Swap & Burn
The innovative Swap & Burn mechanism is designed to create sustainable value and diversified returns for STO holders while maintaining deflationary pressure on the token supply. This page explains how the mechanism works and its benefits.
Understanding Swap & Burn
The StakeStone Treasury accumulates a diversified portfolio of assets through its revenue streams:
Platform Fees: Generated from withdrawals across STONE vaults, SBTC & STONEBTC vaults, and LiquidityPad vaults
Bribe Portions: A percentage of bribes offered by protocols to attract liquidity
These assets primarily consist of blue-chip cryptocurrencies such as ETH, BTC, stablecoins, STO, and partner ecosystem governance tokens. As the protocol grows and more protocols leverage StakeStone's liquidity solutions, the Treasury naturally expands in asset diversification, creating increasing value that backs the STO token.
The Swap & Burn mechanism allows STO holders to exchange their tokens for a proportional share of these alternative treasury assets, effectively removing STO from circulation in the process.
How Swap & Burn Works
The Swap & Burn mechanism creates a powerful market dynamic by enabling arbitrage opportunities. When a user holds STO tokens, they inherently possess rights to a proportional share of the treasury's alternative assets. When the value of Treasury assets corresponding to a specific amount of STO exceeds STO's market value, users can:
Acquire STO tokens on the open market
Swap these tokens for their proportional treasury assets
Realize the value difference as profit
This process simultaneously:
Removes STO from circulation through permanent burning
Distributes alternative blue-chip assets to STO holders
Creates natural price discovery and a soft value floor for STO
The arbitrage potential incentivizes market participants to constantly monitor and maintain efficient pricing, creating a self-regulating, organic, and sustainable ecosystem that protects STO value.
Benefits of Swap & Burn Mechanism
Flexible Exit Options: Enables direct exchange for blue-chip treasury assets without relying on exchange liquidity
Portfolio Diversification: One swap provides exposure to multiple blue-chip assets in the treasury
Market-Driven Deflation: Creates natural token burns triggered by arbitrage opportunities
Value Accrual for Holders: As tokens are burned, each remaining STO represents a larger claim on treasury assets
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