12. Token Economy

Create Protocol Token Economy has 3 important Elements:

• Governance

• Utility and Calculation (How token price appreciates)

• Different stakeholders involved in the token economy and how the relationship in terms of the token and stakeholder plays out across the economy

Governance

Token holders have governance over ecosystem decisions on different fees and further development.e
Token holders represent the ecosystem and ownership automatically transitions to the treasury value. Also, linked to the treasury governance, which depends on a quadratic model
Instead of a one-to-one model in terms of token holding and governance. The exact formulation of this will be released once we are close to our phase 1.

Circulation and Buy Back Mechanism

The ecosystem and treasury are supposed to get returns over time and grow the treasury. Let's say in any given month, x amount of returns and fees over time are generated through the ecosystem.

• If x is $10 million, then a portion of it, let's say x/2, will go to the buyback of created tokens, and $5 million will immediately go to the treasury return.

• This $5 million worth of buyback in created tokens automatically leads to the treasury having more created tokens. Whatever is bought back as created tokens can be redistributed to different pools, like ecosystem pools for developers, users, other application creators, and asset managers.

• It gets distributed to users and stakeholders through these pools. Additionally, token holders who have invested or locked their tokens can gain staking rewards from the buyback, and there's also a reserve element.

The formula for the percentage that goes to each pool is based on a dynamic algorithm.

This algorithm allocates to the right pool based on the circulating supply's nature, the reserve, and whether the pool already has some tokens or is distributing some tokens. This balance ensures that the buyback gets distributed to the right pool and, through the pool, to the right people representing rewards.

Circulation : The key, of course, is to have a healthy circulating economy that becomes self-sustainable over time.

• The formula for fees, whether they are bought back or directly go to the reserve, and how treasury funds are deployed, is dynamic.

• It's based on the token's phase and journey over time. Broadly speaking, it's related to the amount of assets managed and stakeholders using these assets in different ways—be it fans or users consuming or viewing them, creators generating more assets, or applications linking to them to build experiences for consumers of the creative assets created here.