LUA Minting
Last updated
Last updated
LUA is minted through stablecoins(USDT/LUAUSD) and LUAB, with LUAB being a necessity for minting.
For Example: 10 LUA = 10 units of USDT/LUAUSD corresponding to the minting price of LUA + 10 LUAB
The function for minting is a dynamic, segmented function curve.
The minting price of LUA tokens is systematically designed to increase and not decrease under normal circumstances. However, an exception exists when the buyback protocol engages in purchasing and burning LUA tokens through protocol earnings using a mechanic similar to TWAMM. This process reduces the total supply of LUA tokens, which can lead to a decrease in the minting price as a result of the diminished supply.
Over a period of time, the ongoing buyback mechanism will result in the price of LUA in the secondary market being higher than that in the minting protocol.
The bonding curve function remains unchanged and incorporates all liquidity accumulated in previous versions within the protocol. Consequently, when LUA tokens are burned, the minting price will not fall below the prior floor price of approximately $2.49. (As shown in the gif above, when the minting price continues to decrease, the blue dot will eventually coincide with the green line)
Different Scenarios of LUA Pricing
Minting Price (Price1), Secondary Market Price (Price2)
Price1 < Price2
Strong demand for LUA creates arbitrage opportunities, which simultaneously boosts the demand for LUAB. This leads to increased participation and transactions in the incentives offered by various applications at the application layer.
Price1 > Price2
When the demand for LUA weakens and the demand for LUAB decreases, the protocol will, based on certain trigger conditions and TWAMM, buy back and burn LUA over a period of time. This process gradually lowers Price1.
You can sell LUA through the LUA Secondary Market, and of course, you can also buy LUA in the secondary market.
