🔥Buy & Burn
The buy and burn mechanism is a key feature of Meme Royale that can significantly benefit coin holders. Let's dive into what it is, how it works, and why it's good for you as a holder.
TLDR:
Buy and burn reduces circulating supply while increasing liquidity
It's funded by various taxes and fees in the Meme Royale ecosystem
Benefits all holders by potentially increasing coin value
Creates a "liquidity floor" for coins
This is an advanced topic, and is not essential to enjoy buying, selling and battling memecoins on Meme Royale.
However, if you want to understand more of the underlying mechanism, feel free to jump right in!
What is Buy and Burn?
Buy and burn is a process where:
A portion of coins are purchased from the open market (the "buy" part)
These purchased coins are then permanently removed from circulation (the "burn" part)
How Does it Work in Meme Royale?
In Meme Royale, buy and burn events are triggered in several ways:
Battle Settlements: A portion of the "chicken tax" collected during battles is used for buy and burn.
Post-Battle "Dirty Dump" Taxes: 50% of these taxes go towards buy and burn.
Conversion of "Rekt" Coins: When a coin is "rekt," a small amount of SOL is used to synthetically buy and burn some supply.
Interested in learning more? You can read a thread by Meme Royale's evolutionary biologist, Darwin on the topic: https://x.com/Darwinianmeme/status/1823328493381226857
Why is Buy and Burn Beneficial?
Reduced Supply: By removing coins from circulation, the total supply decreases.
Increased Scarcity: With fewer coins available, each remaining coin potentially becomes more valuable.
Price Support: The buying pressure from burn events can help support the coin's price.
Increased Liquidity: The SOL used for buys adds to the coin's liquidity pool.
Liquidity Floor: Creates a minimum level of liquidity, even for inactive coins.
Example Scenario
Let's say a coin has:
1,000,000 total supply
100 SOL in liquidity
Current price of 0.0001 SOL per coin
A buy and burn event uses 10 SOL to purchase and burn coins:
100,000 coins are bought and burned
New supply is 900,000 coins
Liquidity increases to 110 SOL
New price (all else being equal) could increase to about 0.00012 SOL per coin
In this scenario, holders benefit from both the reduced supply and the increased liquidity, potentially seeing an increase in the value of their holdings.
Buy and Burn in Different Contexts
During Battles: Encourages holding during high-pressure situations.
Post-Battle: Helps distribute gains more evenly and discourages immediate dumping.
For Inactive Coins: Provides a mechanism for value accrual even in low-activity periods.
What This Means for Coin Holders
As a holder, buy and burn mechanisms work in your favor by:
Potentially increasing the value of your holdings over time by making the coin increasinly deflationary
Providing a form of "dividend" from protocol activity
Creating a more stable and liquid market for your coins
Creating a "floor price" within the bonding curve for this coin
Remember, while buy and burn can be beneficial, it's just one factor among many that influence a coin's value. Always consider the broader market conditions and specific circumstances of each coin when making trading decisions.
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