Counterargument Proposal: Lisk Should Invest Excess Tokens into an Ecosystem Fund

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Counterargument Proposal: Lisk Should Invest Excess Tokens into an Ecosystem Fund

The proposal to burn the 100 million DAO tokens aims to address concerns about token dilution and restore confidence among Lisk holders who experienced a reduction in their token proportion during the migration. However, I would like to present a counterargument in favor of investing these excess tokens into an ecosystem fund instead. Here are several reasons why this approach could be more beneficial for the Lisk community and the long-term success of Lisk:

  1. Stimulating Ecosystem Growth

Investing excess tokens into an ecosystem fund can provide much-needed capital to support ecosystems working with Lisk in its niche markets, developers building longterm, startups, and projects building on the Lisk platform. This can stimulate innovation, attract new users, and create a vibrant, dynamic ecosystem. By supporting projects that enhance the platform’s utility, Lisk can drive adoption and usage, ultimately increasing the demand for LSK tokens.

  1. Long-term Value Creation

While burning tokens might provide a short-term boost in token value by reducing supply, investing in the ecosystem can lead to sustainable, long-term growth. A thriving ecosystem will generate ongoing value for the Lisk network, its users, and token holders. This approach focuses on creating a foundation for continuous development and expansion, which is crucial for the platform’s future success.

  1. Enhancing Network Effects

A well-funded ecosystem can attract a diverse range of projects and participants, enhancing the network effects of the Lisk platform. As more developers and users engage with the ecosystem, the platform’s overall value and utility increase. This can lead to greater token adoption, higher transaction volumes, and a more robust and resilient network.

  1. Attracting and Retaining Talent

An ecosystem fund can be used to provide grants, incentives, and support to talented developers and teams. This can attract top-tier talent to the Lisk ecosystem and retain those who are already contributing. By fostering a supportive environment for innovation and development, Lisk can ensure that it remains competitive and continues to evolve with the blockchain space.

  1. Mitigating Short-term Market Reactions

Burning a large number of tokens can create volatility and speculative behavior in the market. While it may lead to an immediate price increase, it could also result in sudden sell-offs and market instability. Investing in the ecosystem, on the other hand, provides a more measured and strategic approach to value creation, reducing the risk of short-term market disruptions.

  1. Strengthening Community Engagement

By involving the community in deciding how the ecosystem fund should be allocated, Lisk can strengthen its relationship with its users and stakeholders. This participatory approach fosters a sense of ownership and collaboration, ensuring that the community’s needs and priorities are reflected in the platform’s development.

Conclusion

While the concern about token dilution is valid, the long-term benefits of investing excess tokens into an ecosystem fund far outweigh the short-term advantages of burning them. By prioritizing ecosystem growth, value creation, and community engagement, Lisk can build a more sustainable and prosperous future for the platform and its stakeholders.

Therefore, I urge the stakeholders and community to consider the broader and longer-term impact of this decision and vote in favor of investing the excess tokens into an ecosystem fund. This approach will not only address dilution concerns but also pave the way for a more innovative, robust, and valuable Lisk ecosystem.

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  1. 45M LISK has already been minted for the DAO fund (!!!)
  2. I’ll ask just one question: Why was the Lisk Foundation renamed to Onchain Foundation, and why does Onchain Foundation not want to cover all expenses related to the Lisk ecosystem?
  3. Onchain Foundation and the team have already “robbed” their holders of 50%, and now they want more? Is it not enough?
  4. Read this: If the team doesn’t plan to increase the price, then burn it. If they do plan to increase it, then my variant is the best one, or again the team is lying and showing deceit. IMHO

Update: To be honest, over time I’ve come to agree that maybe we should keep the tokens, but only with my variant. This will motivate the team to create the best product, and investors will not sell tokens because the team will have strong motivation. There are many other advantages as well.
Update 2: If the first vote is to keep or burn, I will vote to burn. If the first vote is to keep it with a lock by price or burn, I will vote to keep.

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@grumlin thank you for your submission and for sharing more on your perspectives. At the end of the day we all want Lisk to win.

