Burning vaults are a special kind of vault. They are used to manage the burn rate of fees, and have their own distinct benefits.
Instead of immediately burning all fees, we opt for a slow burn, gradually growing over time.
Here's how it normally works:☝🐱
Say we have $10,000 in fees to burn. Most other yield farms would just take a portion ($1,000, for example), to buy back their own token and send it to a burn address.
This ends up with $9,000 leftover in fees and a bump in the token price temporarily.
Eventually, there won't be any more fees to burn. The price of the token will gradually trickle down to zero, as there is now no price incentive to farm. 😿
What does Polycat do differently?
Instead of the above, our methodology is to take the burning fees and stake them in a vault, for example AAVE-USDT. We then burn the earnings from the vault.
Going back to our $10,000 example above:
$3,000 is set aside for ad-hoc direct burning, and the remaining $7,000 is staked in a vault, generating a humble but consistent $30 per day. The key here is consistency: it will continuously generate $30 per day.
As swaps on the DEX increase, the burning vault grows, generating more rewards to burn.
This avoids the price gradually reducing to nothing, making Polycat farming more sustainable for the long-term.
How do Burning Vaults grow?
When someone makes a swap routing through our liquidity, the following is taken from the transaction fee: 🔥🐾 0.12% to burn $PAW
This transaction fee is then deposited into a Burning vault which continuously grows and may use multiple different strategies as fees grow over time.