Laughing because I largely disagree. Speculators tend to become a secondary, if not primary marketing engine. But I totally get what you’re saying too.
I was just thinking this actually, that maybe not all of it has to be burned. I was thinking more like 50% of it though 
Yes and price appreciating is the marketing fuel but we don’t need mechanisms designed to attract speculative behavior, there will always be a healthy amount of speculators.
Not all attention is positive.
I think we look at this through very different lenses mainly due to our professional backgrounds tbh. As I yet again disagree 
I meant more so short term speculators, as we are all speculating at the end of the day.
Very good recap @JohnnyWyles im totally supportive of this proposal let it burn.
I’m with @trix on voting for POL over chasing the herds for a burn narrative.
I will toss out my old idea again for immutable POL…where the liquidity is enshrined into the protocol via burning the GAMM tokens from depositing into an xyk Balancer pool.
It wouldn’t provide a clear cut deflationary narrative angle like every other chain seems to be selling, because the OSMO would still exist…but unless the other side of the pools it was paired with goes to zero, there would be some amount ‘burned’ into the protocol itself.
It would certainly present a unique and differentiating narrative to respond with when anyone inquires about a burn mechanism.
While also, over time, building up an immutable level of liquidity on Osmosis, and who knows that could become it’s own badass narrative meme in and of itself…the ‘mountain of immutable liquidity under pinning the inter-chain DeFi Hub’
…eh, eh? Any takers? I might just have been getting high on my own supply there at the end. 
In the interest of fairness I believe we shouldn’t be making an exception for this user when other smaller traders suffer, perhaps proportional, losses through errors in setting slippage.
If governance does make an exception then to be fair we should ask if this should be the policy or a one time event.
I agree with both you and @trix that we should be rapidly adopting POL, but I think that the burn of OSMO is actually the best mechanism to achieve this sustainably.
If you’re proposing that the obtained ProtoRev assets should be automatically added to POL, then we have the issue where the amounts differ each day and are also far smaller than the Taker fee non-OSMO generation. So we still have the question of what to do with this excess - with letting it accumulate until needed still leaving it open to requests for refunds!
price appreciating is only true if the burn is net new demand (i.e. buyback & burn) or the market reacts to the burn by increasing demand
For ProtoRev it mints OSMO to arbitrage which isn’t new demand (?) so there is no guarantee of price appreciation.
This is new demand! ProtoRev effectively buys OSMO using the slippage gained from the backrun trade.
E. G. Someone buys TIA from the TIA/USDC pool. ProtoRev back runs this by minting osmo, buying TIA from the TIA/OSMO pairing, selling TIA from TIA/USDC as arbitrage, selling the USDC into OSMO/USDC, and then burning the original amount of OSMO. The leftover OSMO has been removed from the circulating supply in liquidity pools, and there is no net change in maximum supply.
We haven’t seen the shift towards non-OSMO pools quite as much as I was expecting so far, so most of ProtoRev is still in OSMO. Leaning into this by deploying even more OSMO liquidity as Protocol liquidity makes even more sense when paired with a mechanism for burning in my opinion.
Since ProtoRev routes start and end in OSMO pools, having more OSMO liquidity increases the amount of OSMO collected over time by ProtoRev. This then further reduces the circulation supply of OSMO and makes the community pool holdings more valuable through scarcity. Especially since we will be able to reduce incentive spends due to owning more and more of the Target Liquidity.
Any POL also collects OSMO in the form of swap fees, further reducing free circulation, as well as collecting non-OSMO which can then be compounded to increase POL, or spent.
Since both of these mechanics reduce the circulating liquidity of OSMO in the hands of mercenary providers, the chain begins to own the majority of its own governance token’s liquidity.
Then we get the mechanism that you describe @nostradamus! If the value of OSMO falls compared to other assets, then the Community pool owns more OSMO (the community pool should be inherently bullish on itself, so not a bad thing), and if the value of OSMO rises compared to other assets, then the community pool owns less OSMO, but further diversifies.
Distribution is also totally valid, but I feel like it has a much smaller impact now that Taker Fees exist, and is operating on a different cycle than ProtoRev is. ProtoRev is already removing circulating supply; burning just confirms this as permanent and impacts the maximum supply also.
As far as the immutable GAMM idea, I don’t think we should be using GAMM for this since CL pools are far more efficient, and just because we have a lot of funds in the pool doesn’t mean that we shouldn’t try to be efficient with it. Immutable CL positions then… I don’t really see the point of making something state-immutable (requiring a software upgrade to restore GAMM tokens) compared to just governance-controlled (existing in the community pool). If we wanted to change the holdings then we would likely want to do so faster than a software upgrade could be orchastrated.
You’re right about net new demand, I was unsure about that.
My argument against using the CP for POL was going to be that everything in the CP is new supply but for it to actually go on the market it needs to be bought. I’m heavy against distribution in this case for the reasons u stated + we need mechanisms that DIRECTLY benefit Osmosis long term, not just hoping for speculators/fundamental investors to value 1% more yield that’ll decrease as OSMO becomes more valuable.
