Why does the Cigarette Token burn revenue from the Harberger Tax?

The Cigarettes Token
2 min readMay 8, 2023

Why doesn’t the CIG protocol give any of the purchase price amount to the previous CEO? Why is all the tax revenue burned?

The reason why the revenue is burned is because we want to make sure that the CEO’s interests are aligned with the protocol, rather than just their own self interest. The CEO is a serious job where they can control the issuance rate of CIG. So to become a CEO, one must burn their CIG, and that is a way to show dedication and commitment. Also, if the CIG from the sale wasn’t burned and went to the outgoing CEO, then the outgoing CEO could just use the CIG they received to take the position back. Burning it makes it more difficult for the previous CEO to take it back. It also prevents “wash CEOs” — people taking the CEO from their multiple wallets, polluting the CEO history.

To explain more about the self interest thing: If the CEO was to receive some revenue to their own pocket, they would probably tend think about making a profit for themselves and hope to exit as soon as they make a profit. Where as a CEO who is there to lead the project may actually be interested in preserving their role, rather than selling it.

Another reason why the revenue is burned is because we wanted to avoid having a treasury. When the Cigarette Token was designed, the author was under the opinion that simplicity wins over all the token voting headaches that come with a regular DAO.

How effective is the burning of the tax?

Between December 2021 and April Apr 2023, there were 12 CEO changes. In total, 39,119,420 $CIG has been burned from Harberger Tax sales alone, which is almost 2% of supply.

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