Deflationary Mechanism

In the previous chapter, we delved into the various fees within the economic model of Magicverse and how the conversion method works.

However, an important question arises:

If the main contract consistently sells Orb Tokens for conversion into native coins, won't this lead to a constant decrease in the price of Orb?

Indeed, with each selling transaction of Orb Tokens, the project's market cap diminishes, consequently impacting the token's price through the formula:

Token's Price = Token's Market cap / Token's Total Supply

Is there a way to counter this token's price drop over time?

So, as we already mentioned, the market cap will be decreasing because of the extra selling pressure that the main contract will add to serve the utilities of Magicverse. What if somehow, we could also gradually decrease the token's total supply in order to counteract and establish balance in the aforementioned formula of the token's price?

Introduction to Deflationary Mechanism of Magicverse

Orb is a deflationary token, which means its total supply in the market can be reduced over time. This is achieved every time a burning event occurs. By burning, we mean sending a number of tokens to a non-retrievable address, or else a "zero address". This way, the tokens that were sent to the zero address are no longer available in the market and so the total supply of Orb Tokens in the market is lower than before.

Magicverse burns its tokens through 3 functions that take place inside its ecosystem.

1. 50% of the price paid by a user, in Orb tokens, to open a magic box is sent to the zero address.

2. 100% of the price paid by a user, in Orb tokens, to unlock a staking slot in the Magic Farm is sent to the zero address.

3. 50% of the early withdrawal penalty out of the Magic Shards' staking machine is sent to the zero address.

This deflationary approach serves as a strategic counterbalance to the selling pressure, contributing to the sustainability of the Orb token's price over time.