Token Burn Discussion

1

I think we should revaluate the existence of token burn. I’ll make a pros and cons list for a starting point. Please add points with reasoning or dispute points I made.

Keep in mind MTRG is a governance token… so the tokenomics should incentivize people who care about the project to hold the token and possess voting power.

Pros:

  • short term price appreciation (shouldn’t really matter if you are a long term holder)
  • nice little buzz word for fomo in bull market “TOKEN BURN DEFLATIONARY ASSET TO THE MOON”

Cons:

  • instead of consistently rewarding validators with MTR, token burns provide short term price increases that traders will sell, so basically rewarding traders
  • with the MTR rewards, MTRG pays the equivalent of dividends, which gives it a measurable value (kind of a P/E ratio). what inherent value does MTRG posses without this mechanism? (other than governance which is subjective) None… it is not used for gas as something like ethereum is. i think its nice that MTRZG is set apart from other governance tokens in having measurable value outside of gas.
  • currently it is a ponzi coin in which the only way it can provide you value is if you sell to someone else for a higher price. this incentivizes moon boy shilling the project and generating hype to drive inorganic growth. If the MTR rewards go to validators instead, it incentives large holders to increase transaction volume by creating genuinely useful applications on the network, which would drive more organic growth and create long term value.
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The burn is more for long term price appreciation rather than the short term you stated.

As the ecosystem grows, more transactions = more MTRG burned. The less MTRG in circulation, less selling pressure and the coin becomes rarer.

A deflationary token is a huge draw to investors in any crypto space.

I don’t see how giving the MTR to validators is going to make them create useful applications on the ecosystem like you say. The apps are going to be built regardless of this.

Don’t think calling MTRG a Ponzi coin is a good call. It’s an investment and governance token currently which is more than a lot of coins in the crypto space. You can use it to liquidity mine to earn volt, you can stake it for decent APY too.

And the point of traders making off a token burn, until there is a lot more transactions on the meter ecosystem, the amount of MTRG burned isn’t going to be substantial enough to cause big fluctuations. When there is a lot of tx, the MTRG bought to burn will create a positive impact on price. Frequency of the buy/burn can be made erratic and unpredictable to traders.

I am definitely in favour of keeping the burn

1 Like
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Look, I disagree with you and completely agree with SHANE.
Token burn is a fundamental element for MTRG. Without it, unfortunately MTRG is not as attractive as a currency compared to coins from other ecosystems / networks (eth, polygon, sol, etc.).
As is well known, the fees on the meter are paid in MTR … it is only through the token burn that it is really useful (on a par if not more than Eth for the Eth network, for polygon for the polygon network etc. ) because MTR will then be used to buy MTRG and burn it permanently.
Obviously that initially will not have much effect because the tx on the meter network are still few, but in the long run it is a truly FUNDAMENTAL mechanism for the project.
Sooner or later you had to start with the token burn and implement it as soon as possible I think it’s really important.
Furthermore, as is well known, the BURN is a tool to attract new investors … as in all things until you see people unfortunately they are very reluctant for what I can’t wait to see live the first TOKEN BURN of MTRG :fire: :fire: :fire:

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Appreciate the answer bro,

P1> "The burn is more for long term price appreciation rather than the short term you stated.

As the ecosystem grows, more transactions = more MTRG burned. The less MTRG in circulation, less selling pressure and the coin becomes rarer.

A deflationary token is a huge draw to investors in any crypto space."

R1> Without a fundamental reason of demand (e.g. gas coin or earning tx fees), I don’t see how the burn can help long term price as there is no proper use case to create some sort of price floor. How would you base MTRG value currently, I can’t think of anything besides governance which most people don’t care about. With burns you just increase the price every x time interval and some short term trader can sell the pump, taking the value from the ecosystem while validators, a fundamental part of the project receive nothing, besides a coin with little inherent value.

