The neighborhood behind the Elon Musk-inspired meme coin Floki simply voted to take down one in all its key bridges.
The bridge in query lets customers transfer Ethereum-based Floki tokens over to the BNB Chain. Completely different blockchains are normally incompatible and wish a “bridge” to maneuver tokens from one community to a different.
To deconstruct the bridge, the mission is burning (crypto lingo for destroying) 4.97 trillion Floki tokens. These tokens, on the open market, could be price over $117 million.
So does that imply Floki is destroying greater than $117 million of its tokens?
Probably not. Right here’s why.
The Floki bridge burn
When the cross-chain bridge first launched in July 2021, the mission wanted to mint an equal quantity of BNB Chain-based variations of the Floki token.
Which means a ten trillion whole provide on Ethereum and a ten trillion whole provide on the BNB Chain.
And to kick the bridge off, it wanted to be “seeded” with some preliminary liquidity to make sure transactions may transfer forwards and backwards. The mission deposited 600 billion Floki tokens from its treasury into the bridge for exactly this cause.
On this bridge association, customers migrating between chains would first deposit their Ethereum-based tokens into the bridge, basically eradicating them from circulation by locking them into the bridge. On the BNB Chain facet, they might obtain the identical quantity of tokens. The identical can be true when funds transfer in the other way.
And although the above means that the full provide for Floki is 20 trillion, the bridge’s design signifies that with every deposit, these tokens are successfully leaving circulation. The tokens that customers deposit into the bridge will not be shifting throughout the bridge, they’re merely being mirrored on the opposite chain.
For example, that 600 billion in Floki tokens used to seed the bridge will not be counted as a part of the token’s circulating provide of 9.3 trillion tokens, per CoinGecko.
Now, if we look at the 2 corresponding good contracts that make up the bridge, we are able to see 1.77 trillion Floki tokens are locked on Ethereum and 3.8 trillion locked on BNB Chain.
These mixed 5.57 trillion tokens will not be included within the circulating provide of Floki both, and thus don’t have an effect on the token’s value. Except, in fact, they had been one way or the other moved out of that bridge.
And this is the reason these tokens may, within the occasion of a hack, be price one thing to somebody.
Bridge hacks will not be unusual in crypto. A few of the trade’s largest hacks in 2022 had been related to attackers robbing numerous bridges. In March Axie Infinity’s speedy Ronin bridge was hacked for $622 million after which in October, hackers nabbed $566 million from the cross-chain bridge known as BSC Token Hub
Why the FLOKI fireplace?
This brings us to the ultimate query: Why the token burn?
If a hacker had been one way or the other capable of exploit the cross-chain bridge’s contracts to achieve entry to those 5.57 trillion tokens, FLOKI’s circulating provide throughout each chains would breach 10 trillion, ruining the tokenomics of the mission. That, in flip, would have a big detrimental affect on the token’s value.
Thus, as a precaution, the Floki DAO will burn 4.97 trillion of the 5.57 trillion non-circulating tokens within the bridge contract on February 9.
The remaining 600 billion FLOKI will probably be returned to the Floki treasury, which it initially despatched to seed the cross-chain bridge. When it’s all mentioned and finished, the full provide of Floki stays unchanged.