Profit Distribution
Understanding how profits are distributed in the Solana Index Fund ecosystem.
Profit Sources
The Solana Index Fund ecosystem generates profits from various sources, which are then distributed according to the profit distribution model:
Trading Fees
Fees collected from trading activities on decentralized exchanges where the Treasury provides liquidity.
- 0.3% fee on all trades in liquidity pools (standard Solana DEX fee)
- Treasury's share based on liquidity provision percentage (typically 0.25% of 0.3%)
- Collected automatically by DEX protocols and claimed by the Treasury program
Issuance and Redemption Fees
Fees charged when users mint new index tokens or redeem existing ones for the underlying assets.
- 0.5% issuance fee for minting new index tokens
- 0.5% redemption fee for redeeming index tokens
- Collected by the Treasury contract
Yield Farming
Returns generated from deploying Treasury assets in various yield-generating strategies.
- Staking rewards from compatible assets
- Lending interest from DeFi platforms
- Liquidity mining rewards
Arbitrage Profits
Profits generated from arbitrage operations that maintain the alignment between index token prices and their underlying value.
- Price discrepancy arbitrage
- Cross-exchange arbitrage
- Rebalancing efficiency gains
All profit sources are tracked transparently and can be verified on-chain. The Treasury dashboard provides real-time information on profit generation and distribution.
Distribution Model
Solana Index Fund employs a balanced profit distribution model that supports multiple stakeholders while ensuring the long-term sustainability of the ecosystem:
Profit Allocation
Sub-Index Token Burning Breakdown (50% of total profits):
MINDEX
16.67%
DINDEX
16.67%
NINDEX
16.67%
This distribution model ensures that profits are used to enhance the ecosystem's value through increased liquidity and deflationary pressure on token supply.
Liquidity Enhancement
50% of all profits are allocated to enhancing liquidity for index tokens. This allocation serves several important purposes:
Liquidity Allocation Strategy
- DEX Liquidity Provision: Adding liquidity to trading pairs on major DEXes to reduce slippage and improve trading experience.
- Protocol-Owned Liquidity: Building protocol-owned liquidity positions that generate sustainable fee income for the Treasury.
- Liquidity Incentives: Providing incentives for third-party liquidity providers to enhance overall market depth.
- Strategic Reserves: Maintaining strategic reserves for market operations and to support price stability during volatile market conditions.
The liquidity enhancement strategy is dynamically adjusted based on market conditions, trading volumes, and the growth of the ecosystem. The Treasury dashboard provides transparency into liquidity allocations.
Token Burning
The remaining 50% of profits are used for token burning, creating deflationary pressure on the supply of sub-index tokens:
Burning Mechanism
- Profit Conversion: The allocated profits are converted to the respective sub-index tokens (MINDEX, DINDEX, NINDEX) in equal proportions.
- Token Acquisition: Tokens are acquired through open market purchases to ensure transparency and market-based pricing.
- Burning Process: Acquired tokens are permanently removed from circulation by sending them to a designated burn address (address with no private key).
- Verification: All burning transactions are recorded on-chain and can be verified by anyone.
- Reporting: Burning events are reported through the Treasury dashboard and official communication channels.
Token burning occurs every Saturday at midnight UTC. The amount of tokens burned depends on the profits generated during the preceding week.
Distribution Schedule
Profit distribution follows a regular schedule to ensure predictability and transparency:
| Activity | Frequency | Description |
|---|---|---|
| Profit Calculation | Daily | Daily calculation of profits from all sources |
| Liquidity Enhancement | Continuous