereum’s implementation of EIP-1559 includes a similar feature, where a portion of transaction fees is burned, contributing to the reduction of ETH’s circulating supply.

By adopting these strategies, $CLOUD can effectively manage its token supply, control inflation, and enhance its value proposition to investors and users alike.

6 Likes
2

Hi Dave.

Good and important topic you raise.

I agree with you and keep looking to jupiter which i see as a good project like ours. (please correct me if im wrong) They saw that their tokenomics was not optimal and took an active approach to fix it, which i feel they got community support and in fact it became a bullish catalyst. I am generally positive for staking/locking up the tokens for certain benefits, with new regulations around the corner i feel the staking option is obvious.
In general i think more or less useless governance tokens will/should turn into revenue sharing tokens.
The longer the lock up the higher the rewards could be something to think about, if the rewards are a certain percentage, fee sharing, airdrops from new collaborations or all at once like the kinder egg;)
Regarding buy backs i am not too sure about how that will benefit the community or anyone besides the price action
Burns i have a negative approach towards.

A further clarification of what sanctum is and clouds role in it would also be important imo, as i keep talking with crypto OGS not having a clue about the platform or the token.

CT

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My intention is to create scarcity. Scarcity creates value, ergo, price goes up. If there is a lot of tokens circulating, that’s inflationary and price goes down.

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Burning Mechanism ! yes !
Buyback ! Yes !
Staking Reward ! YES !! ain’t no other better methods to keep the community and the token price stonk with monehhh ! Just look at $usual for example with their rewarding system :laughing:
Tx fee burns is a nice touch of strategy too but not as important and urgent to implement as the above 3 IMO.

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Thanks a lot skicia! I’m glad you found it a good idea. Scarcity is key to make a crypto/token valuable!

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This token is not inflationary since it has a fixed supply. Indeed what you are describing is a mechanism to drive scarcity, but inflation is not part of the tokenomics for CLOUD.

I’m can’t say I care for creating artificial scarcity just to drive up the price of the token. The team will build use cases for CLOUD and demand will be created from that.

Artificially driving scarcity while the team is building products for new users to get involved in sanctum could create a barrier to entry And result in fewer users when these products are released.

While I can understand your desire to increase token value, I don’t think this proposal is aligned with sanctums core values and future goals.

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