At the platform’s inception, it was decided that 33% of all trading fee revenue generated on FTX would be dedicated to the FTX Token Burn. As FTX grows and more fees are generated, the amount of FTT burned will increase until half of the original supply of 350 million FTT is destroyed.
FTX additionally uses 5% of all miscellaneous revenue generated across the platform to Buy & Burn FTX Token.
Socialized Gains and the Backstop Liquidity Pool
FTX was created to give crypto investors the best possible trading experience. This includes providing the most innovative products and services on the market and ensuring that traders are protected from clawbacks during turbulent market swings.
Clawbacks, also known as socialized losses, occur when market volatility causes a large number of leveraged positions to be liquidated. If the exchange lacks the liquidity to cover the losses, this can trigger clawbacks, where funds are taken from net positive accounts to maintain the platform’s solvency.
FTX addressed this issue with the implementation of the backstop liquidity pool. This innovative component of the platform’s Liquidation Engine absorbs negative positions during large market swings and injects liquidity into the market to prevent widespread liquidations and maintain the platform’s solvency.
During market simulations, it was found that FTX’s Liquidation Engine prevented clawbacks and often posted net gains after periods of high volatility. Under the Socialized Gains program, 10% of all net additions to the backstop fund are used to buy and burn FTT, creating a new way to share revenue with the FTX community.