🔥Burn Mechanics
FUEGO is the NEW and IMPROVED, time-based EmberCore Engine.
Last updated
FUEGO is the NEW and IMPROVED, time-based EmberCore Engine.
Last updated
Although simple in its mechanics, the deflationary flywheel effects of FUEGO are quite powerful as the liquidity pool sizes and volumes increase with time, in conjunction with a perpetual EmberCore Engine. A unique, time based mechanism that creates deflation - without tax.
Unlike all other deflationary tokens, FUEGO does not rely on traditional burn mechanisms where taxes and reflections pass inflation on to counter parties. Instead, FUEGO employs a simple mechanism to burn one side of the liquidity pool and uses the other side as future collateral, creating a baseline price that increases with additional burns.
To get technical, what actually happens is the smart contract deployed has a function called claimFUEGO(), which is the core function of the token. But different from the original ClaimVOID() contract, the FUEGO contract has been adjusted to remove exploit risk. The project has also been gamilfied to only benefit the holders through long-term holding and long-term income via the DAO. Additionally, the wallets are also protected by 4 of 5 multi-sig wallets. We explain this in more detail in the VOID Memorial section
The code starts with the initial declaration of the FUEGO_INTERVAL variable, which is the minimum time required for consequent burns to occur. This means the protocol has to wait until this interval has passed in order to burn 1%, in perpetuity, one side of the protocol owned liquidity (POL).
The EmberCore() function removes 1% of the total liquidity in the pool by sending FUEGO tokens to the burn address. The ETH on the other side of the pool is sent to the FUEGO DAO pairing wallet and used to MARKET BUY FUEGO and MARKET BUY another blue chip BASE token at ratio of 50/50. This effectively keeps the buy-side liquidity, and removes the sell-side liquidity. This also begins to build the pools which will be owned by the FUEGO DAO, along with its future trade fee earnings.
This is the initial liquidity pool for FUEGO. A novel aspect of the burn mechanism is that the FUEGO tokens are constantly removed from this liquidity pool on a fixed schedule, but the counterpart Ethereum for those burned tokens is kept (and converted), the buy-side liquidity is usually heavier than the sell-side liquidity.
Similar to liquidity positions that are not set as full range on Uniswap V3 pools, some price points might be a lot deeper and stacked compared to other price points because people can set their liquidity position price ranges to be active at any price points they want.
90% of the counterpart ETH of FUEGO tokens from the 1% burns in this pool are added to the FUEGO DAO owned LP’s, along with all ETH fees. The other 10% will continue to be paid to the team wallet for ongoing protocol maintenance and work done for the DAO members.
1% of the FUEGO and all FUEGO tokens generated by this LP’s fees are instantly burned at each interval.
FUEGO creates additional liquidity pools with other BASE tokens with the accrued ETH collected as the counterpart for the burned FUEGO tokens. With this, FUEGO becomes collateralized by the token it’s making a pool with instead of ETH. Similarly, these other tokens are also backed and collateralized by FUEGO in this case.
This symbiotic relationship has additional benefits for both coins. In order to create and improve this liquidity pool, 90% of the ETH accrued by burning counterpart FUEGO tokens are directly swapped for FUEGO and the other token we are pairing FUEGO with to be put into these pools.
This buyback takes both FUEGO and XXXX off the market and into inert supply. If there are enough reserves for FUEGO or XXXX, the buyback can go up to 100% XXXX or 100% FUEGO instead to reach the required balance inside the pools, creating constant demand and volume for both tokens. Additionally, all the fees earned from these pools are compounded to be used in improving or making new additional pools with other tokens.
FUEGO was released with a max supply of 100 million FUEGO tokens, 80 million of these will be immediately put into the FUEGO/ETH liquidity pool with an initial pricing and a market capitalization of approximately 50 ETH. The LP NFT is then locked indefinitely and the FUEGO contract ownership is renounced.
