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Is there a destruction mechanism for BENQI(QI) coins?
Benqi's auto-burn, repurchase, and governance mechanisms aim to reduce the circulating QI token supply, making the asset more valuable over time.
Dec 22, 2024 at 02:25 pm
Key Points:
- Benqi (QI) is a native utility token of the decentralized lending and borrowing protocol on Avalanche.
- QI has a maximum supply of 100 million tokens, with approximately 42.6 million QI in circulation.
- The QI token is designed with an auto-burn mechanism to reduce its supply over time and increase its value.
Destruction Mechanism for BENQI (QI) Coins:
Avalanche Rush Program:
- A portion of BENQI revenue generated from interest fees on borrowed assets is used to buy back and burn QI tokens.
- The amount allocated for buybacks and burns varies based on market conditions and protocol performance.
- In July 2022, approximately 1.5 million QI tokens were burned through this program.
QI Token Repurchase and Burn:
- The Benqi team may manually initiate buybacks of QI tokens using protocol funds.
- The repurchased tokens are then permanently burned, reducing the circulating supply.
- This strategy is typically employed during periods of low liquidity or price volatility to support the QI token's value.
Community Governance:
- QI token holders can participate in the Benqi governance process via the BENQI DAO.
- The DAO can vote on proposals that involve modifying the tokenomics, including the allocation of funds for QI buybacks and burns.
- This provides transparency and decentralization to the token destruction mechanism.
Other Factors Influencing QI Supply:
In addition to the aforementioned mechanisms, the following factors can also impact the circulating supply of QI tokens:
- Market demand and adoption of the Benqi protocol.
- New QI token issuance for rewards and liquidity incentives.
- The rate at which QI tokens are staked and unstaked within the protocol.
FAQs:
Why does BENQI implement a token destruction mechanism?
- To reduce supply and increase token value, creating a deflationary model for QI.
- To reward long-term holders and incentivize the use and adoption of the Benqi protocol.
How much of the QI supply has been burned?
- As of August 2023, approximately 7.5 million QI tokens have been burned, representing nearly 18% of the total supply.
Is the QI token destruction mechanism sustainable?
- The sustainability of the mechanism depends on the ongoing success and revenue generation of the Benqi protocol.
- The team's commitment to token buybacks and community governance provides confidence in the long-term viability of the destruction mechanism.
Disclaimer:info@kdj.com
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