Today we’ll feature some thoughts from our Bluest developer around our Tokenomics.
This musing is entitled : The Fight Against Inflation
The biggest enemy to a successful yield farm project is inflation!
As an active farmer myself, I know that high yield can’t realistically be sustained without a close, watchful eye and constant tweeks from the projects team. ‘Inflation is the enemy of yield farmers, while increased and sustained TVL is its best friend’.
Layered Farming:- When layered farming was first introduced by Goose Finance, the layer tokens, GGx, didn’t have any distinctive purpose and in turn no true value. Each layer’s tokenomics weren’t sustainable and provided zero value within and outside of the layer creation or the few EGGs that were burned. This issue has been addressed by Blue Finance by providing value to every token within each layer, and interoperability between layers throughout our platforms ecosystem.
Buybacks:– Its benefits are limited within the scope of the tokenomics. It is merely a bandaid used to pump the price of the token. That said, this tool can cause severe pump & dump, as investors anticipate the buyback and take advantage of it potentially depleting the projects TVL. This is by far one of the worst methods if used exclusively to combat inflation.
Here are several problems that may arise:
Fees from native tokens cannot be used solely for buy backs. Native token fees and deposits hold a large position in the health of the TVL.
A Farm produces more than 4% per day so when a buyback is announced by the project team, this can be interpreted as an opportunity for dumpers to profit and exit, depleting the TVL further.
Vaults — similar but different to buybacks need constant funding to stay solvent and can put the projects team under pressure unless there’s another source of income. Sometimes, the source is another project’s token; projects donate their tokens for promotional purposes which can infuse the partnering project with income. This is a tool we plan on using in the future with our own flare.
Our solution to combat inflation in our project is to utilize a combination of techniques. A token’s price is determined by supply, selling pressure, and demand. Endless supply can’t be sustained unless we have endless demand like Ethereum.
1. One of the methods we used to combat inflation early on in our project was to reduce
the reward per block. By reducing the reward per block, it also reduces the APR.
For example , $Blue is already 1 month old but still has less than 0.25M supply when it should have minted nearly 1M.
How to calculate the APR:
APR = price X block reward emission X (My share % in the pool) X (Allocation point of the pool/ Sum of allocation point of all pools)
Since the APR is affected by the lowered emission rate, we don’t automatically reduce it but manually do it to preemptively OR reactively act in accordance to market conditions. As a result, this creates the most positive environment for our ecosystem.
This same deflationary concept is applied to all the other subsequent layer tokens
2. Another method we use is to create “burning” pools within specific layers. It burns
15% to 20% of the deposited tokens in the pool further reducing its circulating supply and conversely, increasing the value of the remaining tokens.
Use Case For $BLUE, $GREEN and $PURPLE.
Is the color that represents ‘finance’ in many countries, the color of trust. This is definitely our core token which will be used in ‘almost’ every situation and on every layer. $BLUE- is also coming to the end of it’s inflation period, the first among all the tokens.
Every token has its role to play within our palette finance.
The color of the greedy goblin will be the core token for the betting system. We have many betting systems in the works within our ecosystem similar to Paint Bucket and SketchBox with new features around the corner. $GREEN holders will have a unique advantage when these features are deployed.
is the currency of the NFT world within our ecosystem. These NFT’s will not only be beautiful but have unique power over the pools and will be essential to maximize each farmer’s profits.
What’s On the Horizon?
Our next layer will implement a delegate farming feature for non-native token pools. Delegate farming is a way to use dormant staked LPs for earning external tokens. Those dead pools which everyone hated so much will start to earn profit for the holders. There will be an airdropped pool for the ‘royal holders’, they will receive a share of these earned tokens, this guarantees a continuous source of income to distribute to our token holders.