Governance Proposal #3: Implementing a Buyback and Burn Program for TINY

Governance Proposals
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Overview

Since the launch of the TINY token in July 2024, Tinyman has witnessed remarkable growth across multiple fronts. This includes:

  • A steady rise in active governors, surpassing 2,600 in recent weeks.
  • A growing number of on-chain TINY holders and liquidity providers.
  • Steadily rising trading volume, hitting nearly $100 million USD in November.

These developments highlight the platform’s expanding footprint within the Algorand ecosystem.

Approximately 7,000,000 TINY tokens are currently distributed each month as governance and farming rewards. These incentives have been key drivers of participation and liquidity growth. However, they have also contributed to steady sell-side activity, which may influence the token’s market dynamics and its potential for value appreciation.

To address this, we propose implementing a buyback and burn program funded by 20% of Tinyman’s trading fees. This initiative aims to:

  • Create additional demand for TINY by reducing its circulating supply.
  • Counteract inflationary pressures from monthly token emissions.
  • Generate excitement and engagement within the broader Algorand ecosystem.

By aligning TINY’s value with Tinyman’s success, this program provides a direct benefit to tokenholders, enhancing the token’s utility and contributing to the platform’s long-term sustainability.

Liquidity providers will not be affected by this proposal.
We are proposing to allocate 20% of the fees currently directed to the Tinyman treasury for the buyback and burn program.

Here’s a breakdown of the current fee structure to clarify:

  • A 0.3% fee is applied to all swaps.
    • 5/6ths (0.25%) of this fee goes to liquidity providers (LPs) as rewards.
    • 1/6th (0.05%) of the fee is allocated to the Tinyman protocol (Treasury).

This means that the fee distribution remains unchanged for LPs, and only a portion of the treasury’s share is used for the buyback and burn initiative.

Abstract

This proposal seeks approval to allocate 20% of Tinyman’s trading fees to a buyback and burn initiative. Under this program:

  1. Tinyman will purchase TINY from the open market using allocated trading fees.
  2. These purchased tokens will be permanently burned, reducing the total circulating supply.

The program will capitalize on Tinyman’s growing trading volumes, aligning tokenomics with the platform’s growth trajectory and fostering long-term value for the TINY token.

Objective

The primary objectives of this initiative are to:

  • Reduce inflationary pressure on TINY.
  • Increase its scarcity.
  • Drive greater engagement around Tinyman and its native token.

Market Opportunity

1. Rising Trading Volumes

Tinyman currently experiences daily trading volumes of approximately $10,000,000 USD, driven by growing interest in ALGO and other popular ASAs in the Algorand ecosystem. The platform’s increasing liquidity and trading activity create the perfect environment to implement a buyback program without disrupting operations.

2. Favorable Market Sentiment

Recent innovations, such as the liquid staking feature, have bolstered Tinyman’s utility and revenue streams. By leveraging this positive momentum, the buyback program can amplify its impact while maintaining financial sustainability.

Proposal Details

Program Structure

  • Allocation: 20% of all trading fees collected by Tinyman.
  • Mechanism: Use the allocated fees to buy TINY tokens on the open market.
  • Burning: All purchased tokens will be permanently burned, reducing the circulating supply.

Financial Model

Trading Fee: Tinyman charges a 0.05% fee on all transactions.

Example Calculation (Based on Current Trading Volume):

  • Daily Trading Volume: $10,000,000 USD.
  • Allocation to Buyback: 20% of trading fees.

Daily Buyback Fund:

10,000,000 USD×0.0005 (0.05%)×0.20=1,000 USD/day10,000,000USD×0.0005(0.05%)×0.20=1,000USD/day

Monthly Buyback Fund:

1,000 USD/day×30 days=30,000 USD/month1,000USD/day×30days=30,000USD/month

Impact on TINY Supply:
At the current TINY price of $0.04, the monthly fund would purchase and burn:

30,000 USD/month÷0.04 USD=750,000 TINY/month30,000USD/month÷0.04USD=750,000TINY/month

Annual Impact:
Over 12 months, the program would burn:

750,000 TINY/month×12 months=9,000,000 TINY/year750,000TINY/month×12months=9,000,000TINY/year

This would offset approximately 10.71% of the annual emissions from governance and farming rewards, significantly reducing inflationary pressures on the token.

Benefits of the Buyback and Burn Program

1. Price Appreciation

  • Reduces circulating supply, increasing scarcity.
  • Directly counters inflationary pressure from token emissions.

2. Increased Visibility and Recognition

  • Establishes TINY as a deflationary token.
  • Enhances community confidence and enthusiasm.

3. Improved Tokenomics

  • Balances token emissions with trading fee revenue.
  • Aligns TINY’s value with Tinyman’s operational success.

4. Sustainability

  • Treasury Development: 80% of trading fee revenue will support Tinyman’s treasury, ensuring robust long-term growth.
  • Supplementary Revenue: Revenue from features like liquid staking will offset buyback program costs, ensuring financial sustainability.

5. Community Engagement

  • Demonstrates Tinyman’s commitment to tokenholder value.
  • Reinforces Tinyman’s position as a community-first decentralized exchange.

