Sperax Foundation Burn Update
Earlier in the year, the Sperax Foundation announced on Twitter the intention to burn a significant share of SPA tokens over the course of 2022. To this day, 30% of the original Sperax Foundation token allocation has been burned.
In the wake of the UST depeg, the price of LUNA spiraled nearly to zero. At the time, SperaxUSD was partially collateralized by the native governance token, SPA. To avoid any sort of bank run scenario, USDs became 1:1 collateralized by stablecoins. This new mechanism design provided USDs peg stability throughout market crashes, but sacrificed the SPA burn when minting USDs.
The Sperax Foundation elected to burn SPA to mimic the original SPA burn effect and to reduce their ownership on the protocol. Since then, a SPA burn mechanism was reintroduced. In August 2022, SIP-6 passed which redirected 25% of protocol revenue to buying and burning SPA.
SIP-6 converts sell pressure and converts this to SPA being burned. This is done by using the protocol revenue to buy SPA from the open market. To date, almost 500k of USDs has been collected as protocol revenue. Of protocol revenue, 25% is used to buy and burn SPA.
This constant burning of SPA is in addition to two massive burns already conducted by the Sperax Foundation:
Burn 3 Update
Due to compressed returns and investor expectation for a prolonged bear market, the Sperax Foundation will retain the 125M SPA allocated for the December 31st burn. This SPA will be held by the Sperax Foundation for future uses: grants, community contributors and furthering protocol partnership incentives. This is necessary to ensure the Sperax Foundation can continue to support contributors for a long time to come.
Price Effect
For investors interested in positive price action following a token burn, this may be viewed as non-optimal. However, when analyzing previous burns you’ll find that when the Sperax Foundation burned SPA tokens there was no lasting positive price action following the burn(s).
14 Days Following May 15 Burn
14 Days Following September 8 Burn
Next Steps
The Sperax Foundation will continue to build SperaxUSD, Demeter and more DeFi products. We are committed to providing the world with financial tools that empower anyone to participate in a censorship resistant financial system. We will continue to partner with leading projects to achieve this. Maintaining 125M SPA will go a long way towards achieving this goal.
Stay tuned for our 2022 recap and 2023 roadmap to learn how we are increasing USDs TVL and protocol revenue to drive value to SPA throughout this bear market.
About Sperax
Sperax USD is a stablecoin and yield automator on Arbitrum. Hold $USDs and earn Auto-Yield. Stake $SPA to govern the collateral investment strategy.
Read more at sperax.io and join the Sperax community!
