Sustainable tokenomics and building on revenue generating POL deployment

Proposals
1

Proposal: Automated Burn & Compound Mechanism with Inflation Adjustments

Overview

This proposal builds upon the existing community pool deployment in the ampLUNA/USDC and LUNA/ampLUNA liquidity pools. Its primary objective is to introduce a structured, automated mechanism that simultaneously compounds liquidity and reduces supply, while also addressing long-term inflation concerns.

1. Automated Burn and Compound Mechanism

Implement an automated burn-and-compound cycle for all ampLUNA pairs utilizing community pool funds or chain-owned liquidity.

For example, the ampLUNA/USDC pool currently holds approximately 5,237,568.997785 ampLUNA and 658,810.035159 USDC. Under this proposal:

  • A predefined ampLUNA threshold (e.g., 5,300,000 ampLUNA) would be established.

  • At each epoch or on a monthly basis, an automated smart contract or chain module would:

    • Withdraw any ampLUNA above the defined threshold.

    • Withdraw the equivalent value in USDC.

    • Convert both assets into LUNA.

    • Permanently burn the acquired LUNA.

This mechanism ensures liquidity growth while systematically reducing circulating supply.

2. Strategic DCA Expansion into Additional Pairs

Authorize a Phoenix directive to dollar-cost average (DCA) into additional ampLUNA pairs backed by strong, blue-chip assets such as:

  • wBTC

  • wstETH

  • PAXG

  • ampATOM?

  • Other high-quality assets as approved by governance

Once deployed, the same automated burn-and-compound mechanism described above would apply to these pools.

3. Inflation Parameter Adjustments

Modify the chain’s inflation parameters to better align staking participation with issuance:

  • When staking participation is below 50%, set a maximum inflation rate of 7%.

  • When staking participation reaches or exceeds 65%, reduce inflation to a minimum of 5%.

This adjustment incentivizes higher staking participation while maintaining controlled issuance.

4. Transaction Fee Policy

Burn all on-chain transaction fees that are not explicitly allocated to smart contract developers or other governance-approved distributions.

This measure further strengthens deflationary pressure while preserving developer incentives.

5. Transparency & Monitoring

Develop and publish a public dashboard on the Phoenix Foundation website to:

  • Track total LUNA burned

  • Monitor burn events by pool

  • Display staking ratio and inflation parameters

  • Provide transparency on fee burns

This ensures accountability and real-time visibility for the community.

Conclusion

This proposal introduces a sustainable framework that combines liquidity growth, systematic supply reduction, disciplined inflation management, and full transparency. The goal is to strengthen long-term tokenomics while supporting ecosystem expansion and staking participation.

2

Feel like this prop is the wrong way round. When LUNA value falls, the ampLUNA in the pool would rise, sending the amount of ampLUNA above whatever threshold is set.

I’m not clear how liquidity would continue to rise. To me, the TVL would fall, e.g. LUNA value dumps 20% > amount of ampLUNA in pool rises above threshold > liquidity removed > total TVL falls.

Instead, if threshold was in $$$ value, liquidity to be burned would only be removed from pool when TVL is rising, i.e. LUNA value increasing.

3

Liquidity would compound when the price of LUNA rises and burn when the price of LUNA falls. The goal would be to target a specific amount of ampLUNA that compounds LUNA at about 29%, so the underlying LUNA would always increase. If anyone has a better way to implement a burn-and-compound mechanism, I am open to suggestions.

4

1. Automated Burn and Compound Mechanism Update.

Revenue Split (Optimal Ratio)

Recommended split:

  • 50–70% → Recompound into LP

  • 30–50% → Buyback + burn LUNA

5

PF is already deploying liquidity into strategic pools that are important to the ecosystem, and it is getting transparently reported on our treasury page: Terra Phoenix - Blockchain Infrastructure & Ecosystem

The only addition would be some form of burn mechanism based on price or trading activity, like the liquidity deployment proposal.

Your suggestion however is complex to implement and requires lots of manual intervention and tasks, as these LPs are all held in multi-sigs. At the current point I think it is better to grow liquidity based on trading activity, so just keep it compounding to increase Terra TVL.

6

What are your thoughts on DCAing into ampLUNA and pairs with strong bluechips like wBTC, wstETH, and PAXG?

on chain transaction fees could also start burning LUNA as the 7% is more than sufficient for stakers.