The new burning mechanism of DERI token
Per the voting result of DIP4, the burning mechanism of DERI token will switch to the burn-to-deadlock mode. However, due to DERI token’s multi-chain nature, the implementation of the burn-to-deadlock mechanism cannot be just a simple transfer to a deadlock address. The tricky part is, while DERI is Ethereum-native, the protocol fees collected to burn DERI might be on non-Ethereum networks, in which the DERI tokens are essentially wrapped ones. To burn a wrapped token, you have to transfer it to the original network and burn it there. It is very easy to understand with this analog: if a Binance-Peg Ethereum Token (ETH) is “burned” on BNB Chain, it does not mean an ETH is burned — an ETH has to be burned on Ethereum network.
Here we explain the procedure taking the DERI-burning from BNB Chain as an example.
The key component of the burning mechanism is a set of two pairing “burner” smart contracts on BNB Chain and Ethereum, with the same address. Let’s call them Burner1 (on BNB Chain) and Burner2 (on Ethereum).
DERI tokens are burned as follows.
- Call the buyAndBurnDeri function inside the protocol fee collector to buy DERI from DEX and transfer them to Burner1 on BNB Chain.
- Burner1 is coded to have one function only: uses the DERI bridge to transfer the DERI tokens from BNB Chain to Burner2 on Ethereum. Please note that Burner1 and Burner2 have to be deployed at the same address on the two networks, since the DERI bridge only supports same-address bridging.
- Once the DERI bridge signs the transfer, Burner2 can claim the transferred DERI tokens.
- Burner2 is coded to have one function only: send the claimed DERI tokens to the deadlock address.
Please note that, in practice, step 1 and step 2–3–4 do not have to be taken at the same frequency. Once step 1 is executed and the to-be-burned DERI tokens are transferred into Burner1, these tokens are permanently out of circulation (while technically they are not dead yet until the completion of step 2–3–4). Step 2–3–4 can be executed once in a while to reduce gas consumption.
All DERI tokens burned with this mechanism can be found in this DEAD address.
About Deri Protocol
Deri, your option, your future!
Deri is the DeFi way to trade derivatives: to hedge, to speculate, to arbitrage, all on chain. With Deri Protocol, trades are executed under AMM paradigm and positions are tokenized as NFTs, highly composable with other DeFi projects. Having provided an on-chain mechanism to exchange risk exposures precisely and capital-efficiently, Deri Protocol has minted one of the most important blocks of the DeFi infrastructure.