The LOAN token has many features which endow it with strong tokenomics.
But this feature is possibly the most overlooked and least talked about, and it protects it from being doomed as a “dump forever” cryptocurrency.
To understand this feature, let’s start with where the yield comes from.
For the LOAN token, yield generation thrives through a twofold avenue which keeps the ecosystem dynamic and robust.
The first source of yield emerges from the issuance fee. Whenever a user decides to borrow USDL, they incur a fee, paid in USDL, ranging from a modest 0.5% to a substantial 5% of their borrowed amount. This initial transaction is distributed to the LOAN Staking Pool.
The second source is the redemption fee. As users seek to redeem their USDL for PLS, they also encounter a fee. This time the fee is paid in PLS with an identical 0.5% to 5% range, based on the amount of PLS they redeem.
What truly sets the LOAN token apart is a crucial distinction: the yield it generates isn't rewarded in the same token that's staked.
One of the standout features that make LOAN tokenomics exceptionally effective is the ability for stakers to reap the benefits of their yield without triggering a detrimental impact on the price of LOAN itself.
In stark contrast, many other tokens employ staking models that necessitate the sale of their underlying asset to realize profits from their yield. This, unfortunately, can erode the core value of the token.
Consider the case of native assets like BTC and ETH, which inflate as miners and validators earn rewards for securing the blockchain. To sustain their operations and generate revenue, miners and validators often find themselves compelled to sell their inflationary yield. The consequence? Constant flux of sell pressure on their own principle.
Thankfully, the LOAN token stands apart from this challenge. Its design ensures that stakers can liquidate their yield without compromising the value of LOAN.
In addition to the Staking Pool not earning LOAN by inflation, the LOAN token technically has zero inflation.
The LOAN token supply has already been set at a specific number, but tokens are distributed on a time-based schedule to various groups of participants.
As each month goes by, more and more LOAN tokens are added to the circulating supply.
Considerable thought has been put into the tokenomics of the LOAN token.
One key design has been for the yield from staking to come from other sources than inflation of the token itself.
The yield on LOAN token staking comes in the form of USDL and PLS from the borrowing and redemptions fees of the protocol, respectively.
This allows users to earn revenue without having to sell down the price of their principal.
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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.
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