MIP-20 A 200 Million Merit Circle Token Burn

Proposals Proposal repository
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A 200 Million Merit Circle Token Burn

Author

Sad Cat Capital

Summary

This proposal puts forward the notion of burning 200,000,000 MC tokens from the Community Incentives allocation.

Despite being allocated almost 30% of the starting 1b MC tokens, since the Community Incentives wallet was created, the tokens have had no utility and none have been spent.

Currently 6,125,000 tokens are being burned each month from the Community Incentives wallet, as per the proposal MIP-7, however the wallet still has almost 200m MC tokens sitting in it. This contributes significantly to the total supply, and the fully diluted valuation of Merit Circle, as well as being included in calculations for upcoming token unlocks.

Burning these (currently purposeless) tokens will significantly reduce the total supply of Merit Circle and will bring the fully diluted valuation more in line with the circulating market capitalization. Likewise it will remove any doubt from outsiders about upcoming token unlocks and whether these tokens will be hitting the market.

We also believe this will create a noticeable statement among the wider cryptocurrency community and further demonstrate Merit Circle’s continued commitment to sustainable tokenomics.

Abstract

As per initial Merit Circle tokenomics, the Community Incentives wallet (0x56475a4a8D00b6F7b01E0879CBbba609707aef6b) was allocated 294,000,000 MC tokens (29.4% of the total supply). These tokens were allocated for community rewards, but over the last 12 months since Merit Circle launched, the tokens in this wallet have served no purpose other than participating in a monthly burn.

A previous proposal (MIP-7) recognized the lack of utility these tokens had, and proposed that 75% of the Community Incentives tokens unlocked each month should be burned. Since that proposal was created in December 2021, 6,125,000 MC tokens have been burned each month from the Community Incentives wallet, resulting in 55,125,000 MC tokens being burned over 9 months solely from Community Incentives.

To this day, almost 130m MC tokens have been burned in total, bringing the total supply to 870,828.108 MC tokens - much to the joy of the Merit Circle community.

Community Incentives and MIP-7

MIP-7 included a clause in which the burning of Community Incentive tokens would be reviewed on a regular basis. Since this proposal passed over 9 months ago, we haven’t seen any further utility for the Community Incentives tokens. No proposals have been put forward to use these tokens and none of them have been spent in any way. It is also possible that some DAO participants could be actively against these tokens being spent in order to prevent them from being sold on the market.

MIP-7 also raised concerns over the disparity between the circulating market capitalization and the fully diluted valuation of Merit Circle. The market has experienced a significant downturn over the past year, and there is now more scrutiny than ever upon token unlocks and the ratio between circulating market capitalizations and fully diluted valuations. Investors are particularly cautious about projects which they believe to have token unlocks approaching, or projects which have a much larger FDV than circulating market capitalization.

As of writing, Merit Circle currently has:

  • Circulating market capitalization: $177 million (294m tokens)
  • Fully diluted valuation: $525 million (871m tokens)

This roughly represents a ratio of 1:3.

This ratio has improved significantly since the writing of MIP-7, but to the average investor this still reads as though a significant number of tokens are waiting to hit the market and could look intimidating to potential investors. After burning 200m tokens, the ratio between circulating supply and total supply will be roughly 1:2.3 - a sizeable decrease.

Furthermore, as the Community Incentives wallet unlocks 8,177,000 MC tokens a month, these tokens are often included in calculations for upcoming token unlocks despite 75% of those tokens being burned, and the remaining 25% being sent to a separate wallet to sit in and not move. It is also worth mentioning that the unlocked tokens accruing in this separate wallet contribute to increasing the circulating market capitalization each month, despite not actually entering market circulation.

We believe it is in the DAO’s best interest to “get it over with” and burn these 200m MC tokens immediately rather than waiting for 75% to eventually be burned through MIP-7. Burning them now will represent a significant reduction in total supply and fully diluted valuation, and will prevent the tokens from increasing our circulating market capitalization each month. Keeping these tokens negatively bloats our tokenomics data and serves no beneficial purpose.

Likewise they will be removed from any calculations involving token unlocks, and will demonstrate to both the Merit Circle community, and the wider cryptocurrency community that these tokens will never be sold on the market, and that Merit Circle is strongly committed to sustainable tokenomics.

The burning of 200m tokens is something that will not go unnoticed among investors. This is something we can do to celebrate the one year anniversary of the DAO’s launch. It will be a momentous occasion for all of the Merit Circle community to enjoy.

