Burn-and-mint tokenomics
Since last year, I have been working on onocoy, a decentralized physical infrastructure (dePIN) project aiming to bring affordable high-precision positioning to the entire world. Like many dePIN projects, including the original Helium, we implement our tokenomics using burn-and-mint.
In burn-and-mint, a token is "burned" in nihilum to pay for a service that a network provides; a token is "minted" ex nihilo to pay for a service that is provided to the network. The mint pays for the supply of a service, and economic demand sustains the burn. Burn-and-mint is useful because it is an equity-based way to bootstrap a network, avoiding the need to raise large amounts of capital.
There are so many questions that should be answered on the best way to design a burn-and-mint economy and I have set out to answer some of them; two posts on this topic have appeared on my blog. Questions that are important to our industry include:
- What is the net present value of a burn-and-mint economy? (see answer here)
- How much should contributers be rewarded? (see answer here)
- How does uncertainty around an economy's value affect volatility of the token price?
- How can an economy be designed to soften the impact of shocks, such as dumping or crypto market volatility?
- what is the interplay between staking and burn-and-mint?
- In a world of infinitely many Nash equilibria, how can an economy be designed to ensure an acceptable outcome for all participants?
I wrote the questions above in the order that I plan to answer them. To ensure the quality of this work, I am collaborating with my fellow onos and some experts in the fields of tokenomics and economic game theory. Note that most of the questions above are not specifically limited to burn-and-mint economies, and therefore this research might answer questions surrounding other types of tokenomic models and even shed light on the mathematics and gamesmanship behind traditional financial systems.
Henceforth this page will act as a place where I will present my findings rearding burn-and-mint.