Eleven Finance: From Buyback and Burn to Buyback and Bond.
Eleven Finance has tried to be on the forefront of innovation in the defi space. In our short lifespan we feel we’ve adapted to meet this changing landscape. Examples of such include, building out our leveraged yield farming ecosystem and moving to a cross-chain model.
The defi space continues to evolve and with this evolution Eleven has felt the impact and needs to, again, adjust as a result.
Being live on 5 chains with one token has many benefits, but also some drawbacks. Liquidity fragmentation is the most significant of these. As a result users wanting to trade our native $ELE token have to deal with fluctuating liquidity on any given chain, at any point in time.
Another hurdle, happening at the same time, is the changing model of AMMs/DEXs, that has seen incentivised liquidity opportunities dramatically reduce. This, combined with the fact our ELE token has always been very low emission, has made liquidity incentivisation and therefore provision increasingly difficult.
A staple of what Eleven Finance has done until this point in time has been capturing value through buyback and burn. A large percentage of revenue Eleven.Finance has generated through fees has been used to buyback $ELE from the market. This has then been burnt every month. Placing a buying and deflationary pressure on our native token.
Today we announce a change in Eleven.Finance’s underlying token mechanism.
Before going any further, please keep in mind, emission rate, total and circulating supply mechanics are not affected by this change.
Eleven.Finance will continue to use fees generated to buyback $ELE from the open market. This happens in small amounts with every compound of every vault on our platform. They are sent to a ‘burn farm’ where, traditionally they have been burnt at the end of every month.
Moving forward, rather than burning these tokens at the end of the month, these tokens will be used to reward those who sell liquidity pool tokens back to Eleven Finance in the form of bonds.
These bonds grant users to allow users to purchase vested $ELE at a slightly discounted rate using ELE LPs tokens. These LPs will be owned by Eleven.Finance, effectively removing them from circulation. We hope this will build liquidity for the $ELE pairs, to allow easier trading of the token.
Bonds will be capped at the amount of ELE bought back from the previous month. While ELE is not burnt in this model, there is ELE that is effectively locked in LPs in the form of bonds. These LPs will sent to the Eleven.Finance treasury.
In order to grow functional liquidity reserves in one place, we will focus liquidity on one specific chain at a time to start. This chain and the specific asset paired with $ELE in the LP are still to be confirmed. We will continue to support community LP provision with $ELE MasterChef emissions for our pairs also, but look to wean these as protocol owned liquidity grows.
We see this as an exciting move forward, helping us transition into a more sustainable $ELE ecosystem, which is a key part of what Eleven.Finance, the platform, offers.