Introducing Minterest Strategic Reserve
Minterest announced the revised tokenomics earlier this month, delivering significantly reduced circulating supply over the first 18 months. The revised tokenomics reflect the new reality of DeFi and underpin the protocol’s success in tight market conditions.
Specifically, lower circulating supply supports the protocol’s token economy, reinforces the value of emissions rewards as Minterest launches and enables the growth of TVL. One major change made in Minterest’s tokenomics goes even further, and reduces circulating supply long term to further support the protocol’s ability to sustainably outcompete. This is the implementation of a Strategic Reserve.
What Is Minterest’s Strategic Reserve?
The role of the Strategic Reserve is to act as a sink. It stakes MNT to earn Governance Rewards which it never sells. Soaking up MNT over the long term creates on-market scarcity which supports demand and benefits from the effect of compounding.
At launch a significant portion of total circulating supply, approx. 5 million MNT tokens or 5%, is held in the Strategic Reserve. These tokens were previously part of the Minterest team token allocation.
The Strategic Reserve grows its balance beyond just earning MNT as Governance Rewards. It will add any unused surpluses from both NFT Rewards and Buyback Rewards. In both cases, surpluses are expected, as those allocations are deliberately larger than required, for 2 reasons:
- The allocation of NFT Rewards of 50% of Standard Rewards guarantees no one is ever disadvantaged by the presence of NFT holders.
- The allocation of Buyback Rewards allows for absolute worst case scenarios, where a black swan event requires more emissions to attract TVL.
Given this, over the first 3 years the Strategic Reserve will likely accumulate a very significant proportion of total circulating supply, possibly as high as 20%.
Why Include a Strategic Reserve?
On-market scarcity created this way supports long term demand of MNT. For Minterest, more TVL correlates to more value able to be spent in its buyback, which results in more value being captured and held by the Strategic Reserve. All of this further empowers Minterest’s flywheel effect.
More TVL allows more fees which fuels more buybacks. More buybacks means the Strategic Reserve accumulates more MNT tokens, reducing on-market supply to spur even further demand for MNT.
More TVL = More Buybacks = More value accumulated by the Strategic Reserve
*This article was updated on the 3rd of November.
27, October 2022