> ## Documentation Index > Fetch the complete documentation index at: https://docs.writz.xyz/llms.txt > Use this file to discover all available pages before exploring further. # Research: Tokenomics & Fee Model **Author:** Research **Date:** 2026-06-22 **Status:** Complete *** ## Overview Writz Protocol's economic sustainability depends on a well-designed fee model. This document defines all revenue streams, the protocol fee structure, treasury allocation, and the governance token strategy - informed by the 2025–2026 shift in DeFi toward real-yield tokenomics. *** ## Industry Context: The Real-Yield Shift (2025–2026) The DeFi industry has fundamentally changed its tokenomics approach: **Old model (2020–2023):** Emit governance tokens as liquidity mining rewards. Users farm tokens, dump them, APYs collapse, protocol dies. **New model (2024–2026):** * Uniswap: 17% of swap fees auto-buy and burn UNI tokens * Aave's "Aave Will Win": protocol revenue directly tied to AAVE token through buyback mechanism * Compound, Curve: fee revenue distributed to stakers/veTokens **The paradigm:** Governance tokens must be backed by real protocol revenue, not emissions. Writz will design tokenomics from day one around real cash flows. *** ## Revenue Streams ### Primary: Lending Spread (Writz Lend) The difference between the borrow rate (what borrowers pay) and the supply rate (what lenders earn). ``` At 75% utilization (Uoptimal): Borrow rate: 8% APR Supply rate: 6.8% APR (= 8% × 75% × 85%) Protocol spread: 1.2% APR on borrowed amount ``` At $1M TVL with 75% utilization ($750K borrowed): \~\$9,000/year in spread revenue. ### Secondary: SPV Verification API Other Stellar protocols pay to use Writz's Bitcoin SPV client. **Pricing model:** * Per-verification fee: $0.10–$0.50 per proof verification * Monthly subscription: $500–$5,000/month for high-volume protocols Early adopter pricing is aggressive - the goal is ecosystem adoption, not maximizing API revenue in Year 1. > These two streams belong to planned features, not products, and no code exists for them. Figures for them come from the June 2026 model and are not a forecast. See [Vision](https://docs.writz.xyz/roadmap/vision.md#planned-for-later). ### Tertiary: Swap Fees (planned feature) Basis points on BTC/USDC swaps. Target: 0.3% per swap (comparable to Uniswap v3). At $10M monthly swap volume: $30,000/month in swap fees. ### Quaternary: ZK Proof of Reserve (planned feature) Enterprise customers pay for private, verifiable BTC reserve attestations. **Pricing model:** * Starter: \$500/month - up to 5 attestations * Professional: \$2,000/month - unlimited attestations, custom reporting * Enterprise: \$10,000+/month - SLA, dedicated support, compliance documentation Target: 10 paying enterprise customers in Year 1 = $20,000–$100,000/year. ### Liquidation Fees 2% of liquidated collateral value goes to the protocol. At 10 liquidations/month averaging $20,000 each: $4,000/month. *** ## Fee Distribution All protocol revenue flows into a distribution contract that routes funds to: ``` 100% of Protocol Revenue ├── 30% → Insurance Fund (on-chain safety reserve) ├── 30% → Token Buyback & Burn (reduces supply, supports token price) ├── 25% → Operations Treasury (salaries, infrastructure, audits) └── 15% → Ecosystem Grants (developer grants, integrations) ``` **Insurance Fund:** Accumulates until it reaches 10% of TVL. After that, excess flows to buyback instead. This ensures the protocol can cover bad debt without relying on tokenomics. **Buyback & Burn:** Protocol buys WRTZ tokens from the open market and burns them. This creates deflationary pressure tied directly to protocol usage - more borrowers = more revenue = more buybacks = less token supply. *** ## Governance Token: WRTZ > **Scope status:** This is a problem-and-hypothesis exploration, not a committed design. No contract, governance mechanism, or legal analysis of WRTZ's status as a security in target jurisdictions exists today. Token launch is explicitly gated on post-\$5M TVL (see "When to launch the token" below), so there is no urgency to finalize this - treat the distribution table and utility design as directional, not final, until closer to that milestone and until legal counsel has reviewed the security-classification question. ### Design principles * Total supply: **100,000,000 WRTZ** (fixed, no inflation) * 100% backed by real protocol revenue (no liquidity mining emissions) * Governance rights over protocol parameters * Revenue sharing via buyback/burn (not direct dividends - cleaner tax treatment) ### Distribution | Allocation | % | Amount | Vesting | | - | - | - | - | | Team | 20% | 20M | 4 years, 1-year cliff | | Investors (seed) | 15% | 15M | 2 years, 6-month cliff | | Ecosystem/grants | 20% | 20M | 3 years, monthly release | | Community/DAO treasury | 25% | 25M | Governed by DAO | | Protocol-owned liquidity | 10% | 10M | Used to seed USDC pools | | Public launch | 10% | 10M | IDO / fair launch | **No pre-mine for team beyond the 20% with vesting.