By Jeremy G. Edited by Kenneth K.

 

 

The topic of token burn has been front and center in the CR and Elastos community for weeks. Beginning May, 2021, 16.31 million of the original 16.5 million CR genesis tokens were scheduled to begin their release to the CRC. 10% was to be unlocked each year for use on Proposals that benefit the ecosystem.

However, the most recent 80% CR Fund Burn Proposal, crafted by Elastos Orchard, has received enough votes to pass with nine votes in favor which will destroy the majority of this unreleased supply often considered a “ticking price bomb” for many in the community.

Starting July 13th, 2020, the Elastos community is allowed one week to veto the passed Proposal. It would need 10% of the circulating supply for a successful veto, a difficult feat that few seem interested in attempting.

 

At the time of writing, the price of ELA has risen to $2.11.

A Quick History

 

Ever since the beginning of the CRC Elections, the “1631” genesis tokens have been on the community’s mind.

 

On December 22nd, 2017, 33 million ELA were generated in its genesis block. 5 million ELA were sold to early angel investors, 6 million ELA were sold in a private sale in August of 2017, 2 million ELA in crowdsale, and 3.5 million ELA were reserved for the Elastos Foundation.

 

This left 16.5 million ELA to be airdropped to BTC holders on exchanges at a 1:1 ratio. However, only 183,436 ELA were claimed by BTC holders on Huobi. 

 

Once Cyber Republic formed, the remaining 16,316,564 ELA tokens were allocated to the CR Genesis Fund. CRC members would be able to utilize 10% of the fund each year towards ecosystem development. 

 

 

As CR Council candidates began lobbying, the 16.31 million ELA was heavily at the forefront of debate. Co-Founder, Sunny Feng Han, considers the CR Fund, “Fake money.” The argument is that this ELA should have been airdropped to BTC holders in the first place. Considering that only a small portion of the 16.31 million ELA were gifted to BTC holders, the remaining fund would only increase scarcity and debase ELA token value.

The Proposal

 

Orchard’s “1631- A Reconsidered 80% Burn Proposal” acknowledges a sense of urgency in the community. They state approximately two years to, “Make it [adoption] happen,” and Orchard sees the burn as necessary to positively affect ELA’s price.

 

Few technical commentators would disagree with the potential social impact of Elastos, one of the biggest and most necessary positive disruptors of our times. “We only need to expose Elastos to those who might wish to utilise it”, Orchard states.

 

As ELA’s price is close to an all time low, Orchard believes this increases sell pressure for DPoS nodes dangling along the profitability margin.

 

If we take decisive action…we send a very clear signal to the largest part of our investor community…sitting on the sidelines.” 

 

Sash of Elastos Orchard sheds some light into the specifics of these sidelined investors in the public Elastos chat: “Connections are being halted because of 1631. And it’s been the Chinese screaming to us that we need to get this done.”

 

This burn is considered by the Eastern community a grave issue. Proponents of the burn believe that the ~400,000 ela per year allotted to the CRC without the 1631 is more than enough, especially if ELA’s price returns to $20 (ten times its current value) or speculatively rises as far as to $200 with $8,000,000 and $80,000,000 budgets respectively.

 

Orchard shares additional insights from Rong Chen and other Eastern community leaders:

 

“From an economics perspective, the genesis funds are ‘thin air’ money. There was no real work or energy conversion to generate these funds and they have the ability to debase our ELA price further, something we can’t afford at $1.38.”

The Votes in Favor

 

Nine of the CRC members have voted “Yes” for the 80% burn of the CR Funds. In summary:

 

  • Sunny argues that “Burning fake money [will] found powerful consensus of ELA”. 

  • Tyro Lee simply stated that, “This Summer needs burning.”

  • Ela Cloud proclaimed their support of the 80% burn because, “That’s what I’ve been pursuing.” 

  • Yipeng Su, the main technical architect of CRC, praised Elastos Orchard for “their efforts to eliminate the misunderstanding between Chinese and Western communities”.  Yipeng Su believes the burn to be “of great significance, and any unilateral interpretation may be one-sided.”

  • Elastos DMA also commended Orchard’s efforts as a show of their “professional attitude to handle disagreement and reach agreement in the community. The content of this proposal has good intentions… In terms of the resources for brand building and marketing efforts mentioned in the proposal, I think it is reasonable because CR really needs to do it in a professional way. Along with the technology and infrastructure gradually delivered to the market, Elastos really needs to have the right position in the market it deserves”. 

  • The Chinese Community Moderators appreciated that “the number of ELA CR controls in the future is roughly equivalent to the amount of ELA that is issued to CR every year. This program not only destroys most of the ELA, but also ensures the normality of CR.” In terms of the economics and future inflation, the Chinese Community Moderators believe the 80% burn achieves both. 