Motivation

  • Significantly reduce the total supply of MC, and therefore further reduce the disparity between circulating market capitalization and fully diluted valuation;
  • Remove a significant portion of perceived upcoming token unlocks so investors don’t inadvertently think these tokens will be hitting the market;
  • “Cut the dead weight” - these tokens have served no purpose the past 12 months except bloating our FDV and total supply;
  • Celebrate the one year anniversary of Merit Circle with a statement to the wider cryptocurrency community;
  • Enhance the value of each remaining MC token through supply burning;
  • 75% of the wallet will eventually be burned with time with MIP-7 regardless, and there is no benefit to just “waiting it out”.

Budget

200,000,000 MC tokens in total to be burned.

198,334,000 of these tokens are currently softlocked in the Community Incentives wallet:

The remaining 1,666,000 tokens can be found in the wallet where unlocked DAO Treasury and Community Incentives tokens are sent upon unlocking each month:

Rationale

Won’t these tokens be needed in the future for community rewards or events?

The DAO Treasury wallet currently has over 17m softlocked MC tokens, and the wallet which holds unlocked DAO treasury and Community Incentives tokens will still hold 75m unlocked MC tokens if this proposal is enacted. This represents a large number of MC tokens for the DAO to do with as it sees fit, which we believe is more than enough for any community rewards or events.

Why burn the tokens? Can’t we think of something better to do with the tokens as it seems a waste?

We defer to the answer we gave in MIP-7 as it still holds true to this day:

“Burning a supply is only a waste if there is a better use for the same liquid MC. Every token use decision should lead to the max amount of value creation for the DAO. We think there are instances where there are better uses. Such as staking dividends, sales to strategic partners with long lockups, or incentivizing certain behaviors that will generate more profits to the DAO. However, as it stands today, and in the current proposal, we have enough MC available to facilitate these needs. In general, a split will probably serve the DAO best. Not in the least, because different stakeholders will value different things. Burns can be a much more tax-efficient way to distribute profits, whereas staking rewards more active participants and locks up supply.”

We believe the DAO has more than enough MC to facilitate the token’s alternate uses, plus the DAO can always replenish its stock of MC through its ongoing buybacks.

Why do you care about circulating market capitalization, fully diluted valuation and token unlocks? They clearly don’t represent the true tokenomics of Merit Circle.

Investors who are either new to a project, or aren’t clued up about detailed and accurate tokenomics, often defer to websites such as CoinGecko or TokenUnlocks to look at data such as Market Cap, FDV and upcoming unlocks when making decisions about investing in a project. These websites often show data which is either completely wrong or misrepresentative of the project’s current tokenomics. Therefore, while we agree that these metrics often aren’t the best to look at, it is important we still give them some thought as they are some of the first pieces of data many investors look at. It is in our best interest for these metrics to represent our current tokenomics as accurately as possible so that outsiders have the lowest barrier to entry possible to joining the Merit Circle community.

Final Words

We hope this proposal pleases the DAO participants, the partners, and the team. We’d like to invite everyone to share their opinion. Let’s hear your thoughts!

Signed with left paw,

Witty Kitty
Queen of Mount Katnip
Sad Cat Capital

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Copyright

Copyright and related rights waived via Creative Commons CCO

10 Likes
2

Henlo,

We’d love to see this happen, for the same reason as the above! It’s a token budget that has no use as can be seen from the previous months.

honey-with-wooden-barrel-vectors

Honey Barrel
Vanquisher of non-Frens
The Freefolk Fellowship

3 Likes
3

I will support this proposal by voting YES.

The reasons given make sense to me. Close to a year passed since TGE and no real use case for the Community Incentives tokens had been brought up, so it makes sense to burn them all at once, instead of waiting for several months to see them get burned on a monthly basis.

5 Likes
4

Greetings, and thank you for the new proposal.

There are only so many things to be done with the community budget. I think it’s most beneficial reducing the token supply through this burniation. It speeds up MIP-7 slightly, and reinforces the strength of the DAO and its future.

Our warships will be ignited once again.

You have the full support of the Ascending Galactic Federation with a “YES”.

Signed,

Erik von Pumpson
Admiral of the MC Enterprise
Ascending Galactic Federation

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5 Likes
5

Meow cats,

Thanks for the great proposal.

As of now, there’s roughly another ~32 months or so of 6,125,000 monthly token burns. That’s a pretty long time to reach the same outcome.

Unless someone can make a stronger case against a mega burn, I’ll be voting YES.

