# 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

<table><thead><tr><th width="110.47265625">Step</th><th>Action</th></tr></thead><tbody><tr><td>1</td><td>Platform generates profit</td></tr><tr><td>2</td><td>Designated portion allocated to buybacks</td></tr><tr><td>3</td><td>CDX purchased from market</td></tr><tr><td>4</td><td>Tokens sent to burn address (irrecoverable)</td></tr><tr><td>5</td><td>Total supply decreases permanently</td></tr></tbody></table>

***

### 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.