Earn And Burn: Exploring Ruby’s Token Economics
Ruby.Exchange’s tokenomics are designed both to reward liquidity providers and to minimize dilution of RUBY supply. The increase in circulating tokens driven by yield farming will be offset by users locking RUBY for staking and spending RUBY to acquire NFTs, and by burning RUBY bought with a percentage of trading fees.
There is a total supply of 200 million RUBY tokens, though the circulating number will never be that high. Available supply will stabilize following the initial bootstrapping phase before falling over time.
RUBY Token Allocation And Initial Circulating Supply
Designing a vibrant Ruby economy starts with the initial issuance and allocation of the token, ensuring a strong foundation of fair distribution. The majority of RUBY tokens sold to VC backers are vested, and upon launch, circulating supply will be than 1.5% (2.87 million RUBY).
RUBY will be a non-upgradeable (fixed supply) ERC20 token minted on Ethereum L1. All 200 million tokens will be migrated to Ruby’s SKALE Chain for distribution and vesting. All RUBY vesting will take place on SKALE, and all liquidity will reside on Ruby.
The success of any cryptoeconomic system relies on its ability to balance and align the interests of different parties and roles in the ecosystem. For Ruby, these parties include traders, liquidity providers, stakers, voters, or simply holders of RUBY.
RUBY tokens have multiple uses, creating demand from different stakeholders:
- LP rewards. Around 100 million RUBY tokens will be distributed over a minimum of three years. Additional tokens may be used to create a Protocol Treasury. Farming rewards are subject to a three-month vesting period, or can be accessed immediately with a 50% early exit fee, which is paid to stakers who lock their RUBY for three months.
- Trading fees and Staking rewards. Ruby.Exchange’s standard fee is 0.30%:
- 0.25% paid to liquidity providers
- 0.04% used to buy RUBY from the open market for staking rewards
- 0.01% used to buy and burn RUBY
- Governance token. As the Ruby community grows, the Ruby DAO will use RUBY to vote for platform updates and key ecosystem decisions.
- NFT distribution. RUBY will be used to purchase tickets for NFT raffles, the chief means of distributing gemstones, including NFT-permissioned rewards and other special features.
While most of these use cases are common to other projects in the DeFi space, the introduction of NFTs gives an immediate edge not just to Ruby’s exchange operations, but to its tokenomics.
As we explored in a recent blog, Introducing Ruby’s First Gemstone NFTs, Ruby’s users can enter raffles for NFTs that give them benefits including LP reward boosts and early-exit penalty reductions, reduced trading fees, and custom avatars. Raffles can also include RUBY prizes.
NFT-permissioned rewards are paid by altering the distribution of trading fees and penalty fees paid to different categories of exchange user. All accounting for rewards is therefore zero-sum, and no new RUBY are released. Instead, NFT distribution is a tool that Ruby governance can use to help offset the supply increase of LP rewards.
Moreover, every raffle burns a configurable percentage of total entry fees. Every time a new gemstone NFT is distributed via a raffle, RUBY is removed from circulation forever.
Full details of NFT supply and tokenomics will be published in a forthcoming Lite Paper.
Expanding Token Utility
The RUBY token will combine the attributes of a governance token with additional utility that will benefit everyone within the Ruby.Exchange ecosystem. NFT raffles, staking of LP rewards, and burning a portion of trading fees and raffle entry fees will play a pivotal role in offsetting the impact of new supply in the form of farming rewards. Alongside Ruby’s other advantages such as zero gas fees, a fast bridge, NFT-powered rewards, and a feature-rich UX, we expect these attractive tokenomics to appeal to a wide cross-section of the DeFi community.