MIP 14: MTRG Tokenomics Update (30M MTRG Burn)

Introduction

Dear Community,

This proposal aims to introduce a plan to burn 30 Million MTRG tokens reserved to fund future ecosystem growth. The proposal will enhance the tokenomics of MTRG, potentially increasing its attractiveness to both current and future investors.

This governance proposal has been long pending. Last year, since our active community member Paolo created the forum discussion, we have had ongoing community requests to follow through on the MTRG burn.

Background

The Total Supply of MTRG through the original Tokenomics design was 70 Million.

While the 40 Million MTRG total supply is widely known and accepted within the community, there was repeated feedback on the vitality of 30 Million MTRG minted at the genesis block and reserved for future foundation growth.

Here is the excerpt from the Tokenomics Paper;

‘The remaining 30M tokens from the genesis block will be locked indefinitely for the Foundation to fund the future growth of the Meter protocol when it hits the exponential expansion curve. These tokens will only start releasing after the circulating market cap of MTRG exceeds $100M and stays above this threshold for at least 10 calendar days. There will be 1M MTRG tokens released for each $100M increase in circulating market cap until the total circulating market cap reaches $3B. However, under no circumstances will these tokens be released during the first two years after launch. This mechanism was designed to strike a balance between protecting token holders and supporting future development.’

This MTRG unlock based on market capitalization milestones had raised concerns among community members and potential investors around its impact on diluting the existing community and investors while deterring potential investors and investment.

While the concern echoed across the majority of the community, we also had users who were content with leveraging the 30 Million MTRG for the aforementioned purpose.

Proposal Details

While we accept community voices and agree to burn the 30 Million MTRG, we propose the burn in a manner that equips the Meter Ecosystem with an emergency ‘Ecosystem Growth Reserve’.

Total Ecosystem Fund Reserve 30 Million MTRG
Immediate Burn 10 Million MTRG
Monthly Burn 1 Million MTRG quarterly
Emergency Funding Community or Meter Foundation can utilize part of remaining MTRG to support ecosystem growth through a governance proposal if needed. Further remaining MTRG continue to be burned as per the quarterly burn.

This approach while meeting its desired objective of burning the 30 Million MTRG while equipping the ecosystem with the funds if required.

With the quarterly burn rate, the remaining 15 Million MTRG will be burned over 5 years.

Tentative Schedule of the Burn

First Burn (10 Million) June
Quarterly Burn (1 Million) September, December, March, June
Period of Burn Starting June 2024 until June 2029
Burn Dates Within first 5 days on month

Governance and Voting Process

Forum Discussion

Period of 7 days starting 19 May 2024 06:00 PM UTC until 26 May 2024 06:00 PM UTC.

Governance Proposal Voting

Period of 2 days starting 26 May 2024 06:00 PM UTC to 28 May 2024 06:00 PM UTC.

Users can vote with MTRG, staked MTRG, stMTRG and wstMTRG. The proposal will pass when it achieves a majority vote. There is no quorum requirement.

1 Like

Hey guys,

As a new user of Meter, I’m wondering how burning non-circulating tokens would help Meter in any way. Right now, outside of Ethereum, the EVM chains that have the biggest market share are the ones with huge treasuries and ongoing grant programs (Arbitrum, Base, Optimism, etc.).

Burning MTRG tokens reserved for ecosystem growth would just decrease Meter’s ability to attract more projects and users in the long run. These tokens are not creating sell pressure day by day, but they are the biggest lever for Meter to become more attractive due to the grant program that I heard about.

The last vote on Snapshot was about releasing 15M MTRG to fund ecosystem growth, so I’m not sure why the next vote is about burning double the amount released not so long ago.

I get that having a small monthly event of token burns can sound bullish to some, but in my opinion, it is very short-termist and does not reflect the establishment of a long-term plan.

I have basically zero voting power, so this is just my opinion, but with the fierce ongoing competition between EVMs cutting down a treasury just for the placebo effect of burning tokens doesn’t look bullish for the ecosystem long-term. My 2 cents

This was an ongoing request from the community to primarily address aversion of new users to invest in MTRG due to dilution/ higher FDV. Meter Foundation does have tokens currently (15 Million) to make progress on the ecosystem growth.

The rationale was keeping a monthly burn over 5 years rather than a 1 time burn was to give the community and the foundation an additional arsenal to use some of the remaining tokens in case it is required.

Also, in addition to this token burn, we do have a monthly transaction fee burn on MTRG.

I agree with the concept of the burn but I don’t agree with the mechanism proposed

My thoughts are:

  1. the burned amount vs not burned is not enough. The previous proposal unlocked 15m tokens for the ecosystem. Now this proposal would leave another 20m effectively, which would be gradually burned over time but be available for “emergency”. That’s 35m tokens in the hands of the team (subject to gov of course) which is far more than currently circulating. This feels unbalanced

  2. linked to the above, burning the remaining 20m quarterly is not fast enough. Crypto users operate on short time horizons because many projects move so quickly. A quarterly burn of 1m tokens that are not in circulation anyway isn’t going to change anyone’s mind about the project.

