- Executive Summary
This proposal introduces a 1%–5% automatic transaction fee on all WLFI transfers, primarily allocated to irreversible token burns. Unlike prior proposals — which focus on buybacks and burns funded by protocol-owned liquidity (POL) fees — this mechanism ensures that every on-chain WLFI transaction directly contributes to supply reduction. It is designed as a complementary measure, enhancing the already approved deflationary mechanisms.
- Rationale
Programmed scarcity: continuous supply reduction with each transaction strengthens long-term value.
Ecosystem sustainability: introduces an additional deflationary layer that is not dependent on protocol revenues alone.
Competitiveness: aligns WLFI with tokens that use dual burn mechanisms (both transaction-based and treasury-based).
Incentive alignment: the more WLFI is transferred or used, the faster the supply decreases.
Complement to prior measures: previous proposals already allocate POL fees to buyback and burn; this adds a universal burn mechanism that activates with every transaction, creating broader coverage.
- Proposed Mechanism
Scope: applies to all WLFI transfers (wallet-to-wallet, smart contracts, payments, utilities).
Fee percentage: dynamic, between 1% and 5%, to be defined and adjusted by governance.
Allocation:
50%–100% of the fee is automatically burned (sent to an inaccessible address).
Any remaining portion may flow to the treasury to strengthen reserves or fund ecosystem development.
- Expected Benefits
Continuous and predictable reduction in circulating supply.
Stronger incentive for long-term holding due to the dual burn structure (transaction + POL fee buybacks).
Market confidence boost: visible and transparent supply reduction at both transaction level and protocol level.
Complementary impact: while prior burn programs depend on protocol revenue generation, this ensures burns happen even when POL activity is lower.
- Risks and Mitigation
Adoption impact: fees above 3–5% risk discouraging usage; recommend starting at 2% and adjusting based on community feedback.
Regulatory compliance: transparency and community governance voting are essential to avoid misinterpretation.
Usability balance: education campaigns to explain the long-term benefits and differentiate WLFI from high-tax tokens that lack utility.
- Final Recommendation
Approve the implementation of a 1%–5% deflationary transaction fee, primarily allocated to automatic burning, starting with a 2% pilot rate.
This mechanism will operate alongside the already approved POL buyback-and-burn programs, establishing a dual deflationary model:
-
Protocol-based burns (via POL fees, already approved).
-
Transaction-based burns (proposed here).
Both mechanisms will remain active until WLFI’s circulating supply is reduced to a target range of 12–15 billion tokens (12–15% of the total supply). Governance may later review and adjust this threshold depending on market conditions and ecosystem growth.