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Introverted Token Burns are Toxic by edicted

View this thread on: hive.blogpeakd.comecency.com
· @edicted · (edited)
$57.97
Introverted Token Burns are Toxic
![burn-money-joker-fire-batman.jpg](https://files.peakd.com/file/peakd-hive/edicted/23vi8Kd9iCXKBR5EsZuCW9PAzDhnPbZH1qZXGkHiTPCoP2WM2xxPtkGFfp866MrbjNbrU.jpg)

#### Incorrect Focus is incorrect.
New and potentially up-and-coming projects love to try and generate hype with token burns.  Why?  Well, it's basically to trick the community into thinking number is gonna go up in order to use them as exit liquidity.  It becomes a self-fulfilling prophecy where the token burn creates a pump/dump just due to the shift in market sentiment rather than having actually created any real value.  

#### No value created. 
Imagine printing a token out of thin air in a premine and then acting like burning a small fraction of the premine is bullish.  This is the ultimate expression of a toxic introverted token burn.  That "money" that was created from the inside was never going to extract any real value.  These premines are big enough to crash the token to zero a hundred times over.  This is the simple nature of liquidity and spot price as they relate to near infinite stacks of counterfeit tokens sitting on the sidelines.  It's insulting on multiple levels. 

#### Such disruption much innovation
The ultimate problem with crypto is that it's not innovative.   How do we know it's not innovative?  Because the greedy people marketing it are telling us it's innovative and solves a problem.  They don't care about making something amazing; they care about getting rich.  This is true at least 90% of the time.  Let's be honest it's higher than 90% but I'm being nice and conservative. 

Even in the case of the product being actually valid and having a sustainable use-case, there are still a million ways for the thing to fail.  The smartest dev can still be terrible with money.  Those are completely different skills.  You give them $20M to build the thing and they go out the next day and buy a lambo with the money.  We see this play out over and over again, not just in crypto but any hype cycle like the Dot Com bubble. 

#### Focus on Supply vs Demand
The ultimate problem here is that creating actual demand for a thing is very hard while reducing supply (or faking it) is much easier.  To increase demand for something means it has an actual use-case and an actual reason for more users from the outside to join the new community.  This is very difficult to achieve, so most of the ideas people come up with revolve around lowering the supply or creating a deflationary system with the expectation that this is how economies operate.  And yet thousands of years of economic history tell us that deflation is the worst thing an economy could possibly experience.  It's a tricky thing to navigate especially with Bitcoin going up in value exponentially for over a decade.  That's how broken the current system is.  BTC can move up exponentially even though the way that it works is very far from ideal. 

#### Supply and demand are linked
When people pitch ideas to lower supply: they very rarely consider that they are also lowering demand.  Emissions exist to incentivize the current infrastructure.  If we take incentives away then the infrastructure goes away.  Inflation is an investment, and if that investment is a good investment then it more than pays for itself.  Just because removing it creates less tokens doesn't imply that the network will gain value.  It can just as easily backfire into oblivion and cascade outwardly into a rippling effect of no-confidence from the current userbase.   Everything is connected. 

Conversely, printing more money will increase the spot value of the token if that investment is sound.  This is a simple truth that I don't see anyone in crypto talking about.  All I hear is the same repetitive brainwashing that tells us that 21M is the ultimate system and any token with an uncapped supply is doomed to bleed out to zero.  That's not how it works but that's where current consensus stands across the board.  They are wrong, and they double and triple down on being wrong every time Bitcoin breaks a new all time high.  After all: they can afford to be wrong when they get paid to be wrong.  It won't last forever. 

------

![heat-fire-burn.jpg](https://files.peakd.com/file/peakd-hive/edicted/23wCG9a4423pGc8KE5zGyLsJpyJvx5KGum6XvUqdnrUHBdb4BYq1ZrbjZLhFx1JomzZET.jpg)

#### Extroverted token burns
The best possible outcome for token burns is to get attention from outside the network.  Meaning if we want to burn Hive we don't want diehard Hive users to be destroying those tokens.  What we actually want is people holding BTC or USDT to notice us within the attention economy, trade their BTC/USDT for Hive on the open market, push up the price, and then burn the Hive so it never gets dumped on the market again.  This is the way. 

I say these things because the other day I was thinking about the tokenomics for my own system and realize that getting people on Hive to burn their assets is not good.  If I leverage my reputation on Hive and get people who trust me to take their Hive and burn it... that means all the people on Hive who trust me the most are going to lose governance power and bandwidth on the main chain.  All this would happen without Hive price even going up.  That's a terrible terrible outcome.  Just sayin. 

#### Conclusion
The only way for number to go up is to get attention from the outside or to build real value from the inside.  Both of these avenues are difficult paths to walk down.  Nobody said solving problems was easy.  If it was someone would have solved it already. 

Everything is connected, including extroverted and introverted liquidity.  Reducing outflows with introversion will push the price up even if inflows stay exactly the same.  It's not the ideal scenario as this isn't real growth, but it would make number go up. 

