BIP-85: Burn the LORDS
The BIP-80: Change to Emissions Schedule signaled the Realms ecosystem’s desire to simplify the tokenomics and increase the investability of LORDS, the native token of Realms. This new proposal (BIP-85) follows that direction by reducing the supply of LORDS allowing for confidence for speculators and holders alike.
Context
The DAO has expressed a clear desire to reassure LORDS holders on the proposition of holding and gaining exposure to our ecosystem via LORDS. While BIP-80 reduced current emissions, it only solved part of the issue. A simple DAO vote could still drastically increase the LORDS supply at any time, posing a risk to both current and prospective holders. By removing LORDS directly from circulation this proposal aims to remove that uncertainty.
Case Study 1: Off the Grid ($GUNZ)
A recent example of low float tokenomics is the launch of GUNZ, a token by Off the Grid, a highly successful game with hundreds of thousands of users and a bustling in-game marketplace all denominated in $GUNZ. This looked to be a homerun of a launch garnering every major T1 exchange with real “utility” and all eyes in where on it. The token has only been down since launch.
GUNZ launched in rough market conditions but the circulating market cap is 27 million. This even in the current market conditions is a disaster. How did this happen?
To review the game has: ✅Utility ✅T1 Exchanges ✅Mind Share ✅Real large user base ✅High volume and activity
The token launched with one of the lowest floats in crypto, only 6% of the tokens were in circulation - This may not be the sole reason but when you break down the key components of the launch it looks to be a major factor in the market's decision.
Case Study 2: World Network ($WORLD)
Worldcoin, a token backed by Sam Altman, the man who is about to close a 40 Billion raise for his little known company OpenAI - he has a token? Yes, World Coin was founded by Sam Altman, Max Novendstern, and Alex Blania. The World Network boasts some of the most mind boggling stats for any chain in crypto. Here are a few:
- World App Usage: The World App has amassed approximately 25 million “users” across 100 countries.
- World ID Sign-Ups: By December 2023, over 2.5 million individuals had verified their World ID.
- Transaction Volume: The World App has facilitated over 70 million transactions, averaging 7.1 transactions per second. Worldcoin to date has raised 250m at a valuation of 3 Billion from multiple high tier investors. Currently the token sits at a circulating market cap of 870 Million - not exactly a good look. Now consider they need to increase the supply of tokens by 10. Not comfy.
IMAGE ERROR - See attached document Coingecko
The throughline again in all of these ramblings is - every single fundamental points towards amazing success yet out of the top 100 tokens Worldcoin has the lowest float of every single one of them. Check price, bad price.
What is a Token Burn?
A token burn is simply removing tokens from circulation. Tokens will be removed from ownership of an accessible account to an address with no owner in this case 0x00 - the burn account.
The Coinbase perspective on token burns: https://www.coinbase.com/en-fr/learn/crypto-glossary/what-is-token-burning
Summary & Key Points
To summarise the key points of what a token burn does and how it could affect the tokenomics of an ecosystem.
Removal of Supply Overhang: Tokens that are yet to hit the market but are still minted can cause stress for market participants as these can drastically increase circulating market cap without clear vesting terms.
Removal of Centralisation: If a single large entity owns a large amount without clear unlocks or usage of those tokens, this can create large uncertainty for both current holders and prospective holders - “When will this entity dump?”
IMAGE ERROR - See attached document Article on low float tokens and market dynamics
Removal of Uncertainty: Minted tokens that are not on the market will be priced in. If these funds are not used - this creates only a negative on the price action of the token. If the tokens are not planned to be utilised - This leaves only a negative on the economics of the token. Removal of Ownership: This proposal does state many benefits but the major downside is the DAO will simply hold less tokens. Less runway and less tokens to spend directly.
Execution
Upon approval of this proposal:
- Send 200,000,000 LORDS directly to the Ethereum burn address. a. Address: 0x0000000000000000000000000000000000000000
- All remaining funds on the Ethereum L1 network will be funneled into a Realms DAO account. a. This will be considered going forward as the only Ethereum L1 DAO owned account. b. Address: 0xA8e6EFaf015D424c626Cf3C23546Fcb3BD2C9f1a
You can see the direct effect on LORDS holdings of the DAO: LORDS Accounts