Merlin Burn And Buy Back Strategy
De-Fi protocols are powered by their native cryptocurrency. Depending on the tokenomics of each platform, balancing supply and demand can be complicated. There are lots of variables that have to be considered. With the right team, it’s doable.
The Merlin Tokenomics In A Nutshell
Every blockchain-based project that has a native token provides a tokenomics on how that cryptocurrency is to be managed.
Merlin Lab is your typical yield aggregator with a native token, MERL.
There’s no maximum supply, so an infinite number of MERL can be minted. As long as supply is managed properly, then it’s no problem.
The interesting thing is MERL minting doesn’t follow the usual quantity/block that’s commonplace among De-Fi protocols. MERL is minted based on assets deposited in the vaults. This is then distributed among stakers.
Managing MERL Supply
As previously mentioned, a token with no cap on its supply can either make or mar the platform depending on how it’s managed. This is more about managing inflation than anything else.
To achieve this, Merlin uses the regular buyback and burn, which is a norm among De-Fi protocols that have no maximum supply.
That brings up the next challenge: getting the funds for such a venture
There’s a burn contribution that’s collated using 0.3% to 0.9% of the non-MERL rewards of vault users. This contribution is divided into two equal parts. One portion is used to buy back MERL from the open market and the purchased MERL is burned.
Merlin Burn And Buy Back Strategy
Buyback and burn events might be helpful, but they are never enough. A visit to several De-Fi protocol sites confirm this assertion. So it’s no surprise to see Merlin add the lottery to its deflationary measures.
The second portion of the burn contribution is added to the lottery pool, making it enticing enough for people to want to take their chances.
At first glance, you might ponder how a lottery helps check the supply of a De-Fi protocol’s native token. Well, participants buy a ticket using the MERL on Merlin Lab. The funds generated from the ticket sales are added to the pot. While some winners emerge, about 20% of the MERL in the lottery pool is burned.
The deflationary measures do go a long way in sustaining the balance between supply and demand.
Minting of the MERL token also tends to reduce over time. At the launch date, 1 BNB deposited in the vault mints 30 MERL tokens. But that number has since fallen to 25 MERL/BNB, and it’s expected to drop further in the future.
With Merlin Lab consisting of innovative team players, more deflationary measures will be added to ensure inflation has nothing on MERL.
Bottomline
The Merlin tokenomics isn’t so different from the average yield aggregator protocol, but few areas make Merlin’s quite superior. MERL is only minted based on assets deposited — not out of thin air. This is the best deflationary measure any platform can think of. And it’s great to see it on the Merlin.
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Merlin important links:
Telegram Announcement: https://t.me/merlinannouncements
Telegram Community: https://t.me/merlinlab
Telegram Bounty Rewards Group: https://t.me/merlinbounty
Twitter: https://twitter.com/Merlinlab
Reddit: https://reddit.com/r/MerlinLab
Medium: https://merlinlab.medium.com/
Website: https://www.merlinlab.com