Best regards,
AS

5 Likes
6

Henlo merit circle frens,

I will be voting YES on this proposal I do agree with the above reasons provided by sad cat and it doesn’t make any sense to me to burn them monthly instead of all at once. Get it done folks

Cheers

3 Likes
7

At the pace Sagey, Honey. Erik is going. Soon we can start proposing to change the name!

Seems like a handful of people are controlling everything, pushing their own narrative by manipulating the community and even removing anyone they don’t agree with from places where most of the discussion happens.

I wonder who will benefit the most from such a burn? Who has such a high % of tokens that they can control majority of the governance?

Maybe the community tokens could be used to actually allow the “COMMUNITY” to stay in charge of the DAO?

It really seems like every single move you guys make is to take more and more control from the community and anyone you don’t like and make this anything but a DAO.

I hope others realize the danger before it’s too late.

8

Since the tokens will be burnt anyway why drag it out? A hard yes from me on this proposal which should also greatly lower any unlock or FDV fud

4 Likes
10

How about you keep on topic and discuss the amount of control these guys have in the “DAO”, the way they control the discussion and who this proposal benefits the most?

Who controls the highest % of tokens? Is this dangerous for the decentralisation of $MC? Or is it okay because you’re a fren of them?

11

Henlo,

Weird coming from someone who bought up over 5% of the Edenhorde supply and has been trying to P&D their own bags. If you disagree with the proposal, that’s fine, you can vote against it. Didn’t you ask everyone to borrow you money as you got rekt?

As for the on-topic part - I hope you do realize that this only speeds up the original purpose for these tokens? If people don’t like that, they can say ‘no’. :slightly_smiling_face:

Honey Barrel
Vanquisher of non-Frens
The Freefolk Fellowship

honey-with-wooden-barrel-vectors

4 Likes
13

I agree with almost everything presented in the proposal and believe it to be the best step forward to addressing real concerns with the tokenomics of Merit Circle.

MIP-7 was the right step forward… this continues that legacy in creating a brighter future for the company, the DAO and the Merit Circle community as a whole.

Signed,
Dread of Bongo

5 Likes
14

Moin,

I vote yes, so far we couldn’t really use the tokens, so why not burn them all directly? This gives several advantages, which were well explained above.

I personally think that MC would not be where we are today without some people. And that’s why I can’t relate to what NMTD said. Feel free to create a counter-proposal which we can vote on. To me it all sounds like a personal issue, which you might want to clarify with them in a private message.

3 Likes
15

Thanks Sadcat for the writeup. In principal I am for the burn and will vote yes. For the people who are afraid for the consequences of the burn in relation of decentralisation maybe it would be good to post some info / data on the effect?

IMO every holders token would appreciate % wise in 20% but that may be faulty logic on my side?

Salute

4 Likes
16

I will vote NO. Reasons are:

  1. The only benefit I see is the one time marketing action. Which is done at a wrong time - good news are much more efficient when market is growing. So at least I would wait for bull to return before doing that.
  2. It is true that currently all unlocked Community rewards are not used. But are we sure we can’t get the situation they might become useful? Such situations could be good (huge growth of investment opportunities) or bad (like any kind of serious troubles with treasury). It may have low probability but not equal to zero. When learning to make decisions in chess or contract bridge the usual advice is “keep all the doors open for as long as you can”.
  3. If we anyway decide to get rid of these 200M I think that using it for staking rewards is much better than burning. Because it rewards loyal participants of DAO (by loyal I mean those who believe in its success). And all other token holders benefit too, because high staking rewards will remove a lot of liquidity from exchanges so should influence price in a positive way.

I would prefer to keep the Community rewards pool as is (contingency reserve) but if not - would prefer moving everything to staking rewards.

2 Likes
17

Agree with 1 & 2 very much, along with the other concerns I stated above.

1.Good news like this isn’t so effective in such a market. Doubt many people will even notice.

  1. We’re a young DAO. Just because we haven’t used funds yet doesn’t mean we won’t in the future. Do we put a 9 month expiry date on any funds not used?

Also let’s keep the censorship up when it doesn’t suit you @SadCatCapital @HoneyBarrel

18

This seems to go into off topic discussion, just want to add one thing.

Personal attacks resulting into moderation isn’t censorship. You are making allegations without presenting facts to prove these. If you want to do good to the MC DAO you might don’t want to attack active DAO members but become one yourself. It’s always easier to be negative against something others have done, than to be proactive yourself.

