Token Mechanisms
Fee Structure: The protocol employs $CYPH tokens as fees for transactional activities. Users are required to pay fees in $CYPH tokens for trading, initiating loans/borrows, and other interactions on the platform. This approach aligns with the native token's role as the driving force of the protocol's ecosystem.
Fee Distribution: Fees paid by users for protocol interactions are subject to a unique distribution mechanism.
For borrowing each fee payment is split into two equal parts: 50% of the fee tokens are permanently removed from circulation through burning, contributing to deflationary effects, while the remaining 50% are directed to the protocol's DAO treasury.
For trading each fee payment is split into 3 parts: 50% of the fee tokens are permanently removed from circulation through burning, contributing to deflationary effects, 10% of taker fee will go to makers as a rebate, while the remaining 40% are directed to the protocol's DAO treasury.
Margin Account Benefits: Users who hold a higher quantity of $CYPH tokens in their margin accounts are rewarded with reduced fees for activities requiring the native token. This incentivizes participants to maintain a higher token balance, fostering a dynamic ecosystem.
Trading Volume and Fee Reduction: For trading activities specifically, the protocol introduces a novel approach. Users' trading volumes per epoch (where an epoch spans one month) impact their fee reduction. Higher trading volumes within a given epoch result in proportional fee reductions, enhancing the protocol's incentive structure.
To ensure simple and clean UX, if a participant does not hold any $CYPH tokens in their cypher account, the protocol will initiate an atomic swap on a DEX. This gasless transaction allows users to initiate transactions without the required native protocol token for fees. Any surplus tokens from the atomic swap are returned to the user, maintaining a user-friendly experience. Users can choose between this mechanism and holding the native token for fees, offering flexibility and convenience.
The cypher protocol's fee mechanism showcases an innovative integration of its native token, $CYPH, to streamline and enhance user interactions. By introducing reduced fees for holding higher token balances and linking trading volume to fee reduction, the protocol aims to create a dynamic and engaging ecosystem that encourages active participation and rewards commitment.
As the protocol continues to evolve, the $CYPH token's pivotal role in facilitating interactions, sustaining the DAO treasury, and aligning incentives ensures the longevity and vibrancy of the cypher ecosystem.
Since fees are denoted in $CYPH, the fees paid by users are flat, ie a trade of 10 $SOL tokens costs the same as a trade of 1000 $SOL tokens.
Example: trader 1 longs 10 $SOL tokens, the cost of this trade is 1 $CYPH trader 2 longs 1000 $SOL tokens, the cost of this trade is 1 $CYPH
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