Mimo’s New Buy-Back Feature — How It Works
On December 15th 2021, MIMO Token Holders were able to exercise their governance voting power by voting on an executive proposal. This proposal included the deployment of the new MIMO Buy-Back feature. This new feature is part of Mimo’s governance token utility program and the changes are as follows:
Before the proposal was executed, and as fees were produced by the usage of the protocol, they were all sent to the safety reserve contract, in charge of safeguarding liquidations in undercollateralized vaults. As a reminder, the safety reserve comes into use when a vault that faces liquidation does not have enough collateral to pay for the entire outstanding debt. After the proposal was approved by the MIMO token holders, the new rules indicate that the fee distributor will send 40% of the total fees to the new Buy-Back contract. This Buy-Back contract has been specifically created in order to buy MIMO tokens on decentralized exchanges (DEXs) and lock them for 4 years in a fund. This new type of fund will be fully managed by the MIMO token holders.
After (4) years in which the tokens are in the treasury of the protocol (40% of the fees collected since the proposal), the MIMO token holders will decide what to do with these funds. They can be used as an additional incentive for liquidity mining, or as staking rewards, for example.
Why did Mimo implement the Mimo Buy-Back feature instead of token burns, which are common in other protocols?
The regulatory risk of guaranteeing burning volatile tokens is higher. We want to ensure our users aren’t going to fall into a Securities Regulation issue. The Mimo governance and token voting on proposals by using vMIMO can change that. The Mimo Team doesn’t control it, but we would advise against burning.
Is it possible to use the Buy-Back feature to grow the protocol?
MIMO had a very fast issuance and a low price for a long time. Having these tokens essentially come back to the token holders as future incentives for growth makes more sense to the Mimo team. Nevertheless, it’s actually more important what the token holders decide regarding what to do with the Buy-Back funds, as they are the ones able to use their vMIMO voting power to take the decision on what to do with the tokens once unlocked.
Will the Buy-Back feature be available in a multi-chain ecosystem?
As more chains are added to the protocol, the Buy-Back feature will also be available in those chains, as Fantom for example.