The Floki Inu community voted in favor of a recent governance proposal that sought to burn 4.2 trillion FLOKI tokens on a cross-chain bridge and reduce transactional tax.
The proposal passed with a 99.97% majority voting in favor of burning the bridge tokens while 0.03% voted against the proposal, developers said. The FLOKI transaction tax will be lowered to 0.3% effective 8 p.m. UTC on Feb. 3, while the 4.2 trillion tokens will be permanently burnt at 8 p.m. UTC on Feb. 9, 2023.
The scheduled token burn is worth over $100 million as of Monday, CoinGecko data shows.
Burning tokens is a way of reducing supply, which subsequently adds value to each token as long as the level of demand remains the same.
As such, the Floki Inu proposal pointed out security risks associated with bridges as another rationale. Last year alone saw over $2 billion lost or stolen from cross-chain bridges, as CoinDesk previously reported.
“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,” developers added in the now-assed proposal.
Developers behind Floki Inu, a Shiba Inu dog breed-themed project, previously told CoinDesk the move was part of a broader plan towards positioning Floki Inu as a serious decentralized finance (DeFi) project. The team has launched ongoing projects such as Floki Locker and the metaverse game Valhalla in the past few months.
The Floki bridge
Floki initially issued its token on Ethereum with a total supply of 10 trillion tokens, before eventually expanding to the faster and cheaper BNB Chain in 2021 based on community requests.
The team had to launch another contract on the BNB Chain 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 exceed 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 BNB Chain to provide the initial funds for the bridge.
Since then, most holders locked their FLOKI tokens on Ethereum and transferred those out on BNB Chain. “As a result of this, while the majority of the supply is still on the ETH chain there is now such a balance that the absence of a bridge would not threaten the stability of project,” developers wrote in the proposal.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.