Our thirdenings also somewhat reduced demand at the same time as reducing the supply. Since the majority of demand for OSMO was to acquire the liquidity/staking rewards and those were almost entirely composed of inflationary rewards. (Same applies to STARS, JUNO and EVMOS at their reductions!)
Concentrated liquidity has changed this for Liquidity rewards, and Taker fee distribution is starting to change this for staking rewards.
Bitcoin halvening causing a price impact is also mostly a meme at this point in my opinion.
The supply drops every halvening, which means that fewer BTC is sold into the market. But the real demand doesn’t come from needing Bitcoin to earn more Bitcoin, only from transaction fees. Recently, this has been boosted by Ordinals, but mostly the demand is the speculation that there is a fixed maximum supply and this is an increasingly scarce asset. This is entirely the perception of value again rather than actual value.
I’m of the opinion that burning only has decent economic pressure itself in the long term, and the short term is mostly a narrative event.
My argument boils down to:
- We already have substantial yield to stakers - Allocating ProtoRev here would be low impact
- ProtoRev could be used to offset traders slippage losses - May align traders with Osmosis more, but also may have zero impact as they may just sell the OSMO.
- The community pool could use the non-OSMO but doesn’t care about the OSMO portion
- Burn mechanics are popular - but mostly as a narrative or as a sustainable monetary policy for tokens with an uncapped supply. Osmosis could get away without a burn mechanic because of the maximum supply, but it may also cause excitement and escalating impact over the next few years so it is worth trying since just absorbing the protorev into a wallet has the same impact without the marketability. It also further incentivises us to maintain or increase OSMO liquidity as each small arbitrage transaction through a pool reduces supply.
Something that may be worthwhile considering would be something Sunny just mentioned in Siberia as a work around for traders selling any protorev reimbursement immediately. Combining
with a distribution to traders (2) may cause increased friction to any sales, and actively rewards traders for choosing to trade on Osmosis which increases taker fees (1) and community pool non-osmo revenue (3).
This completely turns down a burn mechanism though, may need to be backwards compatible to dispose of current holdings, and would be simplest if ProtoRev only collected (or ended up with) OSMO.