More than $5b of funding is being exchanged yearly in the perpetual futures market.
Funding rates for everlasting options are, on average, more than 20 times higher than funding rates for perpetual futures.
If everlasting options end up becoming the primary options derivative (just like perpetual futures became the primary derivative for futures), we will witness the creation of a $100b funding market for buying and selling perpetual gamma. The Everstrike Token (EVS) captures a percentage of this market and diverts it to a community-run DAO.
For each funding exchange on Everstrike, a tax is levied on the profits of the receiving side of the exchange. The proceeds from this tax are re-directed to a community-run treasury. The treasury is governed by the Everstrike DAO, and acts as the official insurance fund of Everstrike. The DAO sets key parameters, such as the Taxation Rate (rate at which excess funding is taxed), and Burn Threshold (once the size of the treasury exceeds this threshold, excess income is used to buy back and burn EVS).
1. A Tax Is Levied On Excess Profits From Funding
2. Profits Are Redirected To The Community Treasury
3. The Everstrike DAO Sets The Treasury Size
4. Excess Taxation Is Used To Buy Back and Burn EVS
There are many ways to use EVS. You can use it to gain influence in the Everstrike DAO (and help decide key parameters, such as Taxation Rate and Burn Threshold), or you can stake it, and benefit from special privileges on the Everstrike platform.
EVS starts out with a fixed supply, and has the potential to become deflationary as soon as the size of the DAO treasury reaches the Burn Threshold, as set by the Everstrike DAO. At that point, the Everstrike DAO can choose to either completely eliminate taxes on excess funding profits, or to maintain a tax and use the proceeds from the taxation to buy back and burn EVS.
The DAO treasury acts as Everstrike's official insurance fund (absorbing all profits and losses associated with liquidations on the platform). While insurance funds are generally growing in size, it is possible that a black swan could temporarily deplete the treasury. It is the responsibility of EVS holders to set the Burn Threshold high enough to safeguard against such events.
If the DAO treasury is depleted, profitable traders on Everstrike could become subject to Auto-Deleveraging (ADL), where a part of their position is closed out automatically (as to prevent socialized losses). If this carries on for a significant amount of time, it would effectively destroy the confidence in Everstrike, and render the EVS token worthless.