MEX 2.0 Tokenomics

MEX 2.0 -Bootstrap trap mechanics of xExchange

 

Main MultiversX reason to push LKMEX hodlers to a MEX 2.0 migration

The Main reason why new MEX 2.0 tokenomics? They want you to relock your LKMEX again in V2 because over 1.3 Billion LKMEX V1 will become unlockable over the year . Unlockable LKMEX will accelerate in March to 16%, april 16.6%, May 15.85% and June 13% and it will never stop. The actual circulating supply is 6.7B and they told us that the supply would be at 8.045B after 1 year (November 19th 2022). Now they confirmed MEX will take 8 years to increase it supply to 22.06B. This is 15.36 B to be added in supply through high inflation.

 

MEX functions, Bootstrapping and tokenomics model

It is important to know that the (MEX tokenomics model) is not based in the short and medium term through a deflationary perspective but rather to serve as a liquidity provider to generate funds and liquidity for the various sub-projects of MultiversX. This is normal in a Boostrapping context where a lot of money is invested in development. MEX token primary function is to incentivize users to provide liquidity. It has a broad distribution and compelling economics. Bootstrapping is a form of financing which allows the “Blockchain” to maintain more control, but it also can increase financial strain. A Bootstrapping liquidity pool (LP) allows new token creators to use a decentralized exchange to generate funds, or liquidity, for their project.

 

MEX 1.0 to MEX 2.0, still a risk

Here is an example : if all the investors (LKMEX hodlers) are deciding to stay MEX 1.0 and quietly unlock and cash out, the MEX token would literally crash and you can add many zeros (MEX price value). Its why they are trying to force you to migrate on MEX 2.0 and relock. Its also why they are telling you that if you convert LKMEX 1.0 to LKMEX 2.0,  you will earn between 2x and 10x more Metabonding Rewards during the first 3 months and earn NFT that can be exchanges with a guaranteed lauchpad ticket. Unlockable MEX 1.0 is about to accelerate over the next months.

 

The MEX 2.0 battery Mechanics :

Every day it is locked is a multiplier which mean that each passing day your battery will discharge… and your multiplier will decrease. You will be able to adjust the locking period at any time and set it to a maximum of 4 years… continue to navigate with a fully charged battery in this ecosystem and fully benefit from all the rewards. But here is the makers trap, MEX 2.0 mechanics will push you to lock for 4 years to bring you again right in the next bear market cycle. I had warned at the MEX release in november 2021 that your MEX would be unlockable near the bottom of the bear market and here we are. As long as you unlock when the token worth nothing you might tell yourself “why not upgrade to MEX 2.0 and relock again”. The temptation will be great and and be sure that everything will be very nice on xExchange and xPortal.

MEX 2.0 new battery style incentives tend towards a lock for the next 4 years, therefore a reduction and postponement of the selling pressure, increase by two of the metabonding rewards, and in addition we will be able to cumulate the metabonding rewards + the inflation which is redistributed in the farm LKMEX so this necessarily is an improvement. More value is redistributed to the LKMEX token, but that’s not going to compensate for everything else. If there is a decrease in inflation, there are fewer rewards to the liquidity provider so potentially investors will leave, the TVL may fall, if the TVL falls, the volume will fall and we remember that the capture of value are trading fees. If there is less volume, there is less value capture, less buy back and burn, and if there is less buy back & burn, inflation will go down but it will also lower the buy back and burn. So will the balance be in a better position after these changes in tokenomics? Probably yes, but inflation will still be much higher and probably not compensated by metabonding.

 

MEX 2.0 Investment Strategy

Firstly, at this stage do not think you will become a millionaire by holding MEX and keep in mind that you are doing it for MultiversX, so to encourage a global project which includes sub-projects who need liquidity. You will still find periods when to token value will increase, some advantages, rewards and governance participation, but it is important to understand that the MEX is not a short and medium term investment Wize. Everything will be different in 7 years when xExchange will  be at the end of its inflationary model.

With liquidity market cycles you must keep a note that in 12 to 16 months from december 2022, its highly probable MEX will retrace strongly with the ETH and BTC Cycle wave 2. And if you had decided to lock for 1 year, don’t expect much profitability. Remember that you will gradually earn less rewards, your battery will discharge and at some point MEX will start to retrace and you will see you wallet starting to decrease. More time will go, higher the temptation will come to lock for 1 more year of 4 years. It’s why even if you break your head to understand MEX 2.0 you need to have a better knowledge of market cycles or you will get burned by makers directly through that mechanics. Be sure they will make it very attractive… but if you want to migrate to MEX 2.0, personnally i would probably opt for 2 years but not 1 and not 4 years from december 2022. Investment wize, IMO its always better to have your hands free and don’t forget MEX will be highly inflationary over the next 7 years even if supply emission will slowly decrease overtime. To get higher probabilities to get a return on my investment, i would probably try to sync LKMEX unlocking before december 2026 or before december 2023.

*please note that this article represents my opinion and is not financial advise and that this article was designed for educational purpose only.