What is Octoblock’s Token Tax and How Does It Work?
Octoblock token, OCTO, charges a tax of 2% on buys and 2% on sales. This token tax is added to the treasury, which is then used to generate revenue to redistribute back to OCTO holders. Here’s how it works:
Transaction Tax:
When someone buys or sells the token, a tax is automatically applied to the transaction. In this case, a 2% tax is applied to buys, and a 2% tax is applied to sells. These taxes are deducted from the transaction amount before the trade is executed.
Redistribution:
After the transaction tax is deducted, the collected fees are distributed to the Multisig treasury.
Automatic and Continuous:
The redistribution process is automatic and continuous. Whenever a transaction occurs, the fees are collected and distributed in real-time to the treasury. This creates an additional income stream for the treasury, that will increase the dollar value of distributions to token holders.
Price Impact:
The transaction taxes can impact the price of the token. When buying, investors need to pay an additional 2% on top of the market price, which effectively increases the cost of purchasing the token. Similarly, when selling, investors incur a 2% fee, reducing the profit they receive from the sale.
This mechanism can create a price floor by discouraging short-term trading and encouraging long-term holding, in addition to encouraging holding to reap rewards from the Nautilus Trove distributions. It also makes sandwich bots ineffective, eliminating negative impact manipulation of the token.
Use Case:
This token tax is used to incentivize long-term investment and discourage speculative trading. It is also used to increase the treasury size over time, increasing the profits generated for OCTO holders.
How To Trade A Taxed Token:
When buying or selling, the token contract itself takes care of any taxation. This means that when using a DEX, users will need to increase the permitted slippage percentage to at least the value of the tax, for example, when buying the tax is 2%, so slippage should be set to around 2.3% or more.
The Future Of The Token Tax:
The token tax is designed to boost early treasury funds with the target or increasing treasury values faster during the project infancy. Once the treasury has reached significant value, a token migration will take place 1-to-1 for a non-taxed token, so that listing on major cryptocurrency exchanges may take place, as many do not support taxed tokens.
