Protocol Fees
At SOFA.org, we are committed to creating a fair and transparent financial ecosystem where users can democratically invest in a wide gamut of structured products with transparent and fair pricing from market makers. Furthermore, as a fully decentralized project, we want to ensure that any protocol gains are primarily shared with our underlying users, ensuring full incentive alignment rather than privileged payouts to special interest groups. As such, we have devised a series of fee structures with 'fair-launch' tokenomics to ensure proper value-accrual and support long-term platform longevity. There will be no VC joy-riding or exit-liquidity dumps within SOFA.org.
Protocol Revenue
SOFA will collect 15% of the user's option premium as a base trading fee. Furthermore, in the event of a 'winning' payout occurring for the user, a further 15% settlement fee will be charged against the total gross notional exposure.
Example:
- User purchases 10,000 USDT worth of Structured Products, maturing in 14 days at a price of 100
- Product pays out [Principal + 2% interest] as a worst case downside scenario
- AAVE APY = 10%
- Excess Interest = [10% - 2%] = 8% APY
- User Option Premium = 10,000 8% (14/365) days = 30.68 USDT
- Market Maker Premium = 100 USDT
- Base Trading Fee = 30.68USDT * 15% = 4.602USDT
- Settlement Fee = (30.68USDT + 100USDT) * 15% = 19.6USDT (only in the event of a winning payout)
- Total Protocol Revenue = 4.602USDT + 19.6 USDT = 24.202USDT
Native Token ($RCH) Buyback
Aligning protocol success with Token performance
At SOFA, we believe that the most straight-forward way to align user and hodler incentives are through token buybacks, with $RCH being our native utility token. We will commit all protocol income to be exclusively used for $RCH buybacks, creating a virtuous loop of token price gains being driven off protocol usage.
With a fixed deflationary supply, methodical release schedule, and usage-driven airdops, the long-term value accretion for $RCH is largely a function of protocol revenue, which in itself is a direct measure of adoption success. Furthermore, with Token airdrops exclusively limited to protocol users and supporters, we can ensure that they stand best to benefit from SOFA's long-term success, staying true to DeFi's commerical ideals of 'giving back' to true core users and early adopters.
The token buyback logic is an integral part of the SOFA protocol smart contract. Protocol administrators will regularly trigger this process to purchase and burn $RCH with protocol revenue through supported DEX venues. Destroyed $RCH will be no longer enter circulation, and the total amount of $RCH will gradually decrease over time on rising protocol usage.
More details of our Tokenomics model will be covered in its own dedicated section below.