3 Likes
19

Hey @NMTD

This is simply a proposal put forward by a DAO participant - literally what this governance forum is used for. You also put forward a topic on this forum previously in March suggesting that we hold too many stables, and should be 50% in BTC + ETH. Slightly off-topic but since you suggested that ETH and BTC went down a further >50%. No one accused you of “pushing your own narrative by manipulating the community” or implying that you were doing so to benefit only yourself or acting in a nefarious way.

Instead of explaining why you think this proposal shouldn’t pass, you have resorted to insults and declaring that the author only has selfish purposes in mind. No one has to vote yes to this proposal and I’m sure Sad Cat Capital welcome any and all discussion - even if its a post to say “I will be voting NO to this for xyz reasons”

You say this centralises the DAO but I fail to see how?

These tokens aren’t owned by anyone in particular. No one is using them to vote and no one will ever gain control of these tokens to do so. If someone did manage to acquire these tokens then they WILL control the DAO. Likewise distributing these tokens to the community will only dilute everyone’s stake in MC and achieve nothing except providing sell pressure. Token burns affect all tokens equally, no one has “special” tokens that this would somehow benefit more than everyone else. I would greatly look forward to a response on how this proposal benefits only one party and negatively affects everyone else.

Is there anything else you’d suggest doing with the tokens? From MIP-7 and this proposal you’d see that 75% are currently being burned every month anyway. It won’t be long before almost all of the funds will be burned by the passage of time. If you have a better use for the tokens then please include that in your response, as thats actually important to this proposal.

Also, you have previously admitted to being the person who sells into green candles in an attempt to re-buy lower each time, so accusing someone else of doing this is one of the richest things I’ve heard.

The entire purpose of this governance forum is for participants to thing “Hey I think this might be a good idea - what do you think?”

People are then welcome to post responses as to why they think this might be a good or bad idea, and then vote accordingly. There is nothing nefarious or manipulative about posting a proposal to be put up for discussion, so please leave the insult throwing at home.

Regards,

Johnny Jawnz

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7 Likes
20

How would I benefit from the DAO buying BTC or ETH? Very different from what I said above. I also suggested we swap to mc/usdc LP in august during the ETH peak around $2K. But that’s besides the point. I don’t own a huge % of BTC or ETH and the DAO doing certain things isn’t going to benefit my own coins.

Meanwhile Sagey / SCC / Honey keep track of everyone in $MC, plan to oust people, manipulate the community into whatever narrative they want. Revoke seed / burn other peoples funds and now the communtiy fund. Since they own a huge % of $MC, it benefits them greatly.

As said above, those tokens not being used for 9 months doesn’t mean we won’t need them in the future. I’m sure a lot of opportunities may come up in the future to utilize these. Even if you don’t agree, there’s no rush right? They will be burned anyways over time. I don’t see much benefit in making such drastic moves when the market is so dead right now, not many outsiders will notice such a move.

I’d hate for this burn to be used to create an exit pump before the bear market gets worse. There’s a lot of things that this can lead to that there’s absolutely no mention of in the OP, just “burn good, number go up”. Let’s skip the sugar coating and properly disclose potential consequences of such a move first.

I admitted to selling into P&D candles where $MC pumps +50-100% within 30 minutes to generate EXIT liquidity for certain individuals. And thats exactly why @SadCatCapital got pissed at me and removed me from community channels. Maybe I prevented her milking the community? Exitting some bags?

Unfortunately 90% of the discussion is done behind closed doors and within censored “community” channels. Of course I have much more I could say about actions behind closed doors that are very much against the ideals of a “DAO” by the members I mentioned above. But I’d prefer the people making proposals to look at all possible outcomes / beneficiaries rather than all the bs about average investors when retail is 95% gone right now.

21

Greetings Frens,
I am finally creating an account to get a bit more involved here, and am absolutely in favour of this going forward. I believe the cost-benefits are far outweighed in the benefits side, solely on the basis of resolving any further FDV fud as soon as possible before the next bull arrives. Sagey’s concise & clear proposal makes me confident there are still plenty of $MC out there to fulfill the DAO’s other needs, and these tokens serve mostly to cause concern for new investors for total supply.

Feel the burn baby, I will be voting yes.

Kind regards,

Meme-lord.

4 Likes
22

Greetings,

I consider the staking rewards to be sufficient in rewarding the community. Best not to dilute the supply, before it becomes subject to e-begging by rekt EH holders.

Therefore, I will support this proposal by voting YES.

4 Likes