🔥Deflationary Mechanisms

Hercules applies three deflationary mechanisms to reduce the TORCH circulating supply:

  1. Buy Back & Burn: In order to apply continuous buying pressure on TORCH, a portion of the protocol earnings is used to buy back and burn TORCH tokens. This removes these tokens from circulation permanently.

  2. xTORCH Redemptions: When converting from xTORCH to TORCH, if the vesting duration is below the maximum limit, the xTORCH:TORCH ratio will be reduced, reaching a minimum of 1:0.5. Any extra xTORCH tokens will undergo automatic burning.

  3. xTORCH Plugin Deallocations: When deallocating xTORCH from a Plugin, a deallocation tax is applied. It can vary between contracts, but will usually be 0.5%. The corresponding TORCH amount will undergo automatic burning, permanently removing it from circulation.

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