💎RFV (Non-Decreasing Risk-Free Value)
DracoDex's native token, $DRACO, introduces a unique feature that sets it apart in the DeFi landscape: a non-decreasing Risk-Free Value (RFV) or "floor price." This RFV acts as a backing to the amount of $DRACO, providing it with intrinsic value.
To put it simply, there is always a substantial amount of locked Ethereum (ETH) against which $DRACO can be exchanged. The beauty of this mechanism is that it offers a known downside risk at all times, adding a layer of security and reassurance for token holders.
The calculation of the RFV or "floor price" is determined by the equation:
amount_of_ETH / circulating_supply_of_DRACO
The last component to ensure the functioning of $DRACO is to guarantee that RFV (Reserve Floor Value) never decreases. To achieve this, there are two mechanisms based on the RFV calculation algorithm:
Reducing the circulating supply of DRACO: All transfers of DRACO, including buying and selling, are subject to a tax. The taxed DRACO tokens are burned, effectively reducing the circulating supply of DRACO. The transfer tax for DRACO is set at 4.5%, in this process, 2.5% will be burned, 1.5% will be transferred to the staker, and 0.5% will be transferred to the DRS.
Matching any increase in the circulating supply of DRACO with an equal or greater increase in ETH into the pool: Whenever DRACO is bought from the initially seeded bin, an equal amount of ETH is exchanged for the purchased DRACO. However, to account for swap fees, a greater amount of ETH is matched with the increase in the circulating supply of DRACO.
Contious business income goes into the DRACO/ETH pair to support rising of RFV
By combining these mechanisms, the invariant of RFV never decreasing is upheld. The reduction in circulating supply through taxing and burning, along with the matched increase in ETH, ensures the stability and integrity of RFV.
This mechanism elevates the RFV continually, reaching new heights. Over time, this dynamic enables DRACO to cultivate an ever-strengthening floor price, representing an evolution in tokenomic design. The innovative blend of these mechanisms represents DracoDex's commitment to long-term sustainability and value creation in the DeFi space.
In traditional securities trading, certain conditions can trigger the enactment of repurchase agreements. However, in reality, these repurchases may not always be guaranteed due to various factors such as financial issues and ethical concerns. Yet, through the use of smart contracts, we can ensure that the trading price of the Token will never fall below a certain value and will continue to increase under any circumstances, thanks to the RFV
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