How often are Gelato coins burned?

The frequency of Gelato coin burns is determined by the community through the Gelato Improvement Proposal (GIP) process, ensuring transparency and community involvement in shaping the network's monetary policy.

Dec 31, 2024 at 12:42 pm

Key Points

• Gelato Network implements coin burns to control token inflation and maintain the value of its GEL token.
• The frequency of coin burns is determined by the Gelato Improvement Proposal (GIP) process, which allows the community to propose and vote on changes to the network, including burn mechanisms.
• The number of GEL tokens burned in each round is calculated based on the total transaction fees collected by the Gelato Network during a specific period.
• Coin burns are a crucial part of the Gelato Network's long-term sustainability, as they help to reduce the circulating supply of GEL tokens, increase their scarcity, and boost their potential value.

How Often Are Gelato Coins Burned?

The frequency of Gelato coin burns is determined through the Gelato Improvement Proposal (GIP) process. The GIP process allows the Gelato community to propose and vote on changes to the network, including burn mechanisms, gas fees, and other operational parameters.

1. GIP Proposal and Discussion:

   Community members submit proposals for coin burn mechanisms to the GIP forum, outlining the rationale, frequency, and amount of GEL tokens to be burned. The community then discusses and debates the proposals, providing feedback and suggestions.

2. Community Voting:

   Once the GIP proposal has been refined and finalized, it is put to a community vote. GEL token holders can vote on the proposal using a decentralized voting mechanism, such as Snapshot or Aragon. A simple majority vote is typically sufficient to pass a GIP.

3. Burn Execution:

   If the GIP proposal is approved by the community, the Gelato team implements the burn mechanism as outlined in the proposal. The Gelato Network then executes the burn at the specified frequency and burns the designated amount of GEL tokens from its treasury.

Benefits of Coin Burns

1. Inflationary Control:

   Coin burns reduce the circulating supply of GEL tokens, mitigating inflationary pressures and maintaining the token's value over time. By reducing the total supply, the demand for GEL tokens can increase, leading to price appreciation.

2. Scarcity Enhancement:

   By burning a portion of the existing GEL token supply, the network creates scarcity, increasing the potential value of each remaining token. Scarcity can attract investors and traders who value rare and limited assets.

3. Network Sustainability:

   Coin burns play a crucial role in the long-term sustainability of the Gelato Network. By reducing the circulating supply, the network reduces the potential for token dilution and protects the value of GEL tokens for users, investors, and the network ecosystem as a whole.