However, what we really need to avoid is thinking that burning tokens that were never going to be dumped is bullish.  If tokens were never going to be dumped, burning them does nothing.  It's complete vapor.  In fact, it's potentially toxic if the users are destroying their own governance power on the main chain and centralizing the distribution.  The goal should always be to decentralize distribution, and token burns are very rarely ever going to achieve that in any meaningful way unless they are set up in a very clever way. 

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vote details (552)
@antisocialist ·
$0.17
The top 20 accounts are taking 50% of the inflation, day after day, year after year, anything that monkey wrenches that treadmill is better than letting the stake continue to concentrate to those that already have game breaking amounts.
Who plays a game they are guaranteed to lose?
Who provides exit liquidity to a game that will never change who is in a position to profit from playing?
Why put effort into hive when the stake will continue to concentrate in the accounts of those that have the most?
This fact has handicapped adoption from the very beginning.
Nobody wants to do anything about it because the only way to get the big votes is to ignore the problem.
Burn posts still pay the curators, only the author rewards are burned.
Better to burn hive than to let it continue to feed the problem, imo.
πŸ‘  ,
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vote details (5)
@edicted ·
$0.11
>Why put effort into hive when the stake will continue to concentrate in the accounts of those that have the most?

#### Show me.
Most inflation is distributed through the reward pool.  
The biggest bloggers are not the biggest stake holders. 
Show how the distribution is centralizing over time. 
It should not be hard and no one ever presents any actual evidence to show it. 
I can never take this argument seriously because I live under the poverty line and there's a chance that I make it to whale status this cycle. 

The absolute biggest contributor of centralizing the stake is market volatility and the 4 year cycle that fucking wrecks all the new users and completely demoralizes them.  It's the distressed selling combined with the fact that 90% of the world lives paycheck to paycheck and has zero ability to manage their finances properly. To top it all off blogging is totally subjective so the jobs the network currently offers are not creating objective value.  There is no problem with how this network currently operates the problem is that the users aren't creating any value.  If the users were creating objective value they'd get rewards.  The only thing we are missing is better infrastructure that allows users to create objective value that can't be contested. 

>Who plays a game they are guaranteed to lose?

Who loses?  
I post something and it pays out $0 just like every other social media site. 
Only 10% of our inflation is allocated to security. 
Everything else is just icing on the cake. 

On Bitcoin only the miners get payed (100% security). 
Why would anyone buy Bitcoin?
Why would anyone run a node if they don't get paid?
Why would anyone build anything on Bitcoin when only miners get paid?
Oh wait that's exactly what's happening. 
Why is that? 
These issues can't just be explained away in a few sentences. 
There's an invisible network effect permeating everything. 
πŸ‘  , ,
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vote details (3)
@antisocialist ·
$0.08
>Why would anyone buy Bitcoin?

I ask myself that all the time.
The days of dimes for lambos has passed.
Dogecoin, too.

>The biggest bloggers are not the biggest stake holders.

Technically accurate.

![image.png](https://images.hive.blog/DQmQSWHAqtkAuzoSVe783i7h4oiZFbXCguXFwG3Ctet3C6s/image.png)
[source](https://peakd.com/hive-133987/@dalz/top-hive-earners-in-january-2024-or-authors-curators-witnesses-dao-hbd-interest)

>Show how the distribution is centralizing over time.

Care to count how many of those are the same people with multiple accounts?

I've talked to people with enough cash to buy in, and be somebody, and they don't want to because they still can't overcome the concentration as it is.
Until it takes 1000 accounts to hand out the first 50% of the inflation, rather than 20 accounts in the hands of ~10 people, the stake is too concentrated to appeal to anybody with enough cash to be one of those 1000.

To overcome a 500mv cap on voting from the pool requires an investment of ~86k usd.
To overcome a 1000mv cap costs ~172k usd.
This only gets worse as the price rises.

Right now, if you invested that amount you would still be diluted by the larger accounts because the pool has no limit on how many mv you can use to pull from it.

While there are many people out there that could do it, none of them are doing it.
8 years should be enough time to test this arrangement of how the pool is used.
Top down management isn't attracting newbs.
It drives them away once they do the math.
Why would they continue to play once the whale votes are in the past?

>I can never take this argument seriously because I live under the poverty line and there's a chance that I make it to whale status this cycle.

Not everybody has the strength of character to exercise this level of discipline.
Not that they couldn't learn, just that it doesn't come natural to them.

>To top it all off blogging is totally subjective so the jobs the network currently offers are not creating objective value.

Yes, smart contracts will open more avenues for revenue, and that can only help, imo.

>If the users were creating objective value they'd get rewards.

You can pull the math, I bet.
50% of the pool goes to the top 20 accounts, this is not in dispute, what percentage makes it past the first 100 accounts?
I'm betting that number will explain a lot about the distribution and how it is concentrating to the top.

