Abstract:

This proposal outlines the implementation of a deflationary mechanism for the $BFR token through supply reduction, burn protocol initiation, and a hard supply cap.

We propose several measures to strengthen the role of the $BFR token as the core asset of the Buffer ecosystem & reduce the dilution of supply through inflation.

These measures have been discussed within the community and team for a long time, and after carefully weighing the options and potential impact, we have decided on proposing the following measures:

1. Burn community allocation to reduce $BFR Total supply 

A total of 25M $BFR tokens (community allocation)* representing 25% of the total supply will be unlocked on June 4th, 2023, after a 6-month cliff. 

*Vesting contract: 0x63B045c2c53Eb7732341a96a496DF1Cf423E11bA

We propose the following approach to reduce future uncertainty and remove the overhang of a large portion of tokens flowing into circulation:

• Burning of 20,000,000 BFR tokens upon unlock (06.04.2023)

• Burning of the remaining 5,000,000 BFR from the community allocation and 5,000,000 from the POL allocation** reserved for burning upon reaching a set milestone***.

**Contract: 0x5558CD6480A63601EC780D8f40FD7cD97dea48a7

***Milestone: 10M in total volume generated on Buffer Finance and 20,000 BFR token holders.

2 - Implementing a sink into Buffer Finance i.e. fees that lead to the token being destroyed/burned. 

We propose to establish $BFR-based trading pools for all Buffer products wherein: 

a) 50% of fees accrued from $BFR trading is burned

b) 50% allocated to  LBFR Loyalty Program rewards to incentivize trading volume 

The $BFR for the counterparty will be sourced directly from the treasury, creating a closed loop that ensures the platform's sustainability and enhances value for stakeholders.

Any alterations to fee usage are contingent on community governance and can be affected through BIP voting.

3- In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, we also propose a maximum circulating supply of 50M for $BFR.

Motivation:

The $BFR supply of 100,000,000 & original emission schedule were intended to provide a secure long-term runway for project funding and incentives for LPs & stakers

Buffer has proven itself as a robust yield-generating platform that can prosper without requiring significant long-term token emissions.

The token is meant to be a scarce multi-utility asset, representing stakeholdership in the ecosystem and granting access to the yield generated by a wide range of products under the Buffer Finance brand.

Protecting current stakeholders and long-term supporters from inflation and putting $BFR on a path toward long-term deflation is the core motivation behind the proposed measures.

Especially the implementation of $BFR-based trading and the burning of 50% of the accrued fee introduces a sink that allows for constant deflationary pressure while providing novel utility and a source for trader incentives via the Loyalty System that scales with the growth of platform usage.

References:

• BFR token allocation and contract: https://docs.google.com/spreadsheets/d/13s8r6hIBhQnPDt-Hlyqi1eQeAS_quEjKi1WHkShX3SA/edit?usp=sharing

• Buffer Tokenomics: https://buffer-finance.medium.com/bfr-tokenomics-a52b4ecc4817