P2> “I don’t see how giving the MTR to validators is going to make them create useful applications on the ecosystem like you say. The apps are going to be built regardless of this.”

R2> Well how else will they get a ROI without selling for a higher price if there are low tx volume on the network. I know for me this is a big reason for me to create dapps as I can receive great rewards without having to sell a single MTRG.

P3> “Don’t think calling MTRG a Ponzi coin is a good call. It’s an investment and governance token currently which is more than a lot of coins in the crypto space. You can use it to liquidity mine to earn volt, you can stake it for decent APY too.”

R3> Currently I don’t see how you can attribute any inherent value to MTRG like I said so the only way to get ROI is sell to someone for higher, which means early buyers win and late buyers lose, similar to ponzi. Staking is meaningless as you need to sell to realize rewards and if someone said here is some dirt you can stake it to earn 10% APY, not in cash or a valuable asset, but more dirt, I wouldn’t bother. If no one cares for MTRG, VOLT holders could easily vote to remove it from rewards as they might want to reward a pool that generates higher tx, because this will generate them rewards in LP fees, more VOLT and increase single staking rewards.

P4> “And the point of traders making off a token burn, until there is a lot more transactions on the meter ecosystem, the amount of MTRG burned isn’t going to be substantial enough to cause big fluctuations. When there is a lot of tx, the MTRG bought to burn will create a positive impact on price. Frequency of the buy/burn can be made erratic and unpredictable to traders.”

R4> Again without an inherent value there is no demand to support the price above a certain level so as soon as burns become more impactful, there is nothing to stop people just trading the burns. But imagine MTRG is operating at full capacity, 473,040,000 MTR can be earnt per year to share between validators. With the current 50% of MTRG staking the 2K needed for a node would earn you about 150,000 MTR per year, or 220,000 USD. So if we assume a “P/E ratio” of 10 is the price floor. That would give MTRG a price floor of 1,100 USD, and no one has to sell their MTRG to receive this value.

5

Thanks for your answer, look at my response to Shane for answer to most of your points. I will respond to some unique points you make.

P1> "Without it, unfortunately MTRG is not as attractive as a currency compared to coins from other ecosystems / networks (eth, polygon, sol, etc.).

As is well known, the fees on the meter are paid in MTR … it is only through the token burn that it is really useful (on a par if not more than Eth for the Eth network, for polygon for the polygon network etc. )"

R1> If the only way MTRG can be useful is scarcity, people can just buy BTC instead. And MTRG is not meant to be a currency, just governance and validator token.

P2> “Furthermore, as is well known, the BURN is a tool to attract new investors”

R2> See this is the talk of someone in a ponzi. You should not need new investors if the asset you buy has inherent value. And I know you aren’t just in it to sell higher which is why it confuse me. Anyway see my response to Shane for more elaboration on this.

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Before I answer your questions, here is the general idea for burn:

  1. The primary use case of MTRG will always be record-keeping and consequently in the security of the ecosystem. Governance, DeFI is a secondary use case. As the ecosystem grows, all the value in the ecosystem is recorded and secured by node operators through their MTRG stakes. Lower MTRG value, lower delegation, lower node operators all result in a ‘not-so-secure’ ecosystem
  2. Since the ecosystem is still not matured (very few blockchain ecosystems are mature at this point), the incentive to secure and perform record-keeping for the ecosystem comes from the inflation of MTRG. Without inflation, no POS system can ensure the decentralization and security of the system in its early phases. And this effect to similar to POW blockchains where every block mined gets the reward
  3. Why the thought process of deflation? Any investment (not trading) into any asset is an investment into the future of the asset and not into its present. However, with the constant dilution of the asset with inflation, the investment is highly skewed towards staking and securing the ecosystem (as it should be). There is no real incentive for investors who do not form part of the record-keeping process since their stake goes on diluting with time. The deflationary mechanism provides the necessary respite to the new investors to come into the ecosystem and ensure that their stake will not get diluted substantially with time.
  4. Why token burn? Token burn is not to create a deflationary environment, its primary objective is to protect the new investors from the dilution of an inflationary mechanism in a proof-of-stake ecosystem.
  5. Why transaction fees? Transaction fees are the only cash flow for a layer1 blockchain and the only source of funds available at their disposal. Without the revenue from transaction fees, a layer 1 blockchain cannot be a sustainable and viable economic model. The block producers are already heavily incentivized through inflation and foundation delegation to give them a good source of passive income. Giving the transaction fees skews the incentive structure heavily towards node operators while making the inflationary nature deterrent to new investors into the ecosystem. Also, heavily skewed incentives towards one stakeholder in the ecosystem is not a viable economic model for the long term.
  6. Process of burn? As mentioned by the team, the token burn contract will be available to any participant in the ecosystem to trigger the burn at any time. With Meter being a low fee ecosystem, the overall impact of the token burn would be so widely spread that no trader can take a meaningful benefit out of it in short term. If the traders can benefit from the setup in long term, well then, they would have earned it through constant vigilance of the ecosystem and the time vested.