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The easier path for many investors or holders might seem to be token burning. However, we’ve evolved significantly since the ICO boom of 2017, progressing through IDOs, IEOs, and beyond. Many projects raised millions to develop the next groundbreaking Layer 1 (L1) solutions, yet few have made significant strides.

At this stage, the key performance indicator (KPI) or benchmark for Layer 2 (L2) protocols, especially for Lisk, should be to incentivize builders to create real-world applications using the technology. This approach would enhance the utility of both the tokens and the underlying technology. The trade-off here is clear: large holders must decide whether they are more interested in seeing the technology address real-world problems at scale or are simply chasing quick returns.
Given that we are now reaching the early majority phase of the industry, I believe the focus should be on incentivizing the builder community, particularly in frontier markets like Africa, where this technology is not just a luxury but a necessity. By doing so, we can ensure that Lisk and similar technologies are used to solve real-world challenges, creating sustainable value beyond mere token holding.

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@AyaHQ_Michael, all your points stated here are valid but I believe the execution of this would convince everyone that we are moving in the right direction. I believe Lisk has the opportunity to foster massive growth across the global south with the ecosystem development fund. This is where the technology adoption is highest and needed the most. I look forward to seeing this proposal move ahead.

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Token burn is way more than “quick return” it is lisk chance to recover from dying and chance to change investors sentiment. The turth is that people are looking at token price and lisk is showing lower lows, instead of firm price rise we observe price going down downperforming compared to whole crypto market meaning every other project on average is doing better than lisk.

As community we don’t want to invest our money to support lisk DAO - that means lisk team who already robbed us from tokens and have more than enough money collected for development to keep going with project for years and years. Moreover, they are looking for “cheap” cooperation with newbie emerging developers from Africa etc. and the truth is 99% of them won’t be successful. We need at least one coop with project that is already successful or we will end up being collector of crap projects with no real community behind it and that will do more harm than good for lisk because people will not be looking at it seriously.

Lisk team took over voting and they can make vote results to be in favour for them meaning that community vote is worthless because lisk team own more than 60% votes. They prefer to squeeze money from investors and have thug life all year long on coasts and islands around the world under the pretext of looking for new projects in emerging markets - that is looking for any developers from streets and welcomming them with their ultra uncertain in terms of success projects giving them grants from our investors money. This is almost like gambling and instead we need some decent cooperation with a well-known project.

Token burn will grab people attention way more than anything else. The dapps list running on lisk is still very small not to say compromisingly small number of dapps considering how long lisk has been running.

Short term price rise caused by token burn will attract new investors and we need them very much for snowball effect combined with crypto bull run time opportunity. Trading volumes on lisk token went down from 130mln+ to 4mln and keeping lisk tokens for DAO won’t change it much meaning that this is lisk last opportunity to survive in crypto market. Noone will be looking at project whose token invariably loses value over time despite development.

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I think this is an interesting discussion / proposal @AyaHQ_Michael. The specifics of it would be need to be clarified further, but certainly our intention with the DAO fund is for the community to be able to support such initiatives.

I know other ecosystems in Web3 have used such funds to be able to attract and retain top founders and applications. Could be a nice win-win… powerful for the founders in the specific market the fund is targeted towards, and the DAO gets an ability to generate new funding outside of solely LSK.

Always also possible to propose an initial fund at a reasonable amount, test it and then double down if it works well. :+1:

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I came across opinions suggesting that burns are effective, so I researched the token burns that were implemented or announced in 2024.

  1. In January, Huobi Token announced a 20% token burn, which caused the token price to surge by 80%. However, two weeks later, the price returned to its original level and is currently down 70% from before the announcement.

  2. The Solana-based DEX “Jupiter” announced a 30% burn of JUP tokens in June, leading to a 10% price increase. However, three months later, the price has returned to its pre-announcement level.

  3. ASTR proposed a 5% token burn in June, resulting in an 8% price surge. Yet, three months later, the price is down 25% from before the announcement.

  4. The meme coin BONK burned 278 billion tokens in April, causing its price to triple. Additionally, another burn of 84 billion tokens was announced in July, but the price has now returned to the level before the April burn.

