ThorChain is getting ready for the Community Incentives Burn Proposal which proposes a major change to the protocol by introducing a mechanism for token burning. Here is the entire text detailing the voting for such a proposal and the mechanics that will be implemented if that happens. The proposal was published on the Thorwap Finance Forum and I am listing it as presented there.

"Introduction

The THORSwap token ($THOR) has crossed the one year mark and a lot has happened since then for THORSwap and the overall crypto sphere. $THOR’s original tokenomics were designed with room for future community feedback, and there has been criticism from the community on one of its points - the high total token supply.

While the circulating supply of tokens is an important metric, total supply is also relevant. It may take a long time for a token to reach that total supply, it may never be fully diluted, but the fully diluted valuation will exist for as long as the tokens do.

Addressing the high FDV (Fully Diluted Value)

Many community members have been vocal about $THOR’s high FDV and in particular, the high amount of non-circulating tokens. The concern is that a high amount of non-circulating tokens could possibly lead to severe inflation and dilution.

Several steps have already been taken to reduce token inflation. Block rewards have been reduced. New community proposals are ongoing to re-allocate token emissions to more productive community actions. Dilution is now at its lowest point and at a healthy level.

However, the fully diluted supply of $THOR still exists as long as the tokens exist, even if they remain non-circulating. Many community members have rightly pointed out that the mere existence of these non-circulating tokens brings the risk of future token inflation and dilution. Burning some of these non-circulating tokens is an effective way to address this situation.

Community Incentives Allocation: Purpose & Goals

THORSwap is a protocol by the community, for the community. Of the original token distribution, 50% of the total supply (250M $THOR tokens) was allocated to Community Incentives. The core purpose of this allocation is to help drive adoption of THORSwap, as governed by the community.

This allocation has been used to incentivize partner programs, acquire protocol-owned liquidity, and as the source of $THOR emissions to stakers. Right now this leaves ~230M non-circulating $THOR remaining in the Community Incentives allocation, which is the biggest contributor to the high FDV.

The Community Incentives pool is meant for the community to govern and drive adoption of THORSwap, as the community sees fit. The community is empowered to submit and vote on proposals for how best to use this allocation. There are already many ideas on re-allocating emissions to more productive user actions, rewarding swappers, attracting new users, etc.

This $THOR Improvement Proposal suggests that burning a portion of the Community Incentives allocation is a benefit to all THORSwap community members, as it reduces future dilution and rewards early participants.

How?

A major change to the protocol, such as a token burn, should be approved by the community and be based on the community’s own actions in using the protocol.

There are many possible metrics to measure the usage of the THORSwap protocol. As a trading protocol, THORSwap’s trading volume denominated in $RUNE is the best indicator of community usage.

Denominating in $RUNE is a way to align with THORChain’s success, and is a better way to compare historical volume because USD Volume is subject to $RUNE’s price fluctuations.

Historically, this has been THORSwap’s volume for the year 2022:

Anyone can check the values using this midgard api endpoint, taking into account token and dollar values should be divided by 1E8 and that times are in unix time format. Current month, January 2023 will be the last in the list.

This community proposal proposes that potential token burns will be contingent on the community’s own usage of the THORSwap protocol, as measured by THORSwap’s trading volume.

The proposal

All token burns are contingent on the community’s own actions - the community must approve the initial burn, and the trading volume targets for each month must be met for the monthly burns to proceed.

This proposal is intended to be an initial test phase. The numbers and figures in this proposal are intentionally conservative because a token burn is a one-way street - no one can undo a burn. The community may bring forth future community proposals that propose to extend the timeframe, adjust the monthly targets and burn amounts as the community deems to be the best use of the Community Incentives allocation.

Proposal Impact

The initial burn of 25M $THOR will more than offset all $THOR emissions to-date (~20M).

Currently, emissions include only emissions to stakers and are 4 tokens per block produced since this January. Block rate of the Ethereum network has been quite steady above 7160 blocks per day since September 2022 so we can expect the burn amount to be slightly above 2.5M $THOR tokens each month if it reaches the volume target.

How voting will work

An on-chain vote will be set up on Snapshot.org

Please vote on the poll below, on Feb 1st in one week's time, if there is majority support, an on-chain vote will be set up on Snapshot.org

Anyone holding $THOR or $vTHOR will be able to vote by connecting their Metamask or TrustWallet through WalletConnect. Sadly, Keystore will not be supported. XDEFI will work through the Metamask option.

Only $THOR and $vTHOR holders have rights to vote, and it won’t affect holdings. $vTHOR holders should have a higher voting power.

After selecting preferred option on the proposal, click “Vote” and sign a message with your wallet. No transaction is needed for this, no gas will be used. You can find more details on Snapshot’s official docs."

Burn Proposal poll (not actual on-chain vote)

Source: https://forum.thorswap.finance/t/thor-community-incentives-burn-proposal/37/1

As we can see so far there is a strong YES voting for "Burn the THOR" with 90% in favor of it. I think that this proposal will PASS and we will see new mechanics implemented in the ThorChain protocol that will burn $THOR tokens and improve it's tokenomy sooner rather than later. And what better moment to do it than now when we are between the bear and bull market? I can only imagine what will happen in the bull market when this action will start showing its results.

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