Stability First: Adopting Standard ERC20 Tokenomics
By DeHub Team — 2022-10-03
When we relaunched as v2 in Q4 2022, we moved to plain standard ERC-20 tokenomics. No transaction tax. No reflections. No conditional logic sitting between a holder and their own tokens.
Why the previous design existed
It is easy to be dismissive with hindsight, so some context. In 2021 and 2022, tax-based tokenomics were close to standard. A percentage of each transaction diverted to liquidity, to marketing, or redistributed to holders. Projects that did not do it were the unusual ones.
The arguments were coherent: automatic liquidity growth, funded operations without selling treasury, a mechanic that rewarded holding. Plenty of people, including us, found them convincing.
Why we abandoned it
Because ours malfunctioned and froze the token and the liquidity pool together, and there was no way to intervene.
The failure clarified something the arguments had obscured. Tax logic runs in the transfer path. It executes on every transaction, forever, immutably, under market conditions nobody has modelled — including conditions that will not exist for years. It is the highest-risk place in the entire system, and it is where the cleverness had been put.
Standard ERC-20 is unexciting. It is also code that has been examined by more people, across more chains, in more conditions, than any bespoke design will ever be. When it fails, it fails in documented ways.
What we gave up
Genuine things, and we should not pretend otherwise:
- Automatic liquidity growth. Now handled deliberately, which became the automated liquidity provision strategies of late 2023 — outside the contract, adjustable, and unable to freeze anyone's tokens.
- Passive operational funding. Replaced by explicit treasury management, which is more visible and harder to obscure. That fed directly into the DEX policy and transparency reports published that year.
- A holding incentive. Replaced by utility — staking, airdrops, and access — which is slower to build and does not evaporate when volume does.
What we gained
Compatibility, mainly, and the freedom that comes with it.
A standard token works everywhere without exception handling. Exchanges list it without special cases. Bridges carry it. Aggregators price it correctly. Every non-standard transfer behaviour is a compatibility problem waiting for the integration you have not done yet.
When DHB later listed on Ethereum mainnet and sDHB listed on Base, none of that required contract-specific accommodation. That is the dividend of boring.
The general position
Put the interesting parts of a system where they can be changed. A contract that holds people's assets is the worst place in the stack to be clever, because the cost of being wrong there is borne by everyone except the person who was clever.
Three years on, the transfer path has done nothing except move tokens. That is the whole review.
The argument we still hear
That standard ERC-20 gives a project no mechanism to fund itself or reward holding, and that this is why tax tokenomics existed.
It is a fair objection and the answer is that those needs did not disappear, they moved somewhere they can be observed and corrected. Treasury operations are explicit and disclosed under a published DEX policy. Liquidity growth runs as an external, adjustable strategy. Holding is rewarded through staking and airdrops that people can choose to participate in.
All of that is more work than a percentage in a transfer function. It is also visible, reversible and incapable of freezing anyone's assets, which are three properties the elegant version did not have when it mattered.