Jared Gray, CEO of decentralized exchange SushiSwap, has plans to redesign the tokenomics of the SushiSwap (SUSHI) token, according to a proposal submitted on Dec. 30 on the Sushi forum.
As part of the proposed new tokenomic model, lock-up levels for emission-based rewards will be introduced, as well as a token burn mechanism and liquidity lock-up to favor prices.. The new tokenomics is intended to boost liquidity and decentralization on the platform, as well as bolster “treasury reserves to ensure continued operation and development,” Gray noted.
In the proposed model, liquidity providers would receive 0.05% of trading fee income, with larger volume pools receiving the lion’s share. Liquidity providers will also be able to lock up their liquidity for emission-based rewards. However, rewards will be forfeited and burned if they are withdrawn before expiration.
I am excited to share the vision for @SushiSwap‘s new token model. I’ve posted a brief tl;dr write-up on the Sushi forum & linked the entire proposal. We look forward to your questions & feedback.https://t.co/D9TO2Oi8ra pic.twitter.com/GBrQKPzfiH
— Jared Gray (@jaredgrey) December 30, 2022
Additionally, staked SUSHI (xSUSHI) will not receive any part of the fee revenue, but instead rewards based on issuances paid in SUSHI tokens. Time-lock levels will be used to determine emission-based rewards, with longer time-locks leading to higher rewards. Withdrawals before the expiration of the temporary blocks are allowed, but the rewards will be lost and burned.
The decentralized exchange will use a variable percentage of the commission of 0.05% per trade to buy back and burn the SUSHI token. The percentage will change based on the total number of time lock levels selected. The proposal states:
“Since temporary locks are paid after expiration, but burns occur in ‘real time’ when a large amount of collateral is released before expiration, it has a considerable deflationary effect on supply.”
The tokenomics redesign comes after SushiSwap revealed that it had less than a year and a half to go before its treasury was depleted, which meant that a significant shortfall threatened the operational viability of the platform. As Cointelegraph reported, SushiSwap experienced a $30 million loss in the past 12 months in liquidity provider incentives due to the token-based issuance strategy, prompting the company to introduce the new model for its tokenomics.
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