CCIP-026: MIA Burn-to-Exit Mechanism

[whoabuddy]

Copying this over from the Discord conversations as a starting point!

The Current Situation

• The MiamiCoin treasury contains approximately 10.2M STX, but access to these funds is restricted due to the legal gift agreement with the City of Miami.
• However, the protocol has access to the accumulated yield from this treasury, which now totals 290,000 STX.

Proposed Burn-to-Exit Mechanism

• The redemption ratio will be calculated using the total MIA outstanding and the full treasury balance of 10.2M STX.
• This ratio reflects what a direct redemption from the treasury would provide if access were possible.
• Example: If the redemption ratio is 1 STX for 100 MIA, this ratio will be applied to the 290,000 STX available for the burn-to-exit.
• MIA holders will be able to burn their tokens to redeem their pro-rata share of the total 290,000 STX pool, based on the redemption ratio.

Why This is Fair and Practical

• Simulates an Actual Redemption: The redemption ratio calculation uses the full treasury balance (10.2M STX), making this approach equitable even though only the yield is distributed.
• Happy Path for Exit: This gives MIA holders a clear, fair way to exit while maintaining protocol integrity and sustainability.
• Test Phase: This mechanism is proposed as a test to gauge its effectiveness and satisfaction among participants. If it works well, it can be extended to provide ongoing burn-to-exit options tied to yield.
• Dual Option: Holders can choose to exit via the burn mechanism or continue hopefully holding MIA.

Next Steps

• Draft a CCIP for vote to formalize the burn-to-exit process, ensuring clarity and transparency in its implementation.
• Work with the community to finalize details, including redemption limits (if needed) and the timeline for the initial test phase.

[whoabuddy]

Analyzing the conversations that followed:

Redemption Ratio Discussions:

• Several members (hackjumeok, BITBAM) proposed a specific ratio of 1,000,000 MIA to 1,700 STX
  Tim Butterfield suggested 1,500 STX per 1M MIA as an alternative, noting it would still be 1.6x the ALEX swap rate
• Discussion around whether early exits should get as favorable a ratio as those who wait

Alternative Approaches:

• David GF proposed using the treasury to provide ongoing liquidity rather than a one-time exit:
• Suggested using half of rewards treasury (145,000 STX) to add to ALEX liquidity pool
• Proposed using weekly rewards yield to increase the pool over time
• Aimed to create a sustainable exit mechanism rather than a "quick hit"

Anibal proposed a market-based approach:

• Suggested buying and burning MIA from exchanges every cycle at set times
• Argued this would create a natural sliding scale and fair market price
• Could potentially drive price higher through speculation

Implementation Concerns:

• Discussions about liquidity limitations with both ALEX and cycle earnings
• Questions about validation and verification of the process
• Concerns about early exits vs staying invested

General Consensus Points:

• Agreement that the process should be kept simple (emphasized by DerekS)
• Support for allowing choice between early exit and holding
• Recognition that those who wait longer may benefit from others' exits through reduced supply

Suggested Next Steps Based on Discussion:

• Clarify and formalize the exact redemption ratio with supporting calculations
• Address concerns about liquidity limitations
• Consider incorporating some form of ongoing liquidity mechanism rather than just one-time exits
• Ensure the process remains simple and transparent
• Add clear documentation about how burns will affect final redemption ratios for remaining holders

[stk99k]

I'm glad that we started discussing again. We can proceed with burn to exit with the rewards that are piling up every cycle. And I'm actively in favor of this. What matters is the liquidation ratio. I think 1M MIA= around 1700STX is right, as many holders claim. The reason is as below. 1. We need a reasonable basis for the liquidation ratio. This is based on the expected liquidation value initially presented. 2. Long-term holders who haven't incinerated can establish a 1M= 1700stx+a strategy because the total mia quantity naturally decreases. 3. This liquidation ratio induces buyers in the dormant market, which allows for faster exit for more people. We've already experienced this difficult process through NYC liquidation. And we've successfully carried out beautiful liquidation. Let's create an orderly exit (MIA VER) through reasonable BURN TO EXIT. Thank you for your hard work. We'll help you together

[nirvana-7]

I also fully support the 1,000,000 MIA to 1,700 STX ratio.
It is fair and balanced for all participants.
It is not just about numbers, it is about doing the right thing for those who have endured MIA through all the ups and downs.

