The concept of a deflationary token is by no means a new one. Veteran crypto investors who’ve been in the crypto space long enough will undoubtedly have heard of popular deflationary tokens like SafeMoon and EverRise.
For the benefit of our newer investors, the theory behind a deflationary token is a simple one. Start by minting a large number of tokens and centre the tokenomics of the project around buying said tokens from the market and “burning them” (sending the tokens to a dead wallet address that no one can ever access). This slowly but steadily reduces the supply in the market which, as basic economics dictates, causes an increase in price and benefits all existing holders.
Case Studies – SafeMoon 🌙 & EverRise
This theory has been proven to work… for a time. SafeMoon for example skyrocketed to its all time high with a market cap of $6 billion a mere 2 months after launch. Today (28th August 2021), despite the continuous burn of SAFEMOON tokens and general sentiment in the crypto markets taking a positive turn, the price of SAFEMOON has fallen approximately 66% since its all time high.
A similar scenario can be said to have happened with EverRise. Investors trading in EverRise tokens paid an 11% tax, of which:
- 6% went to buying back EverRise tokens from the market and burning them.
- 3% went to the EverRise team.
- 2% went to rewarding existing holders, increasing their holdings of the EverRise token.
Today, despite having bought back and burnt just over 25% of the maximum supply, the EverRise token currently trades at $0.000000042245, 44% below its all time high.
So! What seems to be the problem?
The Problem with Deflationary Token Projects Today 🙅♂️
In both case studies, we can clearly see that something is missing.
Despite both projects being wildly popular and seeing its price skyrocket in the first few months post launch, both SafeMoon and EverRise have suffered from being unable to maintain similar levels of interest and trading activity in the long term. This might have been due to a downturn in the market or just investor sentiment shifting towards newer, more “hyped up” projects.
Unfortunately, the entirety of both SafeMoon’s and EverRise’s tokenomics is highly dependent on trading activity and investor confidence. Without sufficient trading volume and investors willing to hold the token, every sale causes the price to fall more than the price increase from the buyback mechanism. This downward pressure scares off potential investors and causes existing holders to sell, which restarts this vicious cycle all over again.
While the basic premise of the xYSL token is similar to other deflationary tokens in the market, we’ve included our own twist on its tokenomics, fitting it amongst our catalogue of existing products and making sure it complements the YSL.IO ecosystem like another piece of the overall puzzle.
10% Transaction Fee
xYSL is a deflationary token that will start with a maximum supply of 100,000 tokens. Similar to other deflationary tokens in the market, any transaction involving the xYSL token will see investors charged a 10% fee (by setting the slippage to 10%). These fees are then split three ways in order to:
- Burn xYSL tokens – 50% of the fees in xYSL tokens are burnt, contributing to the ever deflationary supply of xYSL.
- Create YSL-BUSD locked liquidity – 25% is sold for BUSD, while the protocol then mints an equivalent amount of YSL. These are paired and deposited in the YSL-BUSD locked liquidity contract.
- Pay for ongoing costs – The remaining 25% is sold for BUSD then transferred to the YSL.IO team wallet in order to pay for day to day operational costs.
📍 Note that deposits into and withdrawals out of the xYSL vault will be excluded from the 10% transaction fee!
It’s often said that a picture is worth a thousand words, so here are three infographics that elaborate what happens when users attempt to buy, sell or trade xYSL tokens.
Deflationary Mechanism Independent of Trading Activity 💪
This is the xYSL’s unique twist on deflationary tokens. Where other projects rely on trading volume to ensure their tokens are being bought back and burnt, we’ve designed xYSL to still function independent of market activity.
This is accomplished by using some of the BUSD collecting as fees from other YSL.IO features to market buy xYSL and burn them. These include:
- 66.67% of the BUSD collected from the optimisation and amplification tax.
- 100% of the sYSL entrance and exit fee.
- 100% of the aYSL surcharge.
If you’ve been following our Busy Investor Guide series, you’ll remember that the optimisation and amplification tax alone is charged every hour when YSL.IO vaults auto-compound earnings. This means that even if not a single xYSL trade is made, even if not a single investor buys or sells sYSL, even if the market takes a turn for the worse (bear market) and investors move their funds into stablecoins, the funds investors have staked in the vaults will ensure xYSL is constantly being bought and burnt every hour.
Fun fact ⭐ – This is also where the “x” in xYSL comes from. It’s an x-tremely deflationary token!
Liquidity Mining Rewards 💰
An additional incentive to hold xYSL tokens is the ability to earn liquidity mining rewards.
With a total of 400 sYSL being minted daily to be split amongst the vaults shown above, investors who stake xYSL in the single xYSL vault on YSL.IO will receive a portion of 50 sYSL a day based on their TVL in the xYSL vault.
An important feature to note is that deposits into and withdrawals out of the xYSL vault will be excluded from the 10% transaction fee! Investors can freely stake their xYSL (locked and unlocked) into the vault to earn a share of liquidity mining rewards.
Investors who provide xYSL-BUSD liquidity on PancakeSwap on the other hand, can stake the resulting LP tokens into the xYSL-BUSD vault and also earn a share of 50 sYSL a day based on their TVL.
Convinced now that xYSL is a token worth holding, the question now is how you can go about getting yourself some xYSL. Depending on when you’re reading this, the answer might differ!
If you’re reading this after the initial distribution of xYSL, simply head on over to PancakeSwap and swap for xYSL, similar to how most token swaps are done. Don’t forget to set the slippage to 10% in order to account for the 10% trading fee!
However, if you’re reading this before the initial xYSL distribution, then you’re in luck as you’re early to the party and there are quite a few more options available to you 😉.
For current sYSL holders, this will be one of only two chances to “purchase” xYSL without incurring the 10% trading fee. 20% of the total supply of xYSL (20,000 tokens) will be available for interested investors who’d like to swap their sYSL into xYSL.
The process to do so is simple. Head on over to this link where interested parties can sign up and complete a series of tasks in order to whitelist their wallet addresses and be eligible for the swap. Closer to the date, we’ll also release a BEP20 wallet address that users can send their unlocked sYSL to on the day of the swap.
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