To decide which tokens to pair with and which pools will be created, FUEGO's DAO will prioritize:
Safety of project
Token Volume
Volatility
Liquidity
Market Cap
Ownership Depth
If the token has high liquidity with low volume it is harder to compete against bigger liquidity so we are a smaller piece of the pie fighting for lower rewards (fees) because of low volume therefore the capital is better used somewhere else.
Another thing the DAO will look at is the overall expected price performance of the token. If the token paired with pumps or dumps it also causes an appreciation or depreciation in FUEGO’s price too through the pools and arbitrage transactions (the effect of the downside is less than the positive side due to skewed liquidity pool structure and higher buyside liquidity).
Although the initial ten Pairing Pools will be full range pools, FUEGO’s ongoing Pairing Pools will launch and be adjusted to better concentrate them to compete with other LPs and to enhance its capital efficiency and strength. These new pools will be divided into 3 with different ranges and automated with recurring rebalancing strategies.
1st pool: The main balanced pool with a range of -50%/+50%, creates an initial token ratio of approx. 40% FUEGO and 60% XXX. This pool automatically rebalances back into this initial ratio whenever either token’s ratio is above 80% or below 20% in the pool.
FUEGO's side of the pool being in the lower side helps the pool avoid selling FUEGO and instead sell XXX to buyback FUEGO and to benefit more from other people buying XXX. The effects of partial fills and arbitrage in that direction is stronger and benefits FUEGO’s price more when a buy comes for the other token - compared to sells.
2nd pool: Heavily favors FUEGO's side in its ratio and the range for it is -25%/+200%, this creates an initial token ratio of approx. 76% FUEGO and 24% XXX. This pool automatically rebalances back into this initial ratio whenever either token’s ratio is above 93% or below 7% in the pool.
This pool ensures we have ample FUEGO whenever a rebalance action is triggered in the other pools and we need to buy FUEGO and there are no better sources - or if API’s like 1inch or Uni V3 not performing arbs. The tighter side (-25%) also plays well together with the 1st pool in that direction only, concentrating liquidity further for easier competition with other liquidity sources.
3nd pool: Heavily favors XXX side in its ratio and the range for it is -67%/+33% (opposite of the 2nd pool), this creates an initial token ratio of approx. 76% XXX and 24% FUEGO. This pool automatically rebalances back into this initial ratio whenever either token’s ratio is above 93% or below 7% in the pool.
This pool ensures there is ample XXX whenever a rebalance action is triggered in the other pools and we need to buy XXX and there are no better sources. The tighter side (+33%) also plays well together with the 1st pool in that direction only, concentrating liquidity further for easier competition with other liquidity sources.
If both tokens in the pool are deflationary, then like a magical savings account that grows in value every day, these tokens constantly gain value in their baseline floor with additional burns over time, so the effect also compounds. Because of this, FUEGO will always be worth at least the floor amount of its extra buy-side liquidity and is always backed up to some degree that is also always increasing.
The side liquidity pools are constantly creating volume from arbitrage opportunities and partial fills from aggregators. This volume increases FUEGO’s burn because a large amount of that volume also goes through the main FUEGO/ETH liquidity pool and the FUEGO fees accrued from volume in that pool are burned.
FUEGO’s burn protocol is also incredibly resilient against outside manipulation, it’s LP share has a replenishment mechanism, during good times where price action is positive and there are more buyers than sellers the ETH in the pool outweigh the FUEGO in the pool so when 1% of each is withdrawn to be burned and used, the higher amount of ETH is buying back FUEGO to be used in other pools so the main LP is never actually losing share and recovers what it lost during downtrends.
With all of the additional liquidity gained at each interval, it is spread throughout Base and constantly pairing FUEGO with promising blue-chip tokens and use the ongoing fees accrued from those liquidity pools to further expand, improve, or make new pools. All of this not only benefits FUEGO but also the other token (XXX).
| Interval Length to Burn 1% of POL | FUEGO Burn Amount |
|---|---|
Every 12 Hours
Up to 5%
Every 18 Hours
Up to 10%
Every 24 Hours
Up to 15%
Every 30 Hours
Up to 30%
Every 36 Hours
Up to 50%
Every 48 Hours in Perpetuity
Over 50%