** The community treasury (25%) is controlled by WRTZ governance from day one. ### Token utility 1. **Governance:** Vote on protocol parameters (interest rate curves, collateral ratios, fee splits, new features) 2. **Fee capture:** Buyback/burn mechanism means holding WRTZ benefits from protocol growth 3. **Staking for enhanced yields:** WRTZ stakers receive 10% boost on USDC lending yields (creates demand for staking) 4. **Liquidation priority:** WRTZ stakers have first access to liquidation opportunities (creates demand from keeper operators) ### When to launch the token **Not in Phase 1 or Phase 2.** Token launches before product-market fit destroy communities and set unrealistic expectations. **Token launch criteria:** * \$5M TVL sustained for 60+ days * 500+ active users * At least one completed external audit * Clear governance use cases ready to deploy Expected timeline: Q2–Q3 2027. *** ## Financial Projections (June 2026 model, not a forecast) These tables include revenue from planned features that have no code. ### Year 1 (2027, post-launch) | Revenue Stream | Monthly | Annual | | - | - | - | | Lending spread (@ \$2M TVL, 75% util) | \$1,500 | \$18,000 | | Dark Swap fees (\$500K/month volume) | \$1,500 | \$18,000 | | SPV API | \$500 | \$6,000 | | Proof of Reserve (5 customers) | \$5,000 | \$60,000 | | Liquidation fees | \$1,000 | \$12,000 | | **Total** | **\$9,500/month** | **\$114,000/year** | ### Year 2 (2028) | Revenue Stream | Monthly | Annual | | - | - | - | | Lending spread (@ \$20M TVL, 75% util) | \$15,000 | \$180,000 | | Dark Swap fees (\$5M/month volume) | \$15,000 | \$180,000 | | SPV API | \$5,000 | \$60,000 | | Proof of Reserve (25 customers) | \$25,000 | \$300,000 | | Liquidation fees | \$5,000 | \$60,000 | | **Total** | **\$65,000/month** | **\$780,000/year** | These are conservative estimates. At BTCfi's current 28× annual TVL growth rate, the upside scenario significantly exceeds these numbers. *** ## Key Decisions | Decision | Choice | Rationale | | - | - | - | | Token model | Real-yield, buyback/burn | 2026 industry standard; no inflationary emissions | | Token supply | 100M fixed | Simple, no inflation | | Token launch timing | Post \$5M TVL | Product-market fit first | | Protocol fee % | 15% of interest spread (`PROTOCOL_FEE_BP = 1_500` in contract) | Higher than Aave (10%) due to ZK infrastructure costs | | Mainnet bootstrap fee waiver (option, not decided) | One option under evaluation: a reduced or 0% protocol fee for an initial period after mainnet launch | Would attract early liquidity; the 15% fee is a contract constant, so any waiver is a launch-time parameter change. Not a commitment | | Insurance fund target | 10% of TVL | Industry standard; covers typical bad debt scenarios | | Revenue distribution | 30/30/25/15 | Balanced between safety, token health, operations, growth | *** ### Insurance Fund Ramp The $5K launch seed (`docs/research/security-audit-strategy.md` pre-mainnet checklist) is exactly 10% of the $50K launch TVL cap, so it starts on-target. As the TVL cap is raised, the fund needs to keep pace: | TVL cap | 10% target | Funding source | | - | - | - | | \$50K (launch) | \$5K | Seeded directly at launch | | \$250K (post 30-day clean operation) | \$25K | Must accrue from protocol fee revenue (30% slice) between launch and the cap raise | | \$5M+ (Phase 3 scale) | \$500K+ | Ongoing accrual from protocol fee revenue | **Open gap:** the fund is meant to grow from the 30% "safety" slice of protocol fee revenue, but if the bootstrap fee waiver above is adopted, the protocol fee would be 0% for that period. In that case the fund cannot accrue past its initial $5K seed during the exact window when TVL is scaling from $50K toward \$250K, unless a separate top-up is planned. This needs an explicit answer before the 30-day TVL cap raise is exercised - either delay the cap raise until the fund has organically caught up, or fund the gap from another source. *** *Last updated: 2026-06-22* *Sources: [DeFi Protocol Revenue Rankings - DefiLlama](https://defillama.com/revenue) · [Aave Interest Rate Model](https://rareskills.io/post/aave-interest-rate-model) · [DeFi 2.0 Lending Protocols](https://1bitup.com/blog/defi-lending-protocols)* This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.