  5. Terra Classic (LUNC) conducted a burn of 2.6 billion tokens in July, resulting in only a 3% temporary price increase, and the price has since remained around the level before the burn.

Given these results, do you still think burns are effective? While the impact of the bear market should be taken into account, the currencies mentioned above are mostly those with higher market capitalization than Lisk, yet their effects from burns seem to be underwhelming. Investor expectations for burns do not appear to be as high as they once were, and even if there is some effect, it seems to fade within a few months. Burns seem to be little more than toys for short-term investors, leading the community to lose significant funds that could be used for the development of the ecosystem.

The recent news that Polkadot spent $37 million on marketing in the first half of this year but saw no effect is still fresh in our memory. It is clear that substantial DAO funding is necessary for the long-term growth of the Lisk ecosystem, and that funding could serve as a significant incentive to attract developers.

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Yes, burn is effective. You haven’t taken into consideration that token burns happened on bear market so it is natural that price is dropping. The difference is that if they haven’t burn their tokens price of those projects would be 2x more on -%. Lisk have one of the worst marketing so I think investing in promotion for sake of promoting something that have no real interesting product is waste of money. I strongly believe lisk would get enormous attention if burn would happen at the start of the bull run. We don’t need to support DAO as much as you think lisk have big funds to run for years as of now without even DAO funding.

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Thank you, @UZAMARU for the research :bowing_man: . I have no doubts that many people’s decision about burning the tokens is driven by the quick, most likely short-term, price increase (if any). In my mind, this is silly and shouldn’t be taken into consideration in the discussion. But we need to look back at what actually happened with the tokenomics.

During the migration, the following tokens were printed:

On the community side:

  • 15 million LSK for the Airdrop campaigns
  • 7.8 million LSK for the Ecosystem Fund
  • 45 million LSK for the DAO (non-burnable)

On the Lisk side:

  • 7 million LSK for the Team
  • 8 million LSK for Operations

As we know, printing money/tokens at the end of the day is funded by the people who hold the tokens long-term. This already seems like a lot, considering Lisk’s capitalization of ~150 million LSK before the migration.

Having a huge DAO treasury may sound awesome on paper, but in reality, it all comes down to the token price. If the price of the token rises X times, the value of the treasury rises the same way, and there’s no need for hundreds of millions of tokens in the treasury. On the other hand, if the price of the token drops significantly, having millions in the treasury is meaningless because you would deplete it very fast. Not to mention the potential selling pressure on a market that is already down, where the DAO’s expenses would likely be reduced to a minimum anyway.

It feels like the tokenomics were designed in such a way that they don’t need the additional 100 million tokens.

What should be done:

Develop mechanisms around the ecosystem that fund the DAO treasury in one way or another. This way, when the ecosystem is thriving, the DAO treasury is full and self-sustaining. If the ecosystem can’t generate any traction, millions of low-valued tokens in the DAO won’t help.

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Thank you @przemer for your insights from the perspective of tokenomics. You are indeed correct that if the token price rises, the DAO’s assets would similarly increase, which makes the necessity for a DAO fund of 100 million LSK questionable.

However, a long-term and stable increase in token price requires growing future demand and an increase in expected value as an investment target. This can only be achieved through upfront investments, and I have some concerns about the idea of burning DAO funds based on the assumption of price appreciation.

That said, I completely agree with the proposal to develop a mechanism for raising funds for the DAO as a solution to the concerns mentioned above.

As you suggested in the Discord chat, if a mechanism is established to allocate a portion of the fees to the DAO fund, it could significantly contribute to the development of the Lisk ecosystem through a sustainable DAO fund. This would provide the community with an alternative to the allocation or burn of DAO funds, and it seems like the best option to satisfy both groups of voters.

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Thank you for your research.

Some corrections:

1 HTX burned only 13%.
2 and 3 are correct.
4 and 5 are just for manipulation. :joy:
The total supply (TS) of BONK is ~93 trillion (burned less than 0.4% :rofl:).
TS of LUNC is ~7 trillion (burned less than 0.04% :sweat_smile:).

But the first 3 are interesting stats.

Fully agree.

Don’t forget about the 20-30 million that won’t be reclaimed…