Liquidity mining has become the standard in the DeFi market, opening the door to open financial protocols modeled on liquidity mining, led by Uniswap, SushiSwap, Aave, yearn.finance, and others.
Many newly launched DeFi projects also have liquidity based on the liquidity mining system. However, liquidity gathered through liquidity mining has a major disadvantage. It is difficult to create a sustainable trading environment as the incentive for additional liquidity inflow decreases due to token inflation and token value decline.
Liquidity providers seeking short-term profits “dump” project tokens, causing other liquidity providers to churn, resulting in the collapse of the project token price and ecosystem. Some DeFi services claiming to be DeFi 2.0 did reduce the volatility of liquidity supply through the protocol buying and owning liquidity from users, but did not fundamentally solve the problem of inflation of governance tokens issued by the protocol.
A way to fundamentally solve this problem is to increase the utility of the governance token to increase the number of new governance token holders, or to increase the number of actual users of the service and continuously burn the governance token with a fee generated from this. It is to increase the amount of tokens to be burned over the amount of .
In this way, we are continuing to study the token economy and will strive to construct a sustainable and stable economy.