Implementation Steps

  1. Approval: Secure community consensus through this governance proposal.
  2. Execution: Allocate 20% of trading fees to the buyback program starting January 2025.
  3. Transparency: Publish monthly updates detailing tokens bought back and burned.

Potential Risks and Mitigation

Market Impact: Significant buybacks could lead to temporary price volatility.
Mitigation: Distribute buybacks evenly over the month to minimize market disruption.

Conclusion

The proposed buyback and burn program represents a strategic move to strengthen TINY’s tokenomics, enhance user confidence, and solidify Tinyman’s position within the Algorand ecosystem. With current favorable market conditions and rising trading volumes, now is the ideal time to implement this initiative.

Voting

  • Vote “YES, let’s do it!” to approve the allocation of 20% of trading fees to the TINY buyback and burn program.
  • Vote “NO, this is not the way.” to oppose this initiative.
  • YES, let’s do it!
  • NO, this is not the way.
0 voters

Let’s shape the future of TINY together!

1 Like
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When will this appear on Tinyman for holders to vote?

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HI @scrmjt42 If the majority of the community votes YES, we will launch this as an on-chain proposal. This will likely happen at the end of next week.

2 Likes
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Will the trading fees that currently go to liqudity provider decease because of this?

I believe liquidity providers get .25% of trading fees right?

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Hi @mangosteen No, liquidity providers will of course not be affected by this.
We are proposing to use 20% of the fees which are allocated to the Tinyman treasury.

Here is the fee breakdown to clarify:

A fee of 0.3% is added to all swaps.

  • 5/6ths of this fee (0.25%) is paid to Poolers (LPs)

  • 1/6th of this fee (0.05%) is paid to the protocol (Tinyman Treasury)

6 Likes
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Is this permanent or do we get to decide when to change the burn rate?

1 Like
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Token Buybacks are very similar to what companies do with their stocks. Look how well it worked out for Boeing.

Interesting article on Medium to consider: The Buyback and Burn Model: A Deep Dive into its Pros and Cons in Web3 Ecosystems | by PlayMakr Tokenomics Consulting | Medium

Summary: While buyback and burn proposals may seem appealing as a strategy to enhance token value by reducing supply, they can ultimately undermine the long-term sustainability and growth of a project. One significant concern is that this approach often prioritizes price manipulation over genuine value creation. By focusing on artificially inflating token prices through buybacks, projects neglect essential aspects such as product development, community engagement, and ecosystem expansion, which are crucial for fostering real demand and utility for the token. Additionally, the practice can lead to a misallocation of resources, diverting funds that could be better spent on innovation or improving user experience. This could result in a stagnation of the project’s growth trajectory, as the underlying fundamentals are overshadowed by temporary price boosts.

Maybe focus our resources and efforts on improving market demand and adoption?

5 Likes
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this is a good idea. maybe split the buyback 50 tiny 50 Btc and build the Liquidity Pool and burn the LP what do you guy think about this Idea

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Hi @Algorob,

Thank you for adding value to this conversation. We truly appreciate your thoughtful input.

All of your points are valid, and we’ve carefully considered them before launching this proposal.

We’d like to reiterate that the Buyback and Burn initiative is just one of several exciting enhancements we’re planning to increase the utility of the Tiny token. We are actively working on a range of new use cases for Tiny, and we remain fully committed to introducing even more in the future.

Looking ahead to 2025, we have some thrilling features in development for Tinyman. Rest assured, the buyback and burn program will not hinder our ability to continue improving and expanding the protocol.

Regarding funding: We’re allocating 20% of the fees to the buyback, while the remaining 80% will go toward building a healthy, sustainable treasury to ensure the long-term success of Tinyman. Additionally, revenue generated through the Tinyman stakepool will further contribute to the growth of the protocol’s treasury.

Thank you again for your input, and we’re excited about what’s to come!

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Hi @Mainakeith We may adjust the buyback depending on market conditions in the future. However, this will be also driven by our community.

1 Like
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Perfect.
Thank you for the response.

1 Like
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I think this is a great idea as it will extends T inyman popularity among other BTC community and crypto holder and maybe beyong.

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It also puts tinyman holders in the driver’s seat. This is a positive step.

1 Like
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Won’t this make Tinyman less competitive to other DEXs? Has there been any analysis as to what percentage of swaps are direct vs aggregators?

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@Surfingdegen A DEX aggregator is a service that sources liquidity from multiple decentralized exchanges (DEXs) to provide users with the best possible prices for their trades. Tinyman has a share of more than 88% of the entire trading volume on Algorand.

This proposal does not affect swap routing whatsoever.

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The Buyback and Burn proposal is a smart step forward for increasing the value of TINY and supporting Tinyman’s overall growth. By lowering the number of tokens in circulation, we can help manage inflation and encourage more engagement from the community. This initiative is designed to benefit TINY holders as well as the whole Algorand ecosystem.

One of the great things about this plan is that it strikes a balance between immediate gains and long-term health. By allocating just 20% of trading fees to the buyback and burn program, we can still invest in our treasury and fund future innovations. This thoughtful approach not only helps ensure Tinyman remains competitive but also reinforces its position as a leader in decentralized trading. Overall, it’s a win-win for everyone involved!

1 Like