Summary

• The developers of Floki Inu, a DeFi project, propose burning $55 million of its FLOKI tokens to increase its value and position as a serious DeFi player.
• The proposal cites security risks of cross-chain bridges as a reason.
• The proposal has received 99% support from voters, if passed, it will burn 4.97 trillion FLOKI tokens, reduce transaction tax to 0.3%, and permanently disable the cross-chain bridge.

The developers behind the Shiba Inu-themed cryptocurrency project Floki Inu have proposed a new governance proposal that would involve burning nearly $55 million worth of their FLOKI tokens and reducing a transaction tax that is currently levied on each transaction. The move is aimed at reducing the overall supply of tokens, which would increase the value of each token if demand remains constant.

The Floki team hopes to establish the project as a serious player in the decentralized finance (DeFi) space, and sees this burn as a way to position the project as a legitimate contender in the space. "Floki's latest DAO vote makes it clear that Floki is more than just a memecoin," said a member of the Floki core team. "Floki has demonstrated a strong focus on utility and fundamentals: through the mainnet release of our FlokiFi Locker protocol and the first major testnet release of our metaverse game Valhalla in a bear market," the core team member added.

The proposal also cited security risks associated with cross-chain bridges as a reason for the burn. Last year, over $2 billion was lost or stolen from cross-chain bridges, as reported by CoinDesk. "More exploits and data have emerged to show how much of a threat cross-chain bridges could pose, especially if they hold a significant amount of a token’s supply," the proposal stated. "In Floki’s case, an exploit on our main cross-chain bridge would have a catastrophic impact on the project since this bridge currently holds 55.7% of what FLOKI’s total circulating supply should be. This is a lot of tokens, and that’s more than enough to drain the project’s liquidity pools and essentially destroy the project if exploited," they added.

If this proposal passes, some 4.97 trillion FLOKI tokens in the Floki bridge will be burnt while the self-imposed buy and sell tax on each transaction would be reduced to 0.3%. The bridge would also be permanently disabled. At the time of writing on Friday, an overwhelming 99% of all voters were in support of the newly-floated proposal, the governance forum shows.

Bridges refer to a blockchain-based tool that allows users to transfer tokens between different networks. The Floki team had to launch another contract on the Binance Smart Chain (BNB) with its own total supply of 10 trillion tokens. However, this required a cross-chain bridge to ensure that the FLOKI's total circulating supply at any given time never exceeded a total supply of 10 trillion tokens, and to allow for users to transfer their FLOKI from Ethereum to BNB Chain and vice versa. At the time, the team used 600 billion tokens from its treasury on Ethereum and Binance Smart Chain to provide the initial funds for the bridge.

Since then, most holders locked their FLOKI tokens on Ethereum and transferred them out on Binance Smart Chain. "As a result of this, while the majority of the supply is still on the Ethereum chain there is now such a balance that the absence of a bridge would not threaten the stability of the project," developers wrote in the proposal. FLOKI remained unchanged over the past 24 hours, data from CoinGecko shows. The tokens have appreciated 6% in the past week.