We have a little under 70% of the Min tokens still locked up and being released in the form of farming incentives. As the supply continues to increase, this will dilute the price of the token for existing Min holders overtime and give them less incentive to hold their Min tokens.
Providing liquidity causes the holders to have to split up their Min holdings 50% to the other token of the pair they are providing liquidity for. They are also subject to impermanent loss and during periods of heavy divergence (even if it is a bullish case) this can be fatal. For example look at this individuals case, if they had just held their AGIX, they would have been way better off showing their support in that way rather than by providing liquidity to the protocol.
Case: Need Help - permanent loss or impermanent?
So what about people who just want to buy and hold only Min?
I propose that we increase the utility of the Min token a little more by imposing a slightly higher fee (taken in the form of Min) ONLY WHEN SELLING the Min token for any other token.
These fees would then be sent to a smart contract that stores them until the end of the epoch or until a limit is reached and distributes it (in the form of an airdrop) to all existing holders of Min (as well as LPs) to reward them for showing their support to the Minswap dex. This reward is only distributed to min tokens that were held (or provided for liquidity) for at least 1 epoch and the rewards would be distributed the following epoch.
For example, if we charge a 0.01% (we can vote on how much) fee on transactions where Min is sold. On a theoretical Min sell volume of 10,000,000 Min in an epoch this would allow 1000 Min to be allocated to the Hodler Reward Wallet. And airdropped (every epoch or if a threshold is met) to all current holders of the token with respect to their % ownership in the following epoch.
This fee can also be dynamically allocated between a range of 0.01% - 0.05% (we can vote on range) respectively to address times of low sell pressure vs high sell pressure to strongly incentivize people to keep hodling the Min token.
This will greatly benefit Minswap because:
- It will encourage people to buy and hold Min token despite selling pressure and daily market volatility.
- It will be a safer alternative for those scared to lose out on impermanent loss.
- It will cut back slightly on the current inflationary tokenomics of the Min token and help it hold some of its value (in addition to the fee switch).
- It will not force people who just want to hold min to have to provide liquidity to another token as well and risk impermanent loss.
- It will allow users to gain some utility out of the token as they wait for further developments that will provide even more utility.
- It will rewards buyers and holders at a slight cost to the sellers.
- It will allow existing holders to benefit during times of high selling volume.
- Once all tokens are in circulation, it will still rewards hodlers without subjecting them to any impermanent loss via LPs.
- During weeks of expected heavy sell pressure due to news or big events, it will encourage more people to hold for the epoch rather than sell in order to accrue rewards from heavy sell pressure. Even if selling happens after the epoch is over, that will still benefit hodlers.
Combined with the fee switch and any future utility improvements of the Min token, this will greatly increase the utility of the Min token, have a positive impact on the price, and work towards making the Min tokenomics more deflationary.
This will also greatly benefits LPs who earn rewards in the form of Min which will then respectively earn hodler rewards as well on top of the Min that they provided for liquidity,