Decentralized Exchange (DEX) DeversiFi, the spin-off of former Bitfinex sister exchange Ethfinex, announced that it has burned its governance and utility token, Nectar (NEC), worth $20 million.

This is designed to drive DEX adoption after large centralized exchanges struggled to cope during the recent crypto-currency sell-off, the exchange said in a statement.

Basically, the Nectar token was launched with an inflationary model, in which it was awarded to Ethfinex traders, giving them a stake in the exchange future.

Governance Token Turns to Deflationary One

However, the token has switched to a deflationary model, with Ethfinex pivoting toward decentralization and rebirth as DeversiFi. This has taken the form of weekly ‘necBurn’ auctions since mid-February to keep the supply constantly reduced.

DeversiFi uses up to 50 percent of trading fee revenue to buy back and burn Nectar tokens in an auction format. Holders can offer a certain price for their NECs. If those tokens are purchased, they are removed from the supply permanently. Auctions can also result in a higher sell-price than on the open market, creating a unique opportunity for arbitration.

DiversiFi performed a ‘big-burn’ of 400 million Nectar tokens on March 27, to symbolize and promote the move to a deflationary model. These tokens were the ones that Ethfinex initially held and retained when the exchange closed.

Ethfinex first tested a structure of a decentralized autonomous organization (DAO) back in June last year, partly to dissociate itself from Bitfinex, which at the time was under investigation for an alleged illegal loan from Tether.

That eventually led to Ethfinex being closed down and DeversiFi being launched later on. In December 2019, DeversiFi in turn launched its ‘necDAO,’ which now has 17,000 ETH locked in. Governance began at the DAO in January 2020.

DeversiFi Founder and CEO, Will Harbourn said:

“Nectar has been designed to give holders/traders a number of benefits including trading fee discounts and membership in one of the largest DAO’s to date […] This shift to aggressively deflationary tokenomics will serve to lower the market cap and increase the scarcity/value of Nectar. Coupled with the outlined utilities, this should create a positive feedback loop, helping to attract new traders to DeversiFi and the DEFI space as a whole.”

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