In light of the above points, here are my responses to some points that you have mentioned;

Short term price appreciation which traders will benefit from (sell after the market buy of MTRG)

See point 6

No long-term impact other than ‘Deflationary asset’ buzzword

See point 4

Shifting MTR rewards from Validators (The rewards are like Dividends giving inherent value to MTRG)

See point 5

MTRG does not possess any inherent value (not used for gas) – “I don’t see how the burn can help long-term price as there is no proper use case to create some sort of price floor”, “Again without an inherent value there is no demand to support the price above a certain level so as soon as burns become more impactful, there is nothing to stop people just trading the burns.”

Transaction fees are the primary source of cash flow to the ecosystem. However, it is not the sole driver of the MTRG valuation. The overall valuation is a combination of the demand of the asset (which increases as the ecosystem secures more and more assets and supports larger user bases) and the supply of the asset.

Deriving the value of the ecosystem solely based on whether the asset is used for gas fees is a very constrained viewpoint. To show an example, last time I checked, the annual fee income of Ethereum (the costliest ecosystem to transact on) is 1% of the total value locked in DeFI alone (not even considering ETH2 staking). By that metric, it would take 100 years even for Ethereum to generate the demand of ETH that is locked in DeFI currently.

It is difficult to put a price floor on most crypto assets.

With MTR rewards. Meter ecosystem becomes a PONZI – “Staking is meaningless as you need to sell to realize rewards and if someone said here is some dirt you can stake it to earn 10% APY, not in cash or a valuable asset, but more dirt, I wouldn’t bother”

This argument is very naïve and I hope you got the response from above.

MTR Rewards will incentivize large holders to increase transaction volume by creating a useful application on the network – “how else will they get an ROI without selling for a higher price if there is the low tx volume on the network. I know for me this is a big reason for me to create dApps as I can receive great rewards without having to sell a single MTRG”

This argument is skewed towards your perception. There are a lot of node operators like me who do not know anything about development. You are always open to changing your delegation to uncheck auto-bid and receive MTR.

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Posted the comment without formatting it. See response below

9

Thanks for the answer, I have a few questions about what you said.

1. The primary use case of MTRG will always be record-keeping and consequently in the security of the ecosystem. Governance, DeFI is a secondary use case. As the ecosystem grows, all the value in the ecosystem is recorded and secured by node operators through their MTRG stakes. Lower MTRG value, lower delegation, lower node operators all result in a ‘not-so-secure’ ecosystem

Not related to token burns, but is MTR not the desired currency to be used for DeFi in the long term?

However, with the constant dilution of the asset with inflation, the investment is highly skewed towards staking and securing the ecosystem (as it should be). There is no real incentive for investors who do not form part of the record-keeping process since their stake goes on diluting with time. The deflationary mechanism provides the necessary respite to the new investors to come into the ecosystem and ensure that their stake will not get diluted substantially with time.

