Could Yield Farming Work For Tipping Tokens
They yield farming frenzy has given me a lot to think about, and as I mess around with it more, I'm learning all sorts of new things. I recently got involved in farming another meme coin called Salmon on TRON. I wouldn't recommend it. I like to learn about different revenue and tokenomics models.
While checking out their discord, I saw a post about the market markets using some of their returns to burn supply to improve token prices, and it got me thinking wouldn't that be a great model for tipping tokens.
Tipping tokens have been popular on STEEM/HIVE for a while, but for the most part, it's been a fun community project to show your appreciation for engagement or content. We have coins like ENGAGE and BEER that seem to be the most popular.
How tipping tokens work
Tipping tokens as far as I can see require a user to stake a certain amount of coins and then they'll have access to a set amount of daily inflation for distribution. It doesn't seem to compound so if you don't use it the inflation is just lower for that day.
Having an erratic inflation model like that leaves things open to a lot of speculation in markets.
Side note: Wouldn't it be cool if we had front ends that reminded us of our tipping token allocation and remind us to use it? Might help with a regular rate of distribution, but anyway, that's a story for another time.
Tipping tokens are highly illiquid
So with such a low distribution of tokens but to a wide variety of people due to the way, it's distributed the coins are sparse and in short supply. To buy up tokens at market values to have an allocation so you can tip can be tough and normally the token owner sets the price since they sit with a massive stake to set the initial market price.
As more people get involved, they would naturally dilute the token owner's stake.
But apart from having fun with these tokens, there's not much value to them, and the token owner sort of has to create the market.
If however more people were market makers and added depth to these token tipping tokens, we could see more people willing to buy the stake they need to be able to qualify for tipping since they won't have much.
Buyers and sellers
Tipping tokens are minted erratically when users with stake tip, and that's how a token comes into existence. Once the token is added to someone's wallet via a tip, they have two options, stake enough to tip or sell-off and take the reward.
This makes the market for buyers and sellers; the more people want to reward, the more tokens, the fewer people reward, the fewer tokens.
The more competition for tokens, the higher the price, making it valuable to get a tip. Tipping tokens are great because they allow you to reward outside the seven-day window and give users a new way to participate in the ecosystem.
At the moment, tipping tokens are more for fun, but what if the could also be for value?
Creating a closed-loop
So back to my experience on TRON farming, if you set up markets for tipping tokens, provided liquidity, it helps this market tremendously like I said it's very illiquid.
This allows more people to get in and get out of the tipping token easier without affecting the price too much. Then you take some of the fees from the said market and burn the supply making it even less readily available over time.
I realise people want to make a profit in stake based, but burning some of it can make your stake worth even more. Your principle remains, you make a little on the top, and you reduce the supply with a portion of what you make.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
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