Offering a lower ratio, such as 1,500 STX, would not adequately reflect the challenges faced by MIA Coin holders.

Holding MIA has not been easy.
As all understand this situation...many have been stressed, frustrated, and unsure of what will happen next.
This liquidation process is an opportunity to close the loop and provide real relief.
The 1,700 STX ratio is a reasonable ratio.
It basically shows respect for long time MIA holders without tipping the scales too far in either direction.

Here are some reasons why this ratio is reasonable.
First, it acknowledges the patience and dedication of MIA holders. These people had trusted the process and have maintained their investments despite all the uncertainty.
Lowering the ratio to something like 1,500 STX would be a slap in the face again to those who have waited for so long.
On the other hand, 1,700 STX is not excessive at all.
It is reasonable and fair to all holders.

Second, clearing this at a clear and fair rate helps avoid unnecessary legal complications. Leaving it unsolved or unresolved can lead to conflict and bad feelings that no one wants.
By handling the liquidation process fairly, all have the opportunity to close this chapter in a respectful and even beautiful way.
It is doing the right thing and showing that the community values ​​fairness and trust.

Third, burning MIA is a smart move. It makes sense to reduce the supply and ensures that those who remain benefit over time.

Finally, it is also important to speed up this process. People are already tired of uncertainty.
The longer this goes on, the more stressful it becomes. Closing this quickly at a rate of 1,700 STX will give everyone the clarity and peace of mind they need to move forward.

This liquidation process is an opportunity to resolve the issue the right way, not just legally but psychologically.
Let’s use this opportunity to turn a difficult situation into something positive.

The 1,700 STX per 1M MIA ratio is fair, balanced, and respectful.
It's the best way to close the deal and leave everyone feeling like this was handled with care and integrity.

Let's make it happen.

[tlsao0531]

I will respond to what whoabuddy said as below:
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Suggested Next Steps Based on Discussion:

Clarify and formalize the exact redemption ratio with supporting calculation
-> This should be, without a doubt, the following ratio: In the case we do the same redemption as for NYC, we have 10.2m STX / 5728651696 MIA (not sure about the v1 supply) => 100 MIA = 0.17 STX.

Address concerns about liquidity limitations
Consider incorporating some form of ongoing liquidity mechanism rather than just one-time exits
-> This is also not worth discussing. When I first invested, I invested because I saw the future of Citycoin, but now it is different. When the price of the coin fell, Patrick did not appear and deleted his Twitter account. Also, because it was difficult to continue due to the absence of developers, NYC Coin was successfully liquidated in 2024 (thank you to the developers), and now MIA must go through the same process.

Ensure the process remains simple and transparent
-> After the ratio is set (I think 100 mia = 0.17 stx), we can burn mia coins through the reward from the treasury for each cycle (about 2 weeks). (For example, in cycle #99, a reward of about 40,000 stx came out, which can burn 23.5 million mia coins.) Then, if the treasury approves the liquidation through a positive response from the MIA city, we can adjust the ratio (because the total supply changed due to the burn) and liquidate the remaining holders.

Add clear documentation about how burns will affect final redemption ratios for remaining holders
-> Yes, the remaining holders will naturally have different redemption rates and I agree with that.

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[hanjumeok]

If the ratio is fixed at 1,700 STX for every 1,000,000 MiaCoin, the price of MiaCoin on the DEX will align with this fixed ratio, allowing those who want to exit to do so more quickly.

Additionally, by implementing a burn model, those who choose to stay and wait will potentially gain more profits during future liquidation.