I would suggest that if the team are genuinely nervous about 15m not being enough funding, you ringfence 5m of the 30m as a locked emergency fund which is not going to be burned. The remaining portion is all either burned instantly or something like 50% is burned instantly with 500k burned on a weekly basis.

Most importantly:

A) the team need to formally confirm and announce (!) that no releases will happen in relation to the market cap of MTRG. Irrespective of the burn schedule. That will help to adjust expectations
B) this burn needs to happen quickly; weeks and months, not years. I would point out the trade off between keeping Mtrg back for funding and the purchasing power of those tokens. If you don’t commit boldly to this strategy then the USD purchasing power of your emergency fund will continue to be low. In other words, a 5m Mtrg emergency fund will go a long way if the price of Mtrg is 50x what it is now!!!

In summary I think the proposal as it is currently is directionally correct but far too cautious

1 Like

I agree mainly with Squanchy.

If to proceed with the burn in the current form, the current proposal is too cautious and will not give much confidence to the market. If you want to make a statement, it should be bold and remove the 5 year schedule, increase the burn to 25M and keep 5M as Squanchy stated as emergency fund.

Personally I don’t think this burn will be beneficial long term and if there would be any effect on the PA, it will be short lived. On my end the burn in the current form should not take place for the sake of burning and I will vote against it in the current state as well.

However, I’d like to make a counter proposal on burning this 30M allocation.

My proposal is to introduce an progressive burn mechanism instead on this 30M $MTRG.

As the current marketcap valuation is $ 50M, I would like to propose to burn 1M $MTRG on each increment of $50 M for 10 calendar days in a row in marketcap until we reach $1.5B marketcap.

In the meanwhile Meter gets still their 5% network inflation rewards on this allocation until it gets fully burned and I think Meter & the stakeholders in the ecosystem would be more than happy at this point if we would reach $1.5B marketcap, coming from below $50M currently.

The advantage I see in this approach is that the burned amount will be more impressive each time it’s burned and it’s something you can post on X or other socials after each burn as well. It also gives milestones on the next target that needs to be reached and held for the next burn to happen. In general it’s also just more interesting than doing a ‘one time burn’ or burn schedule over time and may contribute to a better PA.

The disadvantage is that the burns will not be guaranteed over time and are not certain to happen, they can happen faster/slower or not at all, but it gives milestones to reach and to know another burn is waiting around the corner when marketcap increases.

You could also do a combination of this and the current proposal which even sounds better to me and burn 10M at the start and burn up to 1B valuation instead (Nice milestone to achieve), burning 1M every 50M marketcap, this still sounds better to me than the 5 year schedule.

There’s merit to this approach for sure

There’s no way of doing this that would create an actual supply shock, but we are preventing future supply from being released and creating a draw for new investors. Those are both good things in my opinion which is why I support the concept of a burn

The reason I think it’s better to do a big initial burn is that it looks more impressive on X and is more likely to have an impact on price. I know you referenced VRA but that did have a short term impact on their price and those were very different market conditions. We are now in a more bullish market where fewer people are taking short term profits

I think it would also help clear up the tokenomics (we could finally put a max supply on CoinGecko!)

The 5 years schedule if anything is going to drive people away. The team is still thinking far too long term. I know it sounds like a good thing but it’s naive. There won’t be anyone left in the community in 6 months if there isn’t a dramatic change

I don’t wish that to sound threatening but it’s my view. If we aren’t big / bold enough now, what happens in 4 years is irrelevant

An update to this proposal after some additional feedback on Telegram is to add a guaranteed quarterly burn of 1M as well until the first 30M are burned.
Giving it some more thought as well, I don’t think we should stop at this 30M either, yes it will eat a little bit more from the existing supply, but over that would also be a higher valuation as well.

So the updated proposal for the ‘Burning road to $1B valuation’ as I like to call it, would be basically to double the mcap requirements & halve the burn amount per $1B valuation.
With the exception of a guaranteed quarterly burn up to the $1B valuation for the first 30M supply.

So the updated scenario I suggest for this proposal would be as follows:

Up to the first $1B valuation or initial 30M supply to burn

  • Burn 10M MTRG at the start
  • Burn 1M MTRG for every 50 MCAP increase
  • Burn quarterly (at the first day of months 3/6/9/12) 1M as a guaranteed burn on the 30M supply.

Every quarterly burn, deducts also 50M for the $1B initial requirement, after that the 500k burns kick in up to $2B instead.

After the first $1B valuation, the guaranteed quarterly burn fall away, it was just a mechanism to keep the burns guaranteed for the first 30M.

Per $1B valuation, the mcap requirements double & the burn amount get halved. so a few examples

up to $2B, Burn 500k MTRG for every 100 MCAP increase (5M MTRG additional)
up to $3B, Burn 250k MTRG for every 200 MCAP increase (1M MTRG additional
up to $4B, Burn 125k MTRG for every 400 MCAP increase (250k MTRG additional)
up to $5B, Burn 75k MTRG for every 800 MCAP increase (75k MTRG additional)
After $5B was passed, I would propose a fixed rate per 1B MCAP increase and burn 30k MTRG for every 1B MCAP increase from then on, 30k burns to honor to initial 30M burn.

