GAMBL In-depth: How the burn mechanism affects the GAMBL economy
To start, it would probably be best to go back to section 6.6 of the GAMBL whitepaper and pick up from there. It states that “the first deflationary aspect of GAMBL is the destruction of betting and gaming fees, which reduces the total supply of GAMBL. The second deflationary aspect is the blockchain’s automatic liquidity function, combined with its house edge”.
A common misconception at first is that deflation will continue until supply reaches a level that will render the network unusable. But this fails to account for the fixed amount of coins being created by staking. The fixed amount is important to keep in mind as the total supply falls, as this amount represents a larger and larger percentage of the total supply.
Eventually a balance point will be reached for the total supply, where the burns and mints offset each other. This is where things start to get a bit interesting. The balance point can shift based on the volume of betting. More betting creates more burns, resulting in higher deflationary pressure. The opposite for lower betting and higher inflationary pressure.
It’s important to note that this is all on the macroscale and takes place over a rather long timeframe. Over on the micro end, the supply is subject to things like specific sports events and their schedules. Not every bet is profitable for the house as betting action isn’t perfectly balanced. This results in a climate that is difficult to predict, but also creates many unique and interesting opportunities.
An easy to understand, but rather oversimplified example would be looking to buy at a lower price when there have been higher amounts of mints from recent bet events. And the reverse, looking to sell higher when there have been high amounts of burns. This is all independent from other market cycles though, but even those will certainly feel the effects of these short term fluctuations in supply.
For traders this adds a whole new layer of information to take into account and it will be very interesting to see exactly how things play out over time.