Common Wealth’s token economics form a truly closed-loop economy that perpetually generates value for the protocol and its users. We recently wrote a blog on the different types of token economics used by blockchain protocols, which makes a great primer for this explainer.
What is a Circular Economy?
Sustainable economies create ways to bring people in and keep them motivated to continue adding value to the ecosystem, not just extracting value. Sustainable token economies find ways to incentivise users to acquire and use their token.
Another key aspect of a truly sustainable token economy is controlling the value extraction. The best token economies are circular, meaning there is a closed loop system in place where the profits generated within the ecosystem are not extracted by the team or any other individuals but instead flow back into the economy, which in turn continues to grow the value of that economy.
Unlike most protocols, all gains created by the running of the Common Wealth protocol (both transaction fees and investment revenue) are circulated back into the system while rewarding a loyal user base.
Let’s look at how this works:
Value will flow into the Common Wealth economy primarily through:
- Platform transaction fees on all WLTH transactions (1%)
- Fund management fees (2% per year, capped at 5 years)
- Carry fees from investments (10–50% depending on staking levels)
- A dedicated community fund funded by transaction fees and secondary NFT sales
And Value will only leave the Common Wealth economy in one of three ways:
- Revenue-share payout to genesis NFT holders (15% of protocol profits)
- A deflationary buy-back and burn mechanism on investment returns
- Rewards & incentives programs
- Investment returns payouts
- Community Fund returns as rewards for active community members (50% returned, 50% burned as deflationary mechanism)
As you can see there is zero unnecessary leakage from this economy, which is designed to preserve and increase the value in perpetuity as long as the protocol retains usage.
Transaction-Based, Self-Sustaining Economics
This is a transactional tokenomics model, where value accrues to the protocol and, ultimately, to the token holders and investors. There are no preferential payouts. Transaction fees will enable the protocol to grow and reward a loyal user base for their contributions and performance, while also supporting a dedicated community fund. We are committed to avoiding ponzinomics.
At Common Wealth, there will be no preferential payouts or undue privileges. The users who generate the economy will own the value it creates.
Welcome to All Street.
To learn more about Common Wealth, read the first in our series of explainers here where we talk about our funds and how they work. Be sure to be notified when we release a new edition, by following Common Wealth on Medium