✨Tokenomics

In all traditional markets, the ones who benefit most are the early adopters and venture capitalists. This is always the case, and to a certain extent it always will be and should be. If you share a vision and have the belief in an investment, and you take a risk, you should be rewarded.

DeFi has to a certain extent broken this rule, and unfortunately this is not done effectively. Protocols start off great, then they cannot sustain themselves and their founders start to pivot without consulting their investors, often making a decision that ends up having a negative impact on their investors. When you make an investment, you make it on the information you have to hand, so you invest your chosen amount, and you will expect to receive a certain return as a result. The problem with the DeFi space is that the teams do not follow traditional finance rules and just think that because there is no accountability, they can just change direction at their will.

When we talk about sustainability, this is another thing DeFi has done wrong. The real world works on a clear concept: the later you come into an investment, the more it will cost you and the less you will get out of it from an ROI point of view. The markets work this way to self-regulate sustainability, and to the most extent it works.

This is also the case in crypto, which has to a certain extent tried to implement the same structure. Early investors buy cheaper and gain higher rewards — again, this is just the way the world works. However, it has become the norm in the crypto node space, to offer unrealistically unsustainable returns on investment. This ends up heavily rewarding the early investors, but often at the cost of the later investors who come into the investment in good faith, only to have the protocol pivot, or for the liquidity pools to be too depleted for the token to continue maintaining its value.

Technology is never new. It is just a way of combining existing materials and available technology in a way that is better. The case and point for this is Tesla. We had cars, we had batteries, and we had electric motors. Tesla put all of that together better than anyone before them to make one of the most advanced cars on the road. Bitcoin did exactly this as well. It was best in class combined in a way to make it the best of what we had available. Regardless of POW, there are some attributes in bitcoin that are so pure that they should be replicated in DeFi. The first of these is that regardless of how much money you throw at if, from a mining point of view, the protocol will only release X number of tokens per day. The second attribute is that the protocol cycles down its rewards about every four years to make itself more sustainable.

What if we replicated this feature in the DeFi space? What if instead of the concept that the more you put in, the higher the rewards, we flipped the script on its head?

The CFA protocol has built in halving.

The protocol can’t make this perfectly symmetrical because that would make a return on investment impossible, but it does make it very sustainable from the fact that regardless of how many units the protocol has, the most it will ever pay out is 20 000 tokens a day.

This is how it works: Every time the unit count doubles, the distributions half. And every second time the distributions halve, the cost of a unit will also halve. Based on this maths, the distributions start at 0.1 every 24 hours. This means that the distributions will grow from 2 000 tokens a day from the presale, up to 20 000 tokens a day at 200 000 units. When the protocol hits 200 000 units, the distributions will drop to 0.05 up to the next doubling of 400 000 units.

When the protocol hits 400 000 units, the distributions will drop to 0.025 per unit and the cost of a unit will drop to 5 tokens. This pattern will continue for as long as the protocol grows.

The time between each stage obviously grows longer, so it will be paying out the minimum for longer periods of time and taking longer to reach the maximum. This method keeps a max return on investment at 400 days, depending on where in the cycle you buy a unit.

The protocol has built in several other features that are a first for the DeFi space. The protocol has been carefully calculated to be sustainable for the long term.