Greeting all,I wonder often. How are projects determining how many tokens to create, distribute and burn. From the projects we worked on seems the founders just copy what the other guy did or made it up .
Although i have seen a few projects with community input on circulation and burns , i wonder if these are truly informed votes?
Here is my attempt not to make same mistakes and add some value.
I think the total supply is more of a psychological thing. Some people prefer big supply with cheap price cause they like holding millions of tokens while other will prefer small supply cause it makes the token scarce and therefore more valuable (in their eyes).
About the burn, do you mean burning tokens at launch, implementing a burn mechanism or regular manual burns?
Burning tokens at launch only makes sense if you have a taxed token with a redistribution system. Sending a part of the supply to the blackhole means that the blackhole becomes a “holder” and therefore each time someone buys/sells/send tokens, the amount of tokens burned will automatically grow.
About burning mechanism, the first one that comes to my mind is USTX. The algorithm mints and burns tokens to reduce the volatility that sometimes can be crazy for small cap tokens. But if someone has other examples feel free to share.
Manual burns only make sense in my opinion if the tokens are bought back from the market. Burning tokens from team wallet = burning tokens that have never been bought in the first place so, except reducing the total supply, it doesn’t have much effect. Buying tokens back from market pushes the price up and burning them shows that they won’t be dumped in the future. That reduces the supply, pushes the price up and on the long term benefits all the holders.
Why is ETH burning now even though they have infinite supply? I understand decreasing supply to increase scarcity but aren’t they just going to increase supply again? Maybe its a short term gain but to what end?
ETH is a coin so the situation is a bit different with a simple token. Since Ethereum became PoS and implemented the EIP-1559, the amount of new ETH created decreased and the amount of ETH burned increased. So it’s currently deflationary but no idea how it will go in the future
The decision of how many tokens to create, distribute, and burn should be based on a thorough analysis of the project’s goals and market conditions. Factors such as total supply, distribution strategy, and potential use cases should be considered. Community input can be valuable but should be well-informed. Open communication between the project team and community is important.