Smarts INDEF (Inflation-deflation) Economy
Sustainability is a key element that has become a major problem for many crypto projects to express over time. While product development and accomplishment in a system can be a true statement of genuine success, however, the price value of the token economy is a social way of how crypto participants have truly measured success.
Different factors can contribute to the price movement and value of a token, notable factors include;
- Speculative trading and activities.
- Inflation rate.
- Token Availability.
Healthy speculative behaviors are cultivated with strong fundamental tokens, inflation rate defines how a token is easily diluted and determines the availability of such token where both factors can have a direct relationship with price.
Building products with high fundamentals, adopting a deflationary model with vesting schedules are some ways these downsides are tackled.
Nevertheless, most DeFi operations revolve around an inflation model due to the need to continually reward participants.
Incentives are an important part of the current settings, but it doesn’t always have to take an inflationary approach.
Introducing Smarts Inflation-deflation (INDEF) Token Economy.
Smarts will adopt an INDEF economy model which is triggered in factor-determining phases.
Shortly after the project token listing, a 3 months inflation phase will kick-in to reward early participants of the network's various products. This phase will offer some attractive earnings and APY that is decent enough with known averages.
Inflation Phase Breakdown, Reward Distribution, and Allocation
The inflation phase represents a period where SMAT tokens allocation of the reward pool is disbursed to farmers.
When the 3 months inflation phase is over, the deflation phase kicks-in and is maintained owing the parameters that keep it rooted continually function or are met.
In the event these parameters are not met, the inflation phase will come back into the fray again with adjusted structures, lock-time, and earnings. Both phases will take a cyclical turn of events.
Deflation Phase Breakdown, Reward Distribution, and Allocation
Smarts deflation model is a thought-out experimental concept with an approach to limit continual dilution of the circulating supply. It takes on and is built upon the benchmark fee model but with a new form of strategy and execution.
To effect this model variety, a 1% base fee is attached to all trades of SMAT and distributed in precepts as follows;
- 0.4% of the fee will automatically distribute proportionally among all token holders.
- 0.2% will be allotted for buybacks.
- 0.3% for supplementary liquidity addition.
- 0.1% will be assigned for further project developments, maintenance, and improvements.
The above represent the standard and can be adjusted with the set-in of each phase but more likely to be adopted at periods of inflation.
Deflationary distribution will assume the following format;
- 0.4% distribution among all holders of SMAT.
- 0.2% for buybacks.
- 0.15% will be assigned for staking rewards.
- 0.15% allocation for liquidity mining rewards.
- 0.1% for developments.
Governance can effect changes or readjust this distribution once a consensus is reached.
Factor-determining Requirements For Each Phase Induction
The first deflation phase will kick in immediately after the Smarterer liquidity mining program completion.
Since the deflationary model is tightly knitted to fees. Higher daily trading volume is very essential to sustain the phase and keep the incentives and reward attractive enough for participants to keep engaging.
That is,
Deflationary phase ≈ Trading volume
(where ≈ is "dependent").
This demands traders are incentivized to trade the upside of fees and keep the volume healthy.
With this, the Top 100 traders will be rewarded after every 30 days. This reward will come from 50% buybacks of SMAT tokens where the other half is burnt.
Thresholds
The deflationary phase is fee-dependent and requires the creation of a volume floor over which the phase can function.
A daily trading volume of $500,000 on all listed Dex like Uniswap denote the threshold for the deflationary phase continuity.
Volume under this threshold over 7 days will automatically trigger the inflation phase. When the volume rises above $500,000 and is sustained for 3 days the deflation phase sets in back again. The phases are activated in cycles when the threshold of either side is triggered.
1% of $500,000 is $5,000 and is decent enough incentive that compares with the daily averages of notable similar yield farming platforms.
$5,000 over 30 days = $150,000
Let assume a daily volume of $1 M with a turn-out of $300,000 monthly and even more with higher volumes.
0.1% of the total fee or 50% of buybacks goes to reward the Top 100 traders. Higher trading volume equates more reward for traders. This creates a win-win situation for all involved.
Governance will play an important role to ensure this model is sustained and adjusted accordingly.
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