Fuego 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 its liquidity pool and uses the other side (ETH) as future collateral, creating a baseline price that increases its Treasury gradually over time.
To get technical, the smart contract deployed has a function called claimFUEGO(), which is the core function of the token. The project has also been gamified to benefit the holders through long-term ownership and long-term income via the DAO based Treasury.
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 for each interval to pass in order to burn 1% of its liquidity, in perpetuity.
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%
The EmberCore() function removes 1% of the total liquidity by sending FUEGO tokens to the burn address. The ETH on the other side of the pool is sent to the FUEGO DAO Treasury and used to MARKET BUY FUEGO and MARKET BUY another blue chip BASE token at ratio of 50/50 after team fees of 10%. This effectively keeps the buy-side liquidity, and removes the sell-side liquidity. This also begins to build the Treasury which will be owned by the FUEGO DAO, along with its future trading 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 in the Treasury). Because of this, the buy-side liquidity is usually heavier than the sell-side liquidity.
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% be paid to the team wallet in perpetuity for ongoing protocol maintenance and work done for the DAO members.
1% of the FUEGO and all of the FUEGO tokens generated by the POL trading fees are instantly burned at each interval.
FUEGO creates additional liquidity pools with other tokens with the accrued ETH collected as the counterpart for the burned FUEGO tokens. With this, FUEGO becomes collateralized by the token it is 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 the liquidity pool, 90% of the ETH accrued by burning counterpart FUEGO tokens are directly swapped for FUEGO and the other token we are pairing with FUEGO to be placed in 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 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 increasing the pools or making new additional pools with other tokens.
FUEGO was released with a max supply of 100 million FUEGO tokens, 80 million of these were immediately put into the FUEGO/ETH liquidity pool and LOCKED with an initial pricing and a market capitalization of approximately 50 ETH.
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
The DAO will also look at the overall expected long-term performance of the token. If the token paired with pumps or dumps it also causes an appreciation or depreciation in FUEGO’s price 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 buy-side 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 2 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 smaller ranges with the paired tokens. This pool automatically rebalances back into into structured ratios whenever either token’s ratio is above 93% or below 7% in the pool. The pool will also automatically "reinvest" the fee revenue from the pools back into its respective pool when $250 in total revenue has been achieved.
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 are not performing arbs.
If both tokens in the pool are deflationary, then like a magical savings account that grows in value every day, these tokens constantly gain (over a long enough timeframe) in their baseline floor value with each additional burn over time. This adds an additional compounding effect where pairing occurs with another deflationary token.
The Treasury bases 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 from the FUEGO fees accrued.
FUEGO’s protocol is incredibly resilient to outside manipulation. Its LP has a built in replenishment mechanism, where during good times and the price action is positive, there are more buyers than sellers and the ETH in the pool outweighs the FUEGO. At each interval, when 1% of each is withdrawn to be burned/used, the ETH is buying back FUEGO to be used in other pools so the main LP is never actually losing share and recovers what it has lost during downtrends.
With all of the additional liquidity gained at each interval, FUEGO can pair with promising blue-chip tokens and use the ongoing fees accrued from the Treasury liquidity pools to further expand, improve, or make new pools. All of this not only benefits FUEGO but also the other paired token (XXX).