I concede happily, burn ProtoRev as it is net new demand & create POL using all non-OSMO revenue.
I would definitely be against using the OSMO in the Community pool to sell into pools and then create POL that way.
OTC swaps slightly better - probably for larger, long term holders with no immediate price impact, especially with vesting agreements.
Treasury swaps even better - in that you are somewhat holding each other’s tokens hostage somewhat. If the other party disposes then you can also dispose to recover as long as they remain roughly correlated. Biggest risk is the counterparty going to zero.
Pure revenue pairing is best - since you are also doubling any revenue’s earning potential by matching with out-of-circulation OSMO.
Thanks for putting this post together and leading the discussion @JohnnyWyles!
With the recent refund discussions, it is important to come to a decision on ProtoRev funds so we can properly assess and work through that situation.
-Will burning the OSMO portion truly have any potisitve affect? Not sure that burning tokens will do much in the long term, especially when there are still a large amount of new tokens being minted. Still undecided on burn vs redistribute. Has anyone done a long term analysis won this? Maybe the answer is some of both so we don’t jump into burning all of this too soon. We can always increase the burn % as we go. Better than stopping or decreasing burns.
-The injective burn is misleading as you’ve stated, the 5M tokens were never part of the circulating supply to begin with, they were meant to stake at the beginning days and then burn down the road. The marketing aspect has worked but their actual burn is not inclusive of that 5M INJ. I would say the hype came from the 5M vs the normal burns. Will the hype last long term with the lower overall burns?
-The non-OSMO portions should be sent to the pool as is for treasury diversification. If anything, a portion of these funds can be converted into USDC as well.
-Maybe part of the OSMO portion goes towards token swaps. The Hub, Celestia, and USDC are three obvious assets that need the depth even with concentrated liquidity (Take the squid/dydx refund situation for example).
-ProtoRev distribution should focus on stakers, but if theres enough support to give some to traders bot accounts should be excluded. Stakers should still receive the majority of this revenue if distributed seeing as traders are prioritized with most everything else. Traders come and go, stakers are here for the long run.
-If the community decides to give a portion of ProtoRev back to traders, will this be something done for past trades since its implementation, or just going forward? How do we decide who gets a refund and how much? Is is the entire capture of ProtoRev? Only trades of $500,000 or more? Everyone?
As I go through this, I realize this is such a complex decision and might not be solved in one go. We do need to get somewhere though considering the current refund situation. It would be great to get some more eyes and thoughts on this so we can move faster and informed, but we might not have that luxury.
the positive effect from burning is taking the new demand and removing the ability for it to come back as supply.
So its automated demand + narrative.
Distributing it doesn’t remove the demand portion but doesn’t actually do much for stakers (1% yield at current prices) so the hype/attention from the burn is likely going to be more beneficial.
Where is the proof that this actually increases price long term and data that shows what amount is needed to have an effect? If we don’t have sky of that, we’re shooting in the dark and hoping for the best.
The narrative only works initially when it’s announced then we all know that pump doesn’t last.
So is this really the best solution, or can we do something more productive than burning these tokens? There should probably be a mixture of both, burning all of these tokens right now is still too early of a decision.
This is just economics. If demand remains constant or increases, and the supply is reduced, price rises.
Given we could be in the early stages of a bull run, the likelihood of demand rising is high, wouldn’t call this shooting in the dark per se.
The fact that a lot of protocols are implementing deflationary mechanisms is validation in and of itself.
I get supply & demand haha.
If it’s so simple, then why have the halvenings & thirdenings not done anything positive for price to date for the chains that have recently done it? Price even continued to go down for chains after doing this. The only real blockchain that has shown any correlation to a halvening is Bitcoin. For everyone else, it’s a meme and marketing tactic.
Hmmm, I would need to know what chains you’re referencing to even attempt to answer that. But, with Bitcoin for example, all the beginnings of its bull runs tend to be marked by its halvenings.
There’s a lot of variables that come into play when considering prices, and it’s not guaranteed that burning supply will always result in increased price to be fair. There are factors that can influence the likelihood of that being the case though e.g timing of the burning and the market sentiment around that time, as well as the amount to be burned.
Johnny might be best positioned to answer your questions though 
Oops, hadn’t read to the end of your message, see you pointed out Bitcoin already. I wouldn’t say all chains have seen adoption via memes though. If you look at the top 100 there’s actually only a select few.
Marketing is equally important, yep.
If we look at Thirdenings for OSMO, there it didn’t work out indeed.
However, the point @Winfred makes stands. Demand for OSMO was also dwindling (or at least an excess of new supply was brought onto the market every day) which was fueled by an unclear revenue case for holding OSMO.
That is now slowly turning around with ProtoRev and the other yield-bearing mechanisms, which will in turn also drive demand for OSMO as an investment vehicle. So taking that into account reducing the supply will / can have a flywheel effect fueling itself during the coming bullrun.
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:
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.
