> For the complete documentation index, see [llms.txt](https://docs.cod3x.org/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.cod3x.org/cdx-token/profit-split.md).
# Profit Split
### Profit-Based Funding
A core principle of CDX tokenomics is that **buybacks and staker yield are funded from platform profit, not gross revenue**. This distinction is critical for sustainability.
#### How It Works
```
Platform Revenue
↓
Operating Costs
(Infrastructure, Team, Development)
↓
PROFIT
↓
┌──────┴──────┐
↓ ↓
Buyback Staker
& Burn Yield
(CDX) (USDC)
```
#### Why Profit Matters
| Principle | Explanation |
| ---------------------- | -------------------------------------------------- |
| **Sustainability** | Platform remains viable long-term |
| **No Debt Financing** | Distributions backed by real earnings |
| **Aligned Incentives** | Token holders benefit when platform succeeds |
| **Transparency** | Clear relationship between performance and rewards |
#### Profit Calculation
| Component | Location |
| ------------------ | -------------------------------------- |
| Profit Calculation | **Off-chain** (standard accounting) |
| Distribution | **On-chain** (transparent, verifiable) |
Profit is calculated using standard business accounting practices, then distributed on-chain for full transparency and verifiability.
***
### The Profit Split
The allocation between buybacks and staker yield **dynamically adjusts** based on CDX market price:
| CDX Price | Buyback & Burn | Staker Yield |
| ------------ | -------------- | ------------ |
| Below $1 | **70%** | 30% |
| $1 and above | 30% | **70%** |
#### Why This Design?
**When CDX is Below $1**
| Action | Effect |
| -------------------- | --------------------------- |
| Heavy buybacks (70%) | Reduces circulating supply |
| Price support | Consistent market purchases |
| Accelerated path | Drives toward $1 threshold |
**When CDX is At or Above $1**
| Action | Effect |
| ------------------ | --------------------------------- |
| Higher yield (70%) | Rewards long-term stakers |
| Milestone reward | Recognizes collective achievement |
| Stake incentive | Encourages maintaining positions |
#### The Yield Flip
The transition at $1 is called the **Yield Flip**:
```
Below $1: [████████████████████░░░░░░] 70% Buyback / 30% Yield
Above $1: [░░░░░░████████████████████] 30% Buyback / 70% Yield
```
This creates a self-balancing system that optimizes for current market conditions.
***
### 100% Burn Policy
All CDX purchased through buybacks is **permanently burned**:
| Principle | Implementation |
| ------------------------------ | ----------------------------------- |
| **No Treasury Accumulation** | Tokens don't sit in a DAO wallet |
| **No Future Selling Pressure** | Team can't dump bought tokens later |
| **True Deflation** | Supply decreases permanently |
| **Verifiable** | All burns recorded on-chain |
#### Burn Mechanism
Step
Action
1
Platform generates profit
2
Designated portion allocated to buybacks
3
CDX purchased from market
4
Tokens sent to burn address (irrecoverable)
5
Total supply decreases permanently
***
### Buyback Execution
#### How Buybacks Happen
| Parameter | Details |
| ------------ | ------------------------------------------------------ |
| Executor | 3/7 multisig (Conclave contractors + Cod3x Foundation) |
| Timing | Ad-hoc (prevents front-running) |
| Method | DEX aggregator on Base network |
| Alternative | OTC deals with >5% discount |
| Transparency | All buybacks visible on dashboard after execution |
#### Multisig Structure
| Parameter | Value |
| ----------- | ----------------------------------------------- |
| Threshold | 3 of 7 signers required |
| Composition | Conclave contractors + Cod3x Foundation members |
| Timelock | None (slippage management requires flexibility) |
#### Why No Timelock?
| Challenge | Timelock Problem |
| ------------------- | ------------------------------------- |
| Slippage Management | Can't respond to market conditions |
| Front-Running | Creates predictable execution windows |
| Capital Efficiency | Reduces effectiveness of buybacks |
#### Execution Methods
**Aggregator Purchases**
| Aspect | Details |
| -------- | -------------------------------- |
| Platform | DEX aggregator on Base |
| Timing | Ad-hoc to prevent gaming |
| Benefit | Best available price across DEXs |
**OTC Deals**
| Aspect | Details |
| --------- | ------------------------------------------- |
| Threshold | Minimum 5% discount to market price |
| Use Case | Larger purchases where DEX slippage is high |
| Benefit | Guaranteed favorable pricing |
#### Why Ad-Hoc Execution?
Scheduled buybacks can be gamed:
| Attack | How It Works |
| ---------------- | -------------------------------------- |
| Front-Running | Traders buy before known buyback times |
| Sandwich | Sell immediately after |
| Value Extraction | Drains value from the system |
Ad-hoc execution prevents this by making timing unpredictable.
***
### Transparency Dashboard
All buyback and yield distribution data is publicly visible:
| Data Point | Visibility |
| ------------------- | ------------------------------------- |
| Buyback History | Date, amount, price, transaction hash |
| Burn Verification | On-chain proof of token destruction |
| Yield Distributions | Per-period USDC allocated |
| Profit Metrics | Platform performance indicators |
| Cumulative Burns | Total CDX removed from supply |
***
### Key Takeaways
| Principle | Summary |
| ----------------------- | -------------------------------------------- |
| **Profit, Not Revenue** | Only actual earnings fund tokenomics |
| **Dynamic Split** | Allocation optimizes for market conditions |
| **100% Burns** | No treasury hoarding or future sell pressure |
| **Ad-Hoc Timing** | Prevents front-running, maximizes efficiency |
| **Full Transparency** | All actions verifiable on-chain |
| **3/7 Multisig** | Secure but flexible execution |
***
### FAQs
**Q: What counts as "profit"?**
Revenue from credits, subscriptions, and fees minus all operating costs including infrastructure, team, and development.
**Q: How often do buybacks occur?**
Profit is determined every 14 days. Buyback timing varies intentionally within each cycle. The dashboard shows all historical buybacks.
**Q: What if an OTC deal is available?**
OTC deals are only executed if they offer at least 5% discount to market price, ensuring buybacks always get favorable pricing.
**Q: Where can I verify burns?**
All burns are recorded on-chain at the burn address. Links available on the transparency dashboard.
**Q: How is the $1 threshold determined?**
Manual processing at each 14-day deposit cycle. Will transition to automatic oracle-based processing if the system is well received.
---
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