  • The Strawberry Council would have liked additional consultation done for the burn Proposal. Their “primary concern is what if the experts felt that alternative solutions are more viable, such as stable coin options using ELA as collateral. The difficulty is we will never have the ability to truly know the answers to these questions due to the rushed nature of these multiple burn proposals.” Like most other CRC members, they see thatThe community sentiment appears to have dramatically shifted since we ran for election, and it is our belief that supporting an 80% burn best supports the community’s wishes at this time. Therefore, The Strawberry Council reluctantly supports this proposal.

  • Michael S is, “Ready for the East and West to become united. I also expect marketing efforts related to this burn to be addressed very soon so we can make the most of this decision. Let’s keep moving forward.”

  • And finally, Orchard finished the “Yes” votes, leaving a document attached that supports their own proposal. They concluded in saying, “We hope to see our community unite together and correct this tokenomics issue in a very simple manner”.

The Votes Against

 

Three CRC members, however, voted against the proposal: Alex Shipp, T.I., and Adem Belican. 

 

  • Alex Shipp provides an economic argument that the 80% burn of uncirculated coins will not reduce sell pressure of block rewards: “An 80% burn of non-circulating funds will not affect token price via demand-supply dynamics; it can only affect token price via community and prospective investor sentiment. On a positive note, an 80% burn will drastically reduce inflation potential in the year ahead; however, it will not reduce the constant selling pressure produced by Block Rewards, nor will it have a significant, material effect on buy-side dynamics”. Alex shares concerns about the compromise to the CRC budget, which leads to less flexibility to fund contributors, “Undergoing an 80% burn without the necessary forethought and preparation – that is, preparation which involves consideration beyond the immediate environment of our community – will have little impact in the greater landscape of the blockchain space, and a drastically reduced budget – circa $500,000 of USD-equivalent per annum – will only further isolate the Elastos ecosystem from the developers and prospective community members of which we are in dire need.” While the community and Elastos thought leaders truly believe in the potential of Elastos and its ELA price, the current budget only allows for a 6 figure annual budget, arguably not enough to properly fund this dynamic ecosystem.

 

  • Adem Bilican, the second CRC member to vote against the burn Proposal doesn’t understand what the sense of urgency is for funds that can’t be spent until middle of 2021. “Any discussion about the burn is based on several estimations, suppositions, and emotions. I think we should take the time to do a “proper” burn based on data. However, I know that some parts of the community just want to burn because this money is not where it was originally meant to be. That’s fair, but again, we have to think long-term and consider how significantly this decision will affect the future of the CRC and the Elastos projects in general, and assumptions are not the way to go!”

 

  • T.I. was the final vote against the Burn Proposal. In Elastos Orchard’s original suggestion, T.I. posted 12 comments regarding Orchard’s statements. He concludes with powerful statements regarding the magnitude of the burn and the potential repercussions it may have. “I am also NOT against a burn,” he states, “but I am against a burn that is based on personal opinions and assumptions instead of professional and strategic research and planning. I do agree that the main reason for the burn is to reduce the long term sell pressure of ELA, but some of my concerns remain. Were other alternative percentages reviewed by the Orchard Team, and if so, what was the result? Why was burning 13m the ultimate solution (based on research not assumptions)? Why not give an opportunity to evaluate alternative DeFi mechanisms as Clarence is proposing that would not have any sell pressure? This burn needs to be looked at holistically along with other tokenomics options and strategies. We are making a long term and irreversible decision and should take time to properly evaluate our options with experts, preferably outside of the community to enable an objective evaluation. Have we analysed alternative ways of increasing demand for ELA and onboarding new investors, first? Have we done a deep economic analysis of the Elastos tokenomic model? Have any experts in the field of economics and tokenomics been consulted? This burn needs to have sufficient data, analysis and economic theories backing it to prove that this is the most viable option. Otherwise, this is a reckless and emotional decision and an ominous way to begin CR, the future of this project.”

 

Moving Forward

 

One thing that most CRC members agree upon is that tensions between the West and East will subside after this burn. Positive sentiment is real and many community members have turned more positive, especially with a steady increase in the ELA price. 

 

One thing is certain, by the comments of CR Council members, full political maneuvering is already at hand in the CRC as, during the burn debates, CR Council member ELA Cloud announced that any Proposals, even if unrelated to the burn, would be voted against unless the burn was passed. “No proposal will be accepted that does not anchor the future value of ELA until the 16.31 million ELA is properly resolved.”

 

Will this set a precedent for future CRC politicking? Was this fair of ELA Cloud?

The hope is that with the burn behind the Elastos community, the CRC will come to consensus on ecosystem development through proper discussion and compromise.

If you appreciate this material, remember to vote for CR Press supernode, a community-run team funded by community donors. You can Donate Here.

LEAVE A REPLY

Please enter your comment!
Please enter your name here