Recently, I wrote a thread: x.com, however it was probably unclear and not as conscise.
Market Makers are an essential component for tradeable assets on the market, with a primary role of providing enough liquidity on the market to prevent huge sells from dumping the price. Similarly, you also have ‘friendly’ market makers, who can help pump up the price with variour methods.
Currently, ICON has wintermute as it’s market maker, but they have only provided them with $6.5m ICX, this is not a lot in retrospect: x.com
The current volume of ICON on exchanges is low and probably one of the impediments of getting listed on huge exchanges and growing demand.
Another problem for ICON is the growing inflation over the 5 years which was not counter-balanced with adoption, although this is being remidied now, ICON’s peak price is $ was only at a $4b market cap, for ICON to reach ath in $, the market cap would have to reach around $11B, which is doable for ICON given BTP + growing ecosystem, but without a shadow of a doubt inflation needs to be countered, take into perspective ETH’s EIP-1449 and their merge will reduce another 90% of inflation:
Currently ICON has a 4% inflation, much of which goes towards stakers, however, stakers staking $ICX are only retaining their share of the $ICX in circulation, this does not neseccarily mean they are profiting. Staking in DPOS is made for the ecosystem to vote on who they wish to run their ecosystem (node operators). As a side note: ICON has sICX, which is a solutions that alieviate the issue of locking stake vs freedom to use your $ICX.
The point of this is: staking without price action is not really beneficial.
Proposal: Ecosystem Market Makers
Brief: By redirecting inflation (staking and p-rep rewards), $ICX inflation can be used to mint stable coins which burn $ICX from the market, ultimately, burning $ICX and increasing stablecoin TVL in the market.
The process explained:
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A portion of ICON inflation is directed towards a Market Maker Fund (e.g. 50% of the inflation which is 2%)
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The 2% from $ICX inflation is sent to a stable coin Dapp such as Balanced. Balanced offers stable coins at 150% collateral, this means for every $1 of $ICX, you can get $0.66 in stable coins. We could chose to over-collateralise by 200%
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Using that 2% of inflation, we are able to mint a further 1% by the stablecoin, e.g. 100k of $ICX will mint $50k bnusd. Whilst locking in the 2%
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The $50k of bnUSD is then used to buy $ICX of the market and burn it.
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overall, this process results in the locking of 2% of $ICX and burning a further 1% out of circulation for ever.
Initial questions might be: Why don’t we just lower inflation vs the market maker idea:
Lowering inflation:
- Lowers circulation supply, YES
- However, does NOT increase buying pressure
Maket Maker Idea:
- Lowers circulation, IF managed properly and aversis risks
- Increases buying pressure.
Further advantages of the market maker idea are:
- Increases stablecoin tvl in the icon ecosystem
- create arb opportunities between ICON’s ecosystem dex and CEX’s.
- Helps the standardization of $ICX becoming a stablecoin collateral.
- Grows ecosystem dapps such as BALN.
Why should we do this:
Instead of inflation that goes towards node operators and stakers either:
- Not increasing buy pressure - because it is held
- being dumped on the Market
This method will, 1) reduce market supply, 2) increase buying pressure
To put this into perspective, ICON currently has an inflation of 33m icx a year, if 50% of that inflation (16.5m) goes towards the market maker, we can potentially burn 8.25m of ICX a year, whilst locking away 16.5m, in-total reducing 24.75m ICX from the market a year, which is 75% of the inflation.
real interesting idea, would love to read more input from other community members too!