When the Salty Saga hardfork landed, we made the decision to set aside 6 LOKI per block for the first six months following the hardfork as a fund to incentivise liquidity for Chainflip and wLOKI. With the recent announcement that Chainflip will be forming its own blockchain, this is no longer necessary, because Chainflip can provide its own incentives.
With that in mind, the Loki Foundation has resolved to burn this liquidity provision.
This will be the largest public burn in Loki’s history. While that is the most important part of this announcement, in the interests of transparency, we will outline more information about the burn in this article.
How the liquidity provision worked
The liquidity provision was to be paid out at 6 LOKI per block, starting at height 641,111. However, this is actually only paid once a week, at heights divisible by 5,040. This means that the first reward was actually received at block height 645,120, then 650,160, and so on, with the final reward scheduled to be received at block height 766,080.
Each reward is 42,840 LOKI — with 30,240 of that being the provision, and 12,600 being the governance reward. Twenty-five rewards are set to be received over the 6-month-life of the provision, totalling 756,000 Loki.
As things stand, the liquidity provision will automatically terminate at block height 770,711, and it would require a hardfork in order to remove the 6 LOKI per block reward any earlier. Although there may be a hardfork before this, we’re not planning to complete a mandatory upgrade solely to amend the block reward before block height 770,711.
Mandatory upgrades require a lot of coordination and administration on the part of the Loki Foundation, the Loki team, and the Service Node operators who run the network. To keep things as simple and transparent as possible, all of the unused rewards received as a part of this provision will be publicly burnt. Burning is already enabled by the Loki blockchain, and is regularly used for Blink transaction fees as well as Loki Name Service Registrations. This means we can complete the burn using a modified wallet without making any changes to the blockchain itself.
How much of the liquidity provision was used
Because Chainflip has only been in internal testing thus far, the liquidity fund has only been used to incentivise wLOKI liquidity on Uniswap.
The first two rewards (totalling 60,480 LOKI) were used as a part of the wLOKI incentive scheme, which successfully bootstrapped liquidity on Uniswap.
This leaves 695,520 LOKI which will be burned.
For now, there are no immediate plans to run future incentive schemes for wLOKI on Uniswap, but the experience garnered from creating wLOKI, forming the Uniswap pair, and building the wLOKI bridge has already been of immense value to the project.
Come and talk to us
The decision to burn the Loki which was set aside for Chainflip liquidity makes the most sense for the project — and is hugely positive news for the Loki community, given that a large amount of LOKI is now scheduled to be publicly burnt.
While burning is the simplest solution for this specific provision, we’re still interested in setting aside parts of the reward in the future for either liquidity or other community projects. However, this reward was approved by the community and the Foundation specifically to provide liquidity incentives for Chainflip, and it wouldn’t be appropriate for us to redirect these funds for anything else. In the interest of including the community in all major decisions regarding the project, we will re-consult with you about any new rewards, liquidity provisions, or funding for other projects.
There will also be an upcoming LRC to discuss the overall emission scheme of the project. Keep an eye out for an announcement about that — as per usual, we invite everyone in the community to come and offer their thoughts and opinions.
With that in mind, if you do want to talk to us about the burn — don’t hesitate to reach out to us via our Telegram community, Twitter, emailing [email protected], or any of our other social channels.