@GoKiteAI's economic model, the most eye-catching and widely discussed by the community, is undoubtedly its 'buyback-burn' deflationary flywheel. Today, we will delve into the hardcore closed-loop design and see how it attempts to deeply bind token value with network utility.
How does the flywheel rotate?
1. Starting point: Network usage: Developers or users (AI agents) use KITE blockchain services, such as conducting transactions, invoking smart contracts, using the AIR identity system, or paying for collaboration fees between AI agents.
2. Generate value flow: These operations require payment of network fees (Gas Fee) priced in $KITE. This portion of the cost constitutes the real income of the protocol.
3. Triggering Deflation: According to the design, the protocol does not allocate all income to the treasury, but instead uses a portion (or even most) of it to buy back $KITE tokens on the open market.
4. Permanent Scarcity: The tokens bought back will not be retained but sent to an inaccessible address for permanent destruction. This means that this portion of the tokens completely disappears from the total supply.
5. Formation of the Flywheel Effect:
· The more the network is used → The more income → The more buybacks and burns → The less circulation.
· In cases where demand remains unchanged or increases, the scarcity of the token rises, theoretically supporting the price per unit.
· Stronger value support may attract more builders and users, further promoting network usage... thus creating a cycle.
The difference from simply "burning gas fees":
Many chains also experience deflation (like ETH's EIP-1559), but only the base fees paid by users are directly burned. The key to the KITE model is that the funds for buybacks come from "protocol revenue," which ties its deflationary force directly to the overall profitability of the network and governance decisions, theoretically making it more proactive and resilient.
Potential Challenges:
The effective premise of the flywheel is that network usage must continue to grow. If usage stagnates and income shrinks, the flywheel will slow down or even stop. Additionally, when the early circulation is small, the burning effect is significant; as market value expands, a larger income scale is needed to maintain the same deflation percentage.
In summary, the design of @GoKiteAI is a bold economic experiment aimed at creating a strong positive feedback ecosystem of "use is investment." It paints an enticing prospect for $KITE holders: every token you hold becomes increasingly scarce as the ecosystem thrives.
