DEXTools unlike most of the DeFi protocols has decided to adopt a buyback and burn mechanism instead of the classic revenue-sharing model. The majority of fees generated through platform usage, both from users and projects, are allocated to this mechanism.
Since implementing this deflationary model for $DEXT last year, its value has grown steadily and linearly over time. Within just over a year, $DEXT surpassed its previous all-time high as a result of this change in the token economics model.
By focusing fees toward reducing token supply rather than redistribution, DEXTools may have hit upon a more sustainable way to link protocol success and token value appreciation.
Let’s analyze the effects generated by this change in the tokenomics model, more than a year after its introduction.
Token Burning
As mentioned in the previous paragraph, DEXTools uses a significant portion of platform fees to conduct buybacks and burns of $DEXT tokens.
The buybacks are in part executed by purchasing $DEXT from the open market using platform fee revenue. Once accumulated, the bought-back tokens are permanently removed from circulation through burning.
This mechanism ties the deflationary pressure on $DEXT directly to platform usage levels. The greater the activity and transaction volume on DEXTools, the higher the fees that will be used for burning.
Let’s explore how this buyback and burn cycle works in more detail.
How it works
There are currently two key services that drive the reduction of $DEXT’s circulating supply:
- Update Social → This b2b service allows projects to update their project information such as links to the website, social channels, coingecko, coinmarketcap, and so on, directly on DEXTools.
Projects can pay in $ETH, $BNB, or $DEXT, with a 20% discount offered for settling fees in $DEXT. Importantly, 100% of the $DEXT collected is permanently burned.
- DEXTswap → This b2c and b2b service allows users to perform token swaps by using the on-platform aggregator of DEXTools, DEXTswap. Currently, DEXTools is working with two providers to offer this service: OKX and Kyberswap.
For each swap executed through DEXTswap, DEXTools retains a 0.3% fee. All fees generated by this service are later converted to $ETH and $BNB, going on to create a treasury that is then used to buy $DEXT and then burn it. 100% of the fees generated by this service are used to do the buyback and burn.
Results
Since the introduction of this mechanism, a total of $23.25M $DEXT has been bought back from the market and permanently removed from circulation.
The circulating supply has been reduced from an original 111 million $DEXT to the current 87.75 million, representing a decrease of 20.94% over time. (the burn metrics visible at burn.dextools.io)
If we take the last year as a reference, we can notice that:
- In one year, DEXTools burned approximately 13.55M $DEXT, reducing the circulating supply from 102.23M to 88.71M, thus decreasing the circulating supply by 13.25%.
- On average, DEXTools burned around 1.13M $DEXT per month. In percentage terms, DEXTools burned an average of 1.10% of the supply per month.
It’s important to consider that as the value of $DEXT increases, fewer tokens are burned, establishing an inversely proportional correlation (due to a lower price rate for the “Update Social” service).
Additionally, as visible on The Burn Dashboard, DEXTools plans to introduce a new burn revenue stream, further supporting the burn mechanism.
$DEXT Price Action
Okay all very nice, but what effect has this substantial change had on the token price?
Since the introduction of this mechanism (November ’22), we have seen a linear growth of $DEXT. Looking at the monthly chart, we can see that out of 16 monthly candles, 13 are green, indicating a steady upward trend in the value of $DEXT.
Among the three red monthly candles, the maximum percentage decline in price was about 11.7 percent (crazy low!).
This allowed $DEXT to have steady growth during the bear market, even to the point of breaking the previous ATH made during the two-year bull of 2020/2021.
As visible in $DEXT’s transaction history, there is strong buying pressure every day resulting from the “Update Social” service (multiple buy transactions of $1,000 $DEXT, which is the current rate to benefit from this service).
This demonstrates the soundness of the token economic model underlying $DEXT.
Funding
Since DEXTools started its journey 3 years ago, the platform has always grown without funding.
OKX Ventures, the venture arm of the exchange OKX, has made a strategic investment in the leading DeFi analytics platform, DEXTools.
This partnership will see closer integration between the two projects and help drive innovation in the blockchain space. OKX sees value in DEXTools and is backing further growth. Even if the numbers are not disclosed, we think that this partnership will have a positive impact on the future expansion of the platform.
One immediate integration was to add OKX’s aggregator to the DEXTools platform, allowing users to trade directly from multiple DEXes at the best rates.
Data sharing is also part of the partnership, with DEXTools and OKX API information combined. This will provide users with a more complete view of activity across both CeFi and DeFi ecosystems.
Further tech collaborations between the projects are expected going forward. OKX’s endorsement is a big vote of confidence that this partnership will drive meaningful innovations.
Upcoming Developments
DEXTools does not announce announcements. Despite the recent silence, history tells us that periods of quiet often precede new product launches.
DEXTools has incredible tech, fights for a safer DEFI, and loves to over-deliver.
The amount of developments in the plans is huge, and the team has, up to now, always delivered quality features. We believe these will be the main upcomings:
- Launchpad
- Token Launcher
- DEXTbots NFTs
- Banana Gun technology on DEXTools.
We don’t know the exact ETA for these developments, but we are sure that one of these products will be released very soon.
As we were saying above, a new burning stream for DEXToolsApp is coming. Maybe one, or two, who knows. Anyway, we will burn more $DEXT, making it more deflationary.
