Development Proposal: Creation of a Blockchain ETF for DeFi on Ethereum with Rewards in Shibarium**
Summary
This document proposes the development of a blockchain-based Exchange-Traded Fund (ETF) that will aggregate the top 10 DeFi protocols on the Ethereum network. This ETF will distribute the generated dividends to participants and will specifically benefit the K9 community by distributing rewards in the form of $knine on the Shibarium network. Additionally, a mechanism will be implemented to burn 1% of the dividends in $K9, reducing its supply and increasing its long-term value.
Furthermore, the ETF will be launched in a liquidity pair with $knine, with a 0.5% sell fee applied to every sale transaction. The $knine collected from this fee will be automatically burned, creating a deflationary effect that benefits holders over time.
A) How Does It Work?
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Selection of Protocols: The 10 most relevant DeFi protocols on the Ethereum network will be selected based on factors such as liquidity, trading volume, and stability.
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ETF Tokenization: A representative token of the ETF will be created, allowing users to buy and sell shares in the fund.
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Liquidity Pair with $knine: The ETF will be launched with a trading pair against $knine, increasing its liquidity and market presence.
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0.5% Sell Fee for Burns: Every sale transaction of the ETF token will include a 0.5% fee, which will be used to buy and burn $knine, reducing its circulating supply.
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Dividend Distribution: The revenues generated by the selected protocols will be periodically distributed to participants in the form of $knine on the Shibarium network.
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K9 Participation: K9 will hold a minimum 20% stake in the ETF, ensuring its influence in governance and the ecosystem.
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Burn Mechanism: In addition to the 0.5% sell fee burn, 1% of the dividends generated by the ETF will be used to buy and burn $K9, further supporting price stability and value appreciation.
B) Why Is It Necessary?
Innovation in Decentralized Finance: The creation of this ETF will facilitate diversified exposure to DeFi without the need to manage multiple assets.
Integration Between Ecosystems: By using Shibarium for reward distribution and K9 as a key component of the fund, a synergy between Ethereum and Shibarium will be created.
Incentives for the Community: Participants will not only receive dividends but will also actively contribute to strengthening K9.
Deflationary Mechanism: The combination of the **sell fee burn and the 1% dividend burn will significantly reduce the $K9 supply, benefiting holders in the long run.
Increased Liquidity for $knine**: Launching the ETF in a liquidity pair with $knine** will create deeper liquidity, improving market efficiency and accessibility.
C) Challenges to Overcome
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Smart Contract Security: Ensuring that the ETF’s smart contract is secure, audited, and resistant to exploits.
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Liquidity Management: Balancing liquidity pools effectively to prevent excessive volatility and ensure smooth trading.
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Regulatory Compliance**: Addressing legal considerations in different jurisdictions to avoid regulatory hurdles.
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Cross-Chain Bridge Efficiency: Implementing a reliable mechanism to convert and bridge dividends from Ethereum to Shibarium without excessive fees or delays.
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Adoption and Awareness: Educating users on the benefits of the ETF and incentivizing participation through strategic marketing.
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Governance Implementation: Ensuring fair and decentralized governance, particularly regarding K9’s 20% stake in the ETF.
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Automated Burning Mechanism: Developing and testing a robust system to execute the 0.5% sell fee burn and 1% dividend burn seamlessly.
D) Long-Term Impact
- Growth of the DeFi Ecosystem: Facilitating access to diversified investments will attract new participants.
- Strengthening of K9 and Shibarium: Integrating this ETF will increase visibility and adoption of these ecosystems.
- Financial Sustainability: By generating recurring dividends, a sustainable revenue source will be created for participants and the K9 community.
- Increased Adoption and Liquidity: Implementing this model could encourage other projects to adopt similar strategies, driving sector growth.
- Continuous Deflation of $knine: The dual burn mechanism (sell fee + dividend burn) will consistently reduce the circulating supply of $knine, supporting its long-term value.
E) What Is Needed to Implement It?
- Smart Contract Development: Creation of secure smart contracts for ETF management, liquidity pairing, sell fee automation, and reward distribution.
- Selection of DeFi Protocols: Identification and evaluation of the protocols to be included in the fund.
- Liquidity Pairing with $knine: Establishment of the ETF trading pair against $knine and liquidity pool creation.
- Exchange of Dividends Generated by the Knine Token, Bridging to Shibarium for Distribution: Implementation of an efficient mechanism to convert the generated dividends into $knine and bridge them to the Shibarium network for participant distribution.
- Sell Fee and Burn Mechanism: Development of an automated process to collect and burn 0.5% of $knine from every sale transaction of the ETF token.
- K9 Governance and Participation: Establishment of governance mechanisms to ensure K9’s 20% participation in the ETF.
- Regulation and Compliance: Legal analysis and adjustments to ensure the ETF complies with relevant regulations.
- Marketing and Adoption: Strategic campaigns to promote the ETF and onboard investors.
F) Conclusion
This blockchain ETF based on Ethereum, with reward distribution on Shibarium, will not only provide an attractive DeFi investment option but will also strengthen the K9 ecosystem through its active participation and dual deflationary mechanism. The sell fee burn and dividend burn will continuously reduce the supply of $knine, making it a deflationary asset with increasing scarcity.
Additionally, launching the ETF in a liquidity pair with $knine will enhance its trading volume and liquidity, improving market efficiency. Overcoming key challenges such as smart contract security, cross-chain bridging, and regulatory compliance will be crucial for the project’s success. If executed properly, this ETF has the potential to revolutionize DeFi investments while strengthening the K9 and Shibarium ecosystems in a sustainable and deflationary manner.
Neutral Impact on $knine Price
One of the key considerations in the design of this ETF is ensuring that the impact on the price of $knine remains neutral while still benefiting the ecosystem. This is achieved through a mechanism where any sale of dividends in $ESknine occurs only after an effective purchase, ensuring pure trading volume rather than net sell pressure.
How Does This Work?
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Dividends Are Earned in $ESknine: Participants receive their ETF dividends in $ESknine, meaning they do not originate from existing market liquidity but rather from the profits generated by the ETF itself.
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If Sold, They First Require a Buy Order: In order for $ESknine dividends to be sold, they must first be converted into $knine, which requires a buy transaction on the market. This means that every sale is preceded by a purchase, maintaining a neutral price impact on $knine.
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Pure Volume Generation: Since every sale is counterbalanced by a buy, this creates pure volume rather than downward price pressure. Increased trading volume leads to higher rewards and more dividends being generated within the $knine ecosystem.
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More Trading, More Dividends: As a result of this cycle, the ecosystem benefits from higher transaction fees, increased liquidity, and additional dividend generation, further reinforcing the sustainability of the ETF and $knine’s economic model.
Why Is This Important?
No Net Sell Pressure: Since each sale is preceded by a buy, there is no net negative impact on $knine’s price.
Increased Market Activity: More trading volume results in more fees and rewards for participants.
Self-Sustaining Growth: The ETF mechanism ensures continuous value creation within the $knine ecosystem.
This approach ensures that $knine remains stable while still benefiting from the ETF’s success, creating a sustainable and high-volume trading environment that enhances long-term value.
The reward token can be considered to be ESknine.