Why XTN is not actually burned?
The Neutrino team is closely following the community discussions in our group. We have noticed a proposal to burn XTN (formerly known as USDN) which is stored on the 3PC9BfRwJWWiw9AREE2B3eWzCks3CYtg4yo contract. Such an idea may have arisen due to a misunderstanding of the principles of XTN operation, which we would like to clarify.
To explain why XTN smart contact doesn’t burn tokens using Ride’s Burn action, let’s turn to XTN creation history.
History of XTN creation
On Nov 22, 2019 1,000,000,000,000 XTN were issued by this transaction.
The XTN (USDN) token was issued as not reissuable, that is, it cannot be reissued, the number of existing tokens is finite and limited.
The issued tokens have been locked on the contract to exclude them from circulating supply.
There are two ways to get XTN into circulation:
- invoke the Buy XTN transaction (aka issue XTN) on the smart contract.
- exchange SURF to XTN when XTN price > $1.15 (see more details in SURF documentation)
To take XTN out of circulation, the opposite Sell XTN (Burn) operation is called on the smart contract. It returns tokens back into the “locked” storage. At the same time, they are not technically burned (you can see all locked tokens at the main Neutrino contract balance). But in this case, the return of the tokens to the storage is an operation essentially equivalent to a burn transaction, since it removes the token from circulation and contract does not allow their uncontrolled release or usage.
Why was such a technical solution chosen?
Neutrino protocol is a pioneer dApp in the Waves ecosystem. It was developed using the earliest Ride smart contract language. The newborn language had many limitations and didn’t include such convenient and flexible actions like Issue and Burn.
This rather limited environment “forced” the team to invent a solution to issue a big batch of tokens with their subsequent lock.
Moreover, based on the received experience, production support and communications with external teams outside of WAVES ecosystem the Neutrino team was one of those who spotted the difficulties in the earliest Ride language concepts and forwarded all the obtained information to the core team, which most likely had a very positive effect on the further Ride development.
Is it possible to make XTN burnable?
Yes, it is. But the costs are big. In order to make XTN burnable it is necessary to:
- replace old token with a new one because the current one is not reissuable
- ask all token’s owner to exchange/swap the existing token to a new issued
- communicate with all the external CEXs, DeFI aggregators and platforms about replacing the token id
- re-setup all the existing XTN pools
- review all the related APIs and ensure their compatibility
This is not a complete list yet, however, it already contains a huge scope of work that is not reasonable to do in the current conditions.
Is it possible to burn a part of the locked XTN?
Yes. It is possible. But what is the profit of this move? Let’s look at the facts.
- To begin with, it is worth noting that during the implementation of the Moon Factor function for the NSBT token, we burned all the “extra” NSBT, which, in the long run, turned out to be a wrong decision. As a result, NSBT failed its original function, so that’s why SURF appeared.
- If we mention SURF then we need to remember that SURF holders are entitled to swap it 1:1 into XTN when XTN price > $1.15 (see more details in SURF documentation). This means that we definitely need to keep a certain amount of XTN in the locked state. If so, what is the difference between keeping all the issued tokens or just a part of them?
- We need to be very careful because if we burn more than required it can break the contract logic.
The burn action might have some positive effect on the protocol from the marketing perspective and in the short run, but in the long run it doesn’t matter what amount of the token is locked in the Neutrino main contract.
Conclusion
We hope that we have sufficiently covered the idea of not being able to burn the currently existing XTN. We appreciate your feedback and are happy to answer any additional questions. Please find the most important points below:
XTN (USDN) token was issued as not reissuable. So, it cannot be reissued, the max amount of the existing token is finite and limited.
Neutrino team has no access to the locked tokens.
The only possible way to make XTN burnable is to replace the whole supply with a new token.
Returning XTN back to the main Neutrino contract is the equivalent of the token burning.
UPDATE: July 28, 2023
When we describe XTN as “not burnable”, we intend to explain the Neutrino protocol’s mechanics, meaning that XTN token is not automatically burned when sold (returned to the contract’s locked supply). The Neutrino team advocates keeping (not burning) preissued XTN supply (Max Supply) that is currently locked at the Neutrino contract.
However, in the general sense, just like any other token that has ID, XTN token is burnable. This means that users or projects can burn their XTN using using Burn transaction or Burn action if they really want to. For example, the new L2MP (Mining Power Token) interacts with XTN in such a manner, that when XTN is swapped to L2MP, the swapped XTN amount gets actually burned (irreversibly deleted from the total existing XTN supply).
Neutrino Team 💙
Neutrino website: https://neutrino.at
Twitter: https://twitter.com/neutrino_proto
Telegram : https://t.me/neutrino_group
