Reflect.Finance and the Blackhole
Early on in the RFI project circa 900k $RFI tokens were in community custody, this left a decision on the community to vote upon which resulted in a 50/50 split between a liquidity mining program and the subsequent ‘burning’ of the remaining tokens to a dead address.
Due to the unique mechanics of the RFI token it was understood this mass would grow and thus a community member aptly named it the Blackhole.
Interestingly the Blackhole provides a rather unique deflationary aspect to the RFI ecosystem. I will now describe some predictions and the effects of this first DeFi unique phenomenon.
The accretion rate of the black hole is of course determined by the transaction volume in RFI units within the ecosystem. Fees of 1% are distributed evenly to all addresses of RFI. Initially with a low RFI value the volume flowing through the system is relatively high e.g. a 1ETH buy may equal 22k RFI. Presuming a Blackhole size of 500k RFI which is 5% of all RFI, the Blackhole receives 0.05 x 0.01 x 22k RFI = 11 RFI for that transaction.
As the value increases due to buyers, use case and scarcity we see a slower accretion rate for the same input value. For example a 1ETH buy may equal 500RFI. Increasing the size from the previous example, as would be natural with volume, we can estimate a second point. 550k RFI Blackhole would absorb 0.055 x 0.01 x 500 RFI = 0.275 RFI for the same input value. Selling the same 22k RFI in the first instance while lowering the localised price against a ratio of liquidity will compensate the ecosystem and increase the Blackhole driving further scarcity. If the value increases, the RFI unit volume per ETH reduces thus the growth effect is similar to that of a battery charging in a DC circuit.
In Fig 1.0 we would consider the voltage as the stored value of RFI in the Blackhole or indeed the long term HODLers address. The charging current being analogous to respective absolute RFI volume flow, not value.
Since the growth factor of the Blackhole creates a scarcity, the net effect is that of a balancer with a slowly positive in effect. A very nice simple deflationary feature. Others have tried to solve this with complex basing mechanisms which are best described as ugly in comparison.
It is envisaged, in the long term, smaller amounts of RFI will be able to flow as the exerted ecosystem pressure reaches a maximum from the Blackhole and indeed long term HODLers.
Another interesting dynamic, aside the Blackhole, is that the traditional enemies of HODLers (day traders, frontrunners and arbitrage traders) are benefiting long term HODLers as an effective mechanism of taxation for their activities.
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This does not constitute financial advice.