Jared Grey, CEO of the decentralized exchange Sushiswap, has plans to redesign the tokenomics of the SUSHI token, according to a proposal introduced on December 30 in the Sushi forum.
As part of the proposed new tokenomics model, time-lock tiers will be introduced for emission-based rewards, as well as token-burning mechanisms and liquidity locks for price support. The new Tokenomics aims to boost liquidity and decentralization on the platform, along with strengthening “treasury reserves to ensure continuous operations and development,” Gray said.
Under the proposed model, Liquidity Providers (LPs) would receive 0.05% of swap fee revenue, with higher volume pools receiving the largest share. LPs will also be able to lock in liquidity to earn emissions-based rewards. Rewards will be lost and burned, however, if removed before maturity.
I am excited to share my vision @SushiSwapnew token model. I’ve posted a tl;dr write-up on the Sushi forum & linked all the proposals. We look forward to your questions & feedback.https://t.co/D9TO2Oi8ra pic.twitter.com/GBrQKPzfiH
– Jared Gray (@jaredgrey) December 30, 2022
Also, staked SUSHI (xSUSHI) will not receive a share of fee revenue, but emission-based rewards are paid in SUSHI tokens. Time key levels will be used to determine rewards based on emissions, with longer time keys yielding larger rewards. Withdrawal before the maturity of the time lock is allowed, but the reward will be forfeited and burned.
The decentralized exchange will use a variable percentage of the 0.05% swap fee to buy back and burn SUSHI tokens. The percentage will change based on the total time lock tier selected. The proposal notes that:
“Because the time lock is paid after maturity, but the fire occurs in “real-time” when many collaterals are not determined before maturity, having a considerable deflationary effect on the supply.”
The tokenomics redesign began after SushiSwap announced it had less than 1.5 years of runway left in its treasury, meaning a significant deficit threatened the exchange’s operational viability. As reported by Cointelegraph, Sushiswap suffered a loss of $30 million in the last 12 months in terms of incentives for LPs due to its token-based emission strategy, leading the company to introduce a new tokenomics model.