Hello dear Biz
I am the OP of the below post, and I find it funny that FUD faggots have gone all the way to change the numbers and make the post look like it does not mathematically add up. Anyway, see below the correct post.
As I saw plenty of “I don’t understand” pic related posts, I am going to explain it to you now in details. Forget about what it is being marketed as: index/deflationary/fund/etc… Call it whatever you want after you read the below.
It is the product of modern economics and technology. If you do not understand it, that is absolutely fucking fine because never EVER in the history of mankind could it be done. Not without the blockchain. Worry not though, I am here to explain.
Starting off with basics: market cap = supply x price
As an example, for 5,000 supply at $2 the market cap is: $10,000 = 5,000 * $2
Whenever STA is traded between wallets, 1% gets burnt. Now let’s assume two things:
1- Volume of 50,000 STA gets traded, causing 500 STA to get burnt reducing the supply from 5,000 to 4,500
2- Ignore the demand/price force for STA’s utility (will get back to this point later faggots)
Since we are ignoring demand, the market cap should theoretically maintain its amount.
This burn will therefore cause price to increase:
10,000 = 4,500 x p, which means price should theoretically be pushed to 2.22.
This price increase will cause the STA value in Balancer (or Phoenix) to increase, forcing the pool to rebalance. Rebalancing means selling STA and buying the other 4 coins to keep the percentages as initially agreed upon (50 ETH / 20 STA / 10 BTC / 10 SNX / 10 LINK). Now remember, selling STA will cause STA to be burnt again (supply decreasing), causing a ripple effect: the cycle will keep repeating itself at a decreasing rate, even if no further human-triggered trades happen.