Token burn is not to create a deflationary environment, its primary objective is to protect the new investors from the dilution of an inflationary mechanism in a proof-of-stake ecosystem.

Under the assumption above that MTRG is just for governance, record keeping and staking (not so much DeFi). Which all but governance are rewarded with the inflation tokens, which can be done along side staking or validating (so effectively all these functions allow token holders to earn the inflation rewards). As most nodes charge 10% comision, even at 90% total supply staked, your investment should grow along with inflation. In my opinion, people choosing more risky uses of their MTRG like being a liquidity provider, are accepting this risk when deciding to do that instead of staking.

Transaction fees are the only cash flow for a layer1 blockchain and the only source of funds available at their disposal. Without the revenue from transaction fees, a layer 1 blockchain cannot be a sustainable and viable economic model. The block producers are already heavily incentivized through inflation and foundation delegation to give them a good source of passive income. Giving the transaction fees skews the incentive structure heavily towards node operators while making the inflationary nature deterrent to new investors into the ecosystem. Also, heavily skewed incentives towards one stakeholder in the ecosystem is not a viable economic model for the long term.

I think it makes sense for node operators to have the rewards skewed to them as they bear the risk of paying bail out fees and take the time to manage their node/s. And like I mention before it is very easy for new investors to stake their MTRG to protect it from inflation. And the process of burn is a very good model, if there is going to be burns I’m glad this is how it is done.

Transaction fees are the primary source of cash flow to the ecosystem. However, it is not the sole driver of the MTRG valuation. The overall valuation is a combination of the demand of the asset (which increases as the ecosystem secures more and more assets and supports larger user bases) and the supply of the asset.

Deriving the value of the ecosystem solely based on whether the asset is used for gas fees is a very constrained viewpoint. To show an example, last time I checked, the annual fee income of Ethereum (the costliest ecosystem to transact on) is 1% of the total value locked in DeFI alone (not even considering ETH2 staking). By that metric, it would take 100 years even for Ethereum to generate the demand of ETH that is locked in DeFI currently.

It is difficult to put a price floor on most crypto assets.

I understand the supply and demand is the valuation driver, but without MTR rewards I still feel it doesn’t have a logical source of demand other than speculation. Even though I’m sure Eth’s price is largely driven by speculation, especially in bull markets, it is the gas token for Ethereum network so people have to buy it if they want to interact with the ecosystem. In regard to Eth’s tx fees to valuation ratio, Eth has more or less reached it’s peak tx volume, so without upgrades or insane gas fee increase, Ethereum will never reach its valuation. Also in a single token model. You stake token to earn more token, so without the source of demand (needed for gas) it’s like saying here buy this number on the screen and don’t sell (staking) so you can increase that number at 10% per year. It just wont hold up without hype and speculation. However, Meter is a dual token model, so if MTR proves to be stable, there will be a hard price floor once the “P.E” gets too low. Who wouldn’t buy an asset that returns 10% of it’s value per year without having to sell the initial investment. It is difficult to put a price floor on most crypto assets. ← this is what could set MTRG apart from other crypto currencies.

In regard to higher valuation being required for a secure ecosystem, asuming 10 PE ratio at max tx volume is the price floor. MTRG at 25,000,000 circulating supply would have a valuation of 27.5 billion USD. Which is a huge floor price, higher than ADA valuation in a speculative bull market. Cardano being the largest valued POS ecosystem I know.

This argument is skewed towards your perception. There are a lot of node operators like me who do not know anything about development. You are always open to changing your delegation to uncheck auto-bid and receive MTR.

I didn’t make it clear but I meant large stake holders will try to make dapps for the ecosystem to increase tx volume, or dedicate their resources (MTRG reserve, which all holders control through governance) to incentivising other to do this for them. For example the developer grant, although I’m not sure if that fund is controlled by MTRG holders or Meter team. An example anyway of what can be done outside creating dapps themself.