SIP-008: Burn 50 million STFX tokens immediately and up to a total of 150 million STFX tokens as the protocol grows

The maximum supply of STFX tokens was originally 1 billion. To date, 10,377,869 STFX have been permanently burned due to the combination of the reduction of protocol-owned STFX/ETH liquidity (the STFX was burned and the ETH was used to fund the Mothership), penalties from early gSTFX staking withdraws, and protocol revenue that was used to buyback and burn STFX. Additional buyback and burn and burn-to-earn mechanisms have been articulated in the protocol’s roadmap.

Of the 1 billion maximum STFX supply, 230 million tokens are available for community incentive programs and 250 million are available as a Treasury DAO fund, for strategic use for the advance of the protocol with voting by gSTFX holders. In combination, these two funds represent almost 50% of the total supply of STFX. To date, approximately 82,342,567 Community incentive tokens and approximately 114,813,208 DAO Treasury tokens have been emitted from the token contract to the requisite addresses. The remaining tokens will vest to these funds over the next 18 months. Only approximately 4,000,000 million STFX community incentive tokens have been used to date, and no Treasury DAO tokens have been spent.

Together, the community incentive and DAO Treasury funds represent a substantial fraction of the approx 425 million current circulating supply of STFX; the circulating supply is used to calculate the STFX market cap ($30.6 million at the time of writing). However, the functional STFX market cap is actually much lower than this, given the arguably too-large proportion of community incentive and DAO treasury STFX tokens, with no plans on the horizon to spend any of the DAO treasury tokens or the majority of the community incentive tokens.

An under-appreciated feature of STFX from an investment perspective and something distinct from many other DeFi protocols is that governance token emissions or incentives are not needed for protocol functioning. Specifically, because STFX builds on top of other protocols, the protocol does not need to maintain operating liquidity depth (e.g., STFX is not a stablecoin protocol that needs to maintain swap pools including its asset, and STFX itself does not require a liquidity engine to enable leveraged trading). Nor does STFX need to continually incentivize liquidity providers to provide STFX/ETH liquidity for trading of its governance token, due to the smart decision to use a portion of the initial funds as protocol-owned STFX/ETH liquidity, thereby earning trading fees and avoiding the need for STFX emissions as LP incentives, which would otherwise be dilutive.

Thus, STFX tokenomics stands to benefit from a lack of systemic sell pressure that otherwise plagues many other protocols. Without steady-state sell pressure, the numerous mechanisms providing utility for the STFX token associated with the application (and ultimately for either real yield revenue sharing or continued buybacks and burns with protocol profits) are thus strongly positioned to help drive expanding buy pressure. Any emissions from the community incentives fund can be applied very judiciously and cautiously (for example, community members have suggested that we could develop a moderate airdrop campaign to encourage trading and gSTFX locking to help boost early-stage trading volumes and adoption).

Beyond the lack of structural sell pressure for STFX, by building on top of other protocols and by holding sufficient protocol-owned liquidity, a large proportion of the community incentives and DAO Treasury funds could likely be burned without harming short- or long-term growth prospects. In fact, large token burns (i.e. of the excess STFX designated for these funds) would directly reduce the listed STFX market cap and represent exciting promotional events, potentially leading indirectly to STFX price appreciation and more users becoming aware of and checking out the protocol, respectively.

We propose a multi-stage process. Each stage would be connected with marketing campaigns.

  1. Burn 50m tokens from the community incentives fund immediately to celebrate a $40m cumulative trading volume.
  2. Burn 50m tokens from the DAO treasury fund when STFX cumulative trading volume reaches $250m.
  3. Burn 50m tokens from the community incentives fund when STFX cumulative trading volume reaches $1B.

*Burn 2 and Burn 3 will be pursued if the Community will agree that Burn1 has been effective.


I’m all for this change. I think it will great to get some burn mechanics in place early on. Should really help drive the token value in the future. Will also bring on more investors as many look for burn mechanisms being in place before investing.

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I like round numbers. Why not burn 50m tokens at 50m USD trading volume?