As you can see, the burn amounts get a lot lower after $3B valuation.

I know it exceeds the initial 30M, but I think it can be taken from the released 15M instead. Rather use them for a scenario like this than spending it on some airdrop system instead, there’s still the annual network inflation as well in place that should cover the burns later on as well.

I believe that these kind of burns linked to MCAP targets would generate a lot more buzz, specially at the start as they would be happening a lot more frequently.

Here is the summary of the thoughts from earlier comments;

@Digi

  • Burning non-circulating tokens does not help
  • Treasury and grant programs are crucial for growth

@Squanchy

  • Burned vs not burned is not enough amount, not fast enough (in months rather than years)
  • Confirmation from Foundation that no release from 30 Million
  • Can ringfence 5 Million if Foundation is nervous about funding
  • We are preventing future supply/ dilution
  • Team thinking too long term and not short term

@PirateMeterAhIO

  • Too cautious, not bold enough, burn all 30 Million
  • Burn based on market cap
  • Continue burn beyond 30 Million based on market cap over and above monthly tx fee burn

Here are some of the thoughts on the comments and the potential options for the burn;

Burn beyond 30 Million

This should not be in question at this stage of the project. Value of MTRG is a result of supply and demand. Focusing on supply while suggesting to remove ability of Meter Foundation to grow and generate demand by burning additional tokens is not advisable. Scarcity of MTRG is futile without demand for MTRG. Thus, any additional burn should not be part of the discussion now.

Burn based on Market Cap

This is tied to the comment above and the growth narrative. Emission based on market cap makes sense as it aids growth of the ecosystem. Burn based on market cap by definition hinders the potential for growth – reduces market cap further through burn, removes MTRG from treasury that could have been used to support and grow the ecosystem; and thus is antithetical. In addition, it adds further uncertainty to the tokenomics. It is important to note that all transaction fees are also used to burn MTRG.

Burn at low valuations

Higher the burn at low valuations, lower the significance. That was one of the key rationale behind prolonged burn.

We could make changes to the current proposal to limit the maximum emergency fund to 5 Million MTRG to be used within 5 years.

Burn from non-circulating supply

Some of the community members are strongly proposing burning all 30 Million tokens at once. This leaves a lot of marketing communications to chance!

Here is a simple thought process of any sophisticated investor - Meter ecosystem is burning 30 M tokens? How does it impact float and FDV? What is the real value of the burn? – The only positive response here is reduction in FDV. So we collectively are not fully aware of the marketing impact of the burn. Should we then go ahead and burn all the tokens not knowing how it will impact the new user perception? That is a lost opportunity if the new user sentiment is not favorable.

Too cautious, too long term, not too bold

It is important for the community to embrace the fact that - It is worthwhile to err on the side of caution than have a shortfall of funds to fuel growth. Given the growth of blockchain ecosystem as a whole, we believe that the Meter ecosystem will need commensurate investment into the ecosystem to grow. As such, the ability to grow and generate demand should outweigh need of scarcity. Also, note that the community is the main beneficiary of any incentive programs/ token release from the foundation.

Token Releases focused on Community

Any emission from Meter Foundation funds for growth is primarily directed towards community. This has been our guideline for all dApps that launch on Meter. Community members participating in validation, staking, and liquidity on dApps are and will be rewarded.

Based on the comments above, though we still believe our proposal is beneficial to the ecosystem in the long run, We propose below potential options to honour the community voice;

  • Burn 30 M now
  • Burn 25 M now, ringfence 5 M for growth (max 5 years)
  • Burn 10 M now, 1 M quarterly for 5 years + emergency fund limited to 5 M

We really hope community understands the importance of providing the Meter Foundation with sufficient arsenal to ensure growth is not sidelined vis-à-vis potential scarcity.

  • Burn 30 M now
  • Burn 25 M now, ringfence 5 M for growth (max 5 years)
  • Burn 10 M now, 1 M quarterly for 5 years + emergency fund limited to 5 M
0 voters

As far as my understanding goes, correct me if I am wrong, probably the 10M instant burn approach seems like a decent mix of boosting immediate value and ensuring long-term growth. The initial 10M burn will likely increase the token’s value due to scarcity given that its marketed properly. On top of that, the regular quarterly burns will help keep the market stable and maintain interest. Furthermore, having a 5M token emergency fund seems a smart move. It ensures that we have resources set aside for unforeseen circumstances or opportunities that may arise, without having to scramble for funds later. It strikes a balance between immediate token value improvement and long-term security, which is crucial for sustainable development.

1 Like

Based on additional community feedback, we propose change in the periodic burn option;

Earlier option:
Burn 10 M now, 1 M quarterly for 5 years + emergency fund limited to 5 M

New Option:
Burn 10 M now, 400K Monthly for 50 months + Emergency fund limited to 5 M