For the last few years, a portion of revenue that is earned (from fees and other products) by the QuickSwap DEX has been utilised to buy back the QUICK token on the open market. This QUICK is then provided in the form of staking rewards (as real yield) to QUICK stakers in the Dragon’s Lair, incentivising token holders and the broader community.
Although this process has been the norm, it’s always critical to consider switching things up and exploring other mechanisms to improve the utility and tokenomics for QUICK.
The potential impact of token burns will be illustrated through a series of key case studies later in this blog.
This proposal is being introduced for the dragon community to decide if QuickSwap should implement a burn of 100% of QUICK tokens bought back via revenue, for a trial basis (to be decided in the vote).
TL;DR:
- To date, QuickSwap has taken a portion of its revenue to buy back the QUICK token, which is then provided as yield (staking rewards) to QUICK stakers in the Dragon’s Lair
- This proposal is being introduced for the dragon community to decide if QuickSwap should implement a burn trial of 100% of QUICK tokens bought back via revenue
- To begin, the governance discussion on the official QuickSwap Reddit will run until Thursday, September 5 at 11:30 AM AM UTC
- Once the Reddit discussions finish, a formal Snapshot vote will begin and run from Thursday, September 5 at 11:30 AM AM UTC until Monday, September 9 at 11:30 AM UTC
- Once you’ve read this entire blog post, make sure to visit the official QuickSwap Reddit discussion forum to share your perspective with your fellow community members
Token Burn: What Are The Potential Benefits?
You’ve probably heard the term, but what exactly is a token burn and why is it important?
In essence, a token burn is when a project permanently removes a certain amount of its token tokens from circulation. This reduces the total circulating supply of tokens, making it more scarce.
To do this, the project would buy a certain amount of tokens off the open market. Next, they transfer the tokens to a Burn address, which is a private wallet address that cannot be accessed or recovered due to the lack of a corresponding private key.
Projects do token burns for a variety of reasons. They can have several potential positive impacts, including:
- Increasing the value of the remaining tokens that are in circulation
- Align the interests of token holders with those of the project
- Boosting the token/project reputation given the perception of a project’s commitment to long-term success
- Reduced inflation to increase the stability of the token’s price
2024 Dragon’s Lair Buybacks
Under the current model, QUICK is market bought and then distributed to stakers in the Dragon’s Lair.
To paint a picture of exactly how much this has equated to, let’s look at the data from February - July 2024 of QUICK that was distributed to stakers:
In summary, ~12,450,000 QUICK was bought back and distributed to Dragon’s Lair stakers over this time period (roughly $758,900 at the time). This 6 month period has been relatively low to medium volume, and likely will be seen as very low during the bull market.
QuickSwap will continue to buy back QUICK (which will vary from month to month) and either burn the tokens that were bought back (if this vote passes) or continue distributing to Dragon’s Lair stakers (if this vote does not pass).
It’s worth noting that, in the past, there were single months where over $1 million in QUICK tokens were distributed. When bull run type periods occur with high DEX volume, massive amounts of QUICK could be bought back and burned, thus rapidly reducing the supply.
In May 2021, QuickSwap achieved a trading volume of $8.216 billion. From this, the revenue splits were distributed as follows: LPs (liquidity providers) received $20.54 million, while $4.108 million was allocated for buybacks, benefiting both Dragon's Lair stakers and the Foundation.
Specifically, if $3.286 million was used to buy back QUICK tokens for stakers in the Dragon's Lair (at an average price of $815 per QUICK), approximately 4,032.39 QUICK tokens would have been removed from circulation, representing about 0.40% of the total supply of 1 million QUICK tokens.
Case Study
Below is an example of a case study from PancakeSwap and their implementation of a burn mechanism on their native CAKE tokens, including the impact before and after the burn mechanism was put in place.
PancakeSwap utilises a portion of the trading fees generated on the platform to buy back and burn CAKE tokens, in addition to periodic manual burns.
Burn Dates & Price Impact
- Price at Burn Announcement (May 2021): $15
- Price Leading Up to Implementation of Burn: $25
Current Stats & Estimates
- Current FDV: $743mil
- Total Value Burned: $2.2 billion (78.5% of supply)
- Estimated FDV w/o Burn based on supply destroyed: ~$153mil
It’s clear that the burn announcement initially drove significant price appreciation, peaking at $25 due to market anticipation. Without the burn, the price likely would have seen much slower growth, staying closer to its original value or losing value due to inflation. While prices on CAKE and all other assets have dropped significantly since these times, these numbers still give a good idea of the effects of burns.
QUICK Token Burn Duration: How Long Should The Burn Trial Last?
As mentioned above, it’s up to the community to not only decide if QuickSwap should implement this QUICK token burn but also to determine how long the initial trial should last.
The proposed duration to implement a 100% QUICK token buyback and burn from protocol revenue is 3 months as a temporary trial run.
If the QUICK token were to undergo a burn per the details outlined above, it has the potential to make the tokenomics more attractive and breathe new life into the token with an exciting narrative.
Moreover, if this vote is approved and the token burn is a success in the community’s eyes, there will be potential to initiate another governance vote after the 3 month testing period has ended to continue subsequently burning QUICK tokens (TBD).
If the broader community voices a different opinion from the options above, there will be an opportunity to discuss on the Reddit and Discord forums for consideration to amend the voting options prior to the vote going live on Snapshot.
Join the Discussion
As always, QuickSwap community members are encouraged to participate in and contribute to QuickSwap governance discussions and proposals across all of QuickSwap’s online forums, especially on Reddit. As a Dragon, you are a valued community member and your opinion matters – but you have to participate in community voting procedures to make it count.
Critical decisions guiding QuickSwap’s strategic development will always be determined by way of decentralised governance. QuickSwap’s future is in your hands, so make your voice heard!