💰Economic Model

The Three-Token Economy and Business Model

The Three-Token Ecosystem

The SIR protocol operates through a synergistic three-token model, each serving distinct but interconnected roles:

SIR Token: Value Capture & Governance

• Dividend Distribution: Stake SIR to earn a share of protocol fees (WETH on Ethereum, WHYPE on HyperEVM, WETH on MegaETH)

• Continuous Issuance: 2.015 billion SIR per year, creating sustainable liquidity incentives

• Future Governance: Control treasury and direct reward allocations across vaults

TEA Token: Liquidity Provision

• Liquidity Representation: Mint TEA by depositing assets; burn to withdraw

• Fee Structure: 4.9% upfront deposit fee (retained as protocol-owned liquidity)

• Revenue Streams:

  • Primary: Trading fees from APE leverage positions

  • Secondary: SIR token rewards for selected vaults

APE Token: Leverage Positions

• Position Management: Minted when opening leverage, burned when closing

• Fee Structure: One-time minting fee paid to LPers, scaling with leverage ratio (~9% for ^1.5, ~17% for ^2)

• Revenue Generation: Trading activity drives protocol fees distributed to stakeholders

Business Model Architecture

The protocol's economic model can be understood through traditional business roles:

Customers: APE holders (leverage traders) who pay fees for leveraged positions. They are the primary revenue generators for the ecosystem.

Service Providers: TEA holders (liquidity providers) act as intermediaries, enabling leverage capacity. Greater TEA liquidity allows higher leverage potential, attracting more APE users.

Stakeholders: SIR holders capture value through dividends and governance rights, aligning their interests with protocol growth.

Revenue Flow

1. APE holders generate fees through leverage trading

2. Fees flow to TEA holders and SIR stakers (up to 50% can be directed to stakers)

3. SIR emissions incentivize TEA liquidity provision

4. Increased liquidity attracts more APE users, creating a growth flywheel

Sustainable Tokenomics Design

Why Constant Issuance?

Unlike projects with capped supplies that front-load emissions, SIR maintains constant issuance for several strategic reasons:

Long-term Viability: High initial emissions followed by reduction creates unsustainable dynamics. As emissions decrease, new participants have less incentive to join, potentially leading to protocol forks or competitive disadvantages.

Fair Opportunity: Constant issuance ensures future liquidity providers (when TVL is higher) can still earn meaningful rewards, while early participants benefit from easier accumulation when liquidity is lower.

Transparent Predictability: Instead of teams selling tokens unpredictably to fund operations, SIR embeds liquidity incentives directly into the protocol in a transparent, permanent manner.

The Best of Both Worlds

For participants seeking to optimize their position:

• Stake SIR: Earn dividends from protocol fees

• Provide Liquidity: Earn SIR rewards to offset dilution

• Do Both: LP and stake earned SIR for maximum benefit (no dilution + dividends)

Protocol-Owned Liquidity

On Ethereum and HyperEVM, 4.9% of every TEA deposit becomes permanent protocol-owned liquidity (POL). This POL never withdraws and continuously earns fees, creating a growing foundation that reduces reliance on temporary incentives over time. On MegaETH, POL is optional — LPs can opt out of the fee by locking their deposit for a period of time instead.

For detailed mechanics, see Protocol Owned Liquidity.

Economic Alignment

Incentive Structure

The protocol aligns all participant incentives toward sustainable growth:

1. APE Users: Access leverage with predictable fees and deep liquidity

2. TEA Holders: Earn stable income from fees plus SIR rewards

3. SIR Holders: Capture protocol value through dividends and price appreciation

4. Protocol Treasury: Accumulates permanent liquidity for long-term resilience

Mathematical Optimization

Reward distribution follows economic contribution:

• Vaults receive SIR proportional to fees generated

• Maximum 50% fee redistribution to SIR stakers

• Quadratic constraint ($\sqrt{\sum f_i^2} \leq 50\%$) optimizes allocation efficiency

This creates a self-balancing system where the most productive vaults naturally attract appropriate incentives, maximizing capital efficiency across the protocol.