The whale experiment 4x'd the vote values of the rest of us.
The reward curve is different now, so I wouldn't expect more than a doubling of vote values, but do more people want to blog for pennies or do they want to blog for dimes?
Right now the incentives benefit the haves and drive away the havenots, being that there are more havenots this is a losing strategy, imo.
Unless, you are only looking for <1000 active users.

I've followed the largest curators and much of what they vote to people ends up getting dumped, rather than encourage the savers, they pay the dumpers.
Is it any wonder that the price is in the basement?

>Who loses?

The people that buy in.

Those that earn their way in can only lose if they ride the price down.
Again, encouraging immediate dumping.

>Why would anyone run a node if they don't get paid?

They won't.

>Oh wait that's exactly what's happening.
Why is that?

No better options.
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vote details (4)
@dbooster ·
$0.03
I never really understood token burning. It seems like if a token is planned well, no burn would be necessary. 
πŸ‘  
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vote details (1)
@hivetrending ·
Can the Bitcoin block subsidy halving be considered an extroverted mechanism of the protocol? 
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@edicted ·
$0.05
Seeing as it only has an affect on a very small subset of the internal workings I'd say it's pretty introverted. 
But also the halving event is not a burn and the marketing of 21M and the hardcap is very much extroverted. 
It's a bit of a false equivalence to analyze it in this way. 
The Bitcoin network takes very little risk which is good for everyone to branch out from. 
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vote details (1)
@silverd510 ·
$0.16
Here’s an idea. Instead of burning tokens for no apparent reason. Why doesn’t somebody come up with a way to lock them away for a set period of time making them unavailable. Till the token becomes in demand. If it doesn’t then lock the set amount of tokens back up for a longer duration. 
Or make a token with a capped supply, and do a hold on a certain percentage of tokens that only get released yearly or whatever time frame.
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vote details (1)
@edicted ·
#### Ha nice that's a fascinating idea. 
It only has one problem: it requires oracles. 
These oracles would tell the network how much the token was worth in terms of USD. 
Funny story: Hive already has these oracles via the price feed and HBD mechanics. 
Would probably be very easy to implement something like that here. 
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@silverd510 ·
$0.03
It won’t happen because it’s a good idea. If they didn’t think of it, then it will never happen.
πŸ‘  
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vote details (1)
@teutonium ·
$0.32
Forcing people to burn tokens, or just burning tokens for the fun of it are wrong, the right way to do token burns is to use protocol revenues, buy back the tokens from the open market and then burn them.

This is basically what comapanies do in the stock market and works the same as a dividend, it's basically a stock buyback with revenues and the end goal is to reward current shareholders.

I see a lot of people over here on hive's communities that do burns wrong, they burn tokens that are rewarded from the inflation but that didn't capture any actual revenue, that's not how this should work. Burns and token buybacks need to come from an actual product or service being sold thus generating actual REAL revenue, and then use that revenue to buyback tokens, that's how it is.
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vote details (3)
@edicted ·
Yeah I didn't have time to get into it because I ended the post with "we gotta be smart about this". 
So how this should be done is a topic for a whole other post. 
I envision burns creating new assets like NFTs or derivative tokens.
Instead of the money going to a centralized agent the network buries it forever. 
Value should never get destroyed but transferred somewhere else. 
If that transfer is one way then it's a burn. 
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@teutonium ·
$0.03
Hmmm... you could lock the tokens being burned in an NFT, but not sure what that would do.

Waiting for that new post to see where you are going with this concept...
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@shainemata ·
$0.03
I was thinking the same about stock buybacks. It gives the illusion the corporation is doing something to raise the value of the stock. But corporations continue to sell stocks and/or give stock options after the buyback, which continues to dilute earnings. In the end, the hard-earned profits go POOF for a cosmetic fix instead of being distributed to the stockholders. 
πŸ‘  
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@teutonium ·
$0.02
Those companies can only do those things because the shareholders allow it, if the shareholders didn't allow such thing, they could vote out the board that allows new stock to be issued or stock options, and put someone else in.

When a company is public the shareholders are the ones that decide things.

The stock options though are normally given CEOs that increase the stock's price by a lot.

Only two issues that I got are : When stock buybacks are done via loans. Getting loans to do stock buybacks should not be permitted. And with the fact that big ETFs don't allow the people that own those ETFs, and thus own the underlying  individual stocks, to vote during shareholder's meetings, and instead they vote for them, like Blackrock does with their ETFs.

πŸ‘  ,
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@zekepickleman ·
$0.09
Never thought of it that way!  

I always figured that token burns were a great way for whales to relieve themselves of some centralized power once things were stabilized and the purpose of the project was in the hands of the people. Like when the litecoin guy would get flamed for only trying to pump his own stake when shilling. Not sure of the specifics but he offloaded all of his stake (apparently) so that he could shill the vision and value. Litecoin crashed and never came back to that token level. 

Totally sensible to understand that a chunk of premine being burned can be a pump scheme and question why that premine was printed in the first place. 

Things that make you go hmmmmm!
πŸ‘  ,
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