From my point of view, native tokens can be used to incentive the various participants of a network and the various resource inputs.
In most scenarios, the inflation model helps the basic value growth by increasing the capital flow and economic activity in the system. And ultimately, this growth in turn leads to higher token prices.
We have to give up the idea that automatically increasing scarcity means more value. This is clearly not the case as seen from Kyber. We cannot blindly follow other DeFi projects but improving KNC to change with the times is important. If knc holders gain more value, there will be a lot more users trying to use kyber.
Ok, we can do it without inflation, just ask everyone to voluntarily donate part of their KNC to a descentralized pool so we can give free KNC to LP’s and Traders, let’s start with you donating part of your KNC. It would be exactly the same, but without inflation and it will be voluntarily!
How we could have thought that by giving our precious KNC to other people for free, it would have the effect of increasing the value of our remaining tokens. Oh, and also, burning tokens did not help at all? nothing? Then why ethereum will have a deflationary model with ETH 2.0 in a few years when it finally comes, if it does not help? Of course it does help for storing value, but for an asset to have value it must have an underlying utility behind it, an asset with a store of value property like programmable scarcity without an underlying utility is nothing.
For example, gold, gold is scarce, but scarcity does not make it to have value, is its underlying utilities, gold is useful as a ornamental item and electronics, if gold didn’t have all those utilities that creates demand for gold, even if scarce it wouldn’t have any value at all. So scarcity is only useful when the asset has an underlying utility behind it. Take ornamental and electronics utility out of gold and is just a boring scarce mineral, but in reality is NOT. Gold is a Store of value because of its underlying utilities + its scarcity properties.
Is exactly the same with KNC, KNC value comes directly related to kyberswap success, kyberswap utility is to facilitate swap to traders between ethereum assets, traders pay a fee for kyberswap service, value comes from trader paying that fee, which then part of it is paid to KNC holders and part is paid to LP,s.
Now you can argue that giving free KNC to LP’s and traders will incentivize them to use the platform, of course, you are giving them free ROI at expense of KNC holders, what you say is “capital flow” is basically redistribution of wealth. Then you can argue that, by giving free KNC to them, it will incentivize them to be “part of the ecosystem” and they will also be incentivized to buy off the markets and then we will be like AAVE, no? We just need to make it part of the tribe?
The solution is then giving free money taken from the wealthy or investors? Or the solution is to make KyberSwap competitive so we can attract more traders that will pay the exchange fee that will fund KyberDAO, that will make KNC price token to grow? I think, no sorry, i not just think, I KNOW is the second one. Because KNC price is tied to yield, annual yield paid in ETH liquid asset.
Now if you just want to include LP’s and Traders as part of the tribe (ecosystem) just print 1% a year, instead of 10%, it will have the same effect for the participants to “feel” of being “included into the tribe” so they can feel they are part of it and they are incentivized to buy off exchanges.
In any case, let’s give free KNC to traders instead of LP’s, so they can get a cash back, so they are incentivized to trade in our platform because with a cash back it would be cheaper for them versus the other platforms. If we give that cash back to them, they will pay the swap fee that will fund LP’s. 