🔥 | Deflationary Mechanism

ESPER deflationary mechanism

In addition to a hard cap on ESPER, Esper Finance has implemented deflationary measures to effectively reduce the overall token supply.

Buyback and Burn

A portion of protocol revenues is set aside for the buyback and burn of ESPER tokens, generating constant buying pressure on the token.

xESPER Redeem

During the redemption of xESPER to ESPER, if the vesting duration is not set to the maximum, the xESPER:ESPER ratio will be adjusted to a value below 1:1, ranging down to 1:0.5 as the minimum. Any excess ESPER obtained during this process will be automatically burned.

To illustrate this process, let's consider an example:

If a user decides to redeem 1000 xESPER with the minimum vesting duration of 15 days, they will receive a ratio of 1:0.5, yielding 500 ESPER.

Consequently, a total of 1000 - 500 = 500 ESPER will be burned throughout the redemption process.

xESPER Deallocation

When users deallocate xESPER from a Plugin, a deallocation tax is typically set at 0.5%. This tax can vary across contracts. Moreover, the corresponding amount of ESPER will be automatically burned as part of the deallocation process.