Summary
This BIP reconsiders the value and relevance of burning $BOTTO tokens from the treasury. $BOTTO is a scarce resource that will likely accrue great value, and we are depleting it unnecessarily, in the name of a weak narrative.
Rationale
At Botto’s inception, Botto operated under a buyback and burn (BB&B) program, where all ETH earned from auction sales was used to buy $BOTTO from Uniswap. These tokens were then sent to a burn address.
This was problematic for several reasons, the main one being that we accrued no ETH to the treasury, which at the time consisted only of $BOTTO tokens. It was voted in BIP-06 to stop buying back $BOTTO, and to instead accrue the ETH proceeds from auctions in Botto's treasury, and to burn an equivalent amount of $BOTTO from the treasury.
This was a conservative way to maintain the burn narrative, but it came at an important cost. In the past 365 days, we have burned over 1.8M $BOTTO, approved the swap of 8M $BOTTO to fund the project (≈30% of treasury $BOTTO), budgeted 1.2M $BOTTO for contributors and community initiatives, and budgeted to burn 2M $BOTTO in 2024. This will take us from 30M $BOTTO tokens in December 2022, to 21M in December 2023, and to a projected 14M in December 2024 if we swap the full 8M $BOTTO (as I expect we will), a 53% reduction in just 2 years.
This is not a sustainable path for a project that aims to create the first immortal artist.
Unlike a company that can issue new stock indefinitely, we cannot increase the max supply of $BOTTO. Its importance cannot be overstated: our $BOTTO is a strategic asset required to build the first DAA, so let’s use it strategically.
Burning our most scarce asset is a bad idea, especially today, when the project is not profitable and we don’t know how long the bear market will last, or whether the token price will increase. We should be extra careful with how we use our tokens.
To provide some numbers, over a 12 month period, we've burned about $590,000 worth of $BOTTO (at today's price), or $392,000 (at monthly close price of $BOTTO). Unlike with buybacks, the value did not accrue to token holders, or to Botto; it was destroyed.
In conclusion, I propose to end the burn for the following reasons:
- The burn depletes the treasury from $BOTTO tokens which are increasingly scarce, which are likely to accrue in value, and which are required to fund the project;
- The burn narrative is no longer an important part of our story;
- There are no tangible ROI or benefit to burning from the treasury;
- The burn is a poor use of the team’s time;
- Ending the burn makes Botto simpler;
- If we had no burn in place, it is unlikely we would implement it at this stage.
Disadvantages
- Some people may appreciate the deflationary nature of the token’s max supply;
- Some people may not like that we are revisiting this concept.
Proposal Specification
- Stop burning $BOTTO tokens after each auction, starting with the next Period;
- Update the Docs, specifically the Auction, Rewards, and Treasury pages.
Closing thoughts
There may come a day when a buyback and/or burn program becomes relevant: profitable companies frequently buy back shares. We may revisit the decision to buy back and/or burn $BOTTO when the time is right.
Lastly, there are ongoing discussions about liquidity pool provisioning. I encourage community members to continue their discussions and to put forth BIPs when they are ready. To keep things simple, I recommend we don’t mix the discussion on how to use our treasury tokens with the argument to stop burning tokens.
