Nothing in this proposal is financial advice!
Description of Problem:
Pawthereum’s liquidity is growing from our Binance Smart Chain liquidity tax. However, I would like to see our liquidity grow on the Ethereum chain as well. Our Ethereum liquidity tax was turned off during the last bull run because Ethereum gas fees were so high and we did not have the option of selling on Pancakeswap at the time. Further, our project has been creating sell pressure by selling the funds from our charity wallet to donate to charities.
Solution to the Problems:
1 (Reduce Selling Pressure):
Our charity tax is 1% and 2% of daily volume on Ethereum and Binance Smart Chain respectively. Further, we have a 2% tax on Binance Smart Chain for marketing (which can create selling pressure). Following the creation of PawSwap, we will be able to acquire funds without selling back into our own liquidity pool. This is game changing for Pawthereum, and our project should embrace this improvement by reducing sell pressure across chains substantially.
2 (Liquidity Tax):
Our Ethereum smart contract has a liquidity tax mechanism that is turned off. The maximum that it can go is 2%, and I believe that it should be 2% to grow the Ethereum and Pawthereum in our liquidity pool over time. This could reduce volatility over time and potentially raise the price floor. It believe that a healthy liquidity tax is absolutely necessary for our project to grow and would be happy to explain further if needed.
Suggested Tax Structure:
Ethereum (4% total tax) → 2% liquidity, 1.5% holders, 0.5% charity
Binance Smart Chain (non-PawSwap, 6% total tax on buys and sells)
Tax could be 2% liquidity, 2% dev wallet fees, 1.5% reflections to holders, and 0.5% charity.
Note that I amended this section to include some dev wallet fees, as we will need to be collecting Pawth to support development projects like staking and even future exchange listings. Having said this, I want us to be careful about selling too much from the dev wallet, and I’m suggesting that we keep it primarily for exchange listings/smart contracts.
Binance Smart Chain (PawSwap, 3% total tax on buys/sells)
Taxes from PawSwap could be 2% charity, 1% back to the Pawth ecosystem through buybacks/liquidity additions, development funds, and exchange listings.
The potential for much more liquidity over time! Liquidity is absolutely essential to growing the ecosystem. Volatility could be reduced. Price impact of sells and buys could be reduced. All things being equal, the price floor should be less likely to fall to certain levels over time unless the underlying pairing asset (eth/bnb) loses value (which is always possible).
With the proposed tax structure, our selling pressure as a percentage of total volume should be reduced, and PawSwap’s buying pressure should be more likely to exceed or at least partially counteract selling pressure.
People will still be incentivized to buy and sell on PawSwap relative to Pancakeswap, which creates buying pressure, generates development/marketing funds, and allocates a greater portion of funds to charity
Overall tax on Pancakeswap decreases to 12% (12% total for buying + selling versus 16% currently).
Overall tax on Ethereum is raised, which affects buyers and sellers
Addition of liquidity tax will raise gas fees somewhat
Optics of the tax → people may see the small charity tax relative to other taxes and think that were are not oriented towards helping animals. However, PawSwap could help us to help animals while counteracting sell pressure, and we need liquidity to grow. Plus, even disregarding PawSwap, too much sell pressure is not ideal. I believe that we could help more animals over time by rewarding Pawth holders and consequently growing the project.
We have changed our tax structure a lot before, and we want to be careful of changing our tax structure too frequently. However, despite this concern, the creation of PawSwap changes matters significantly, and I believe action is warranted following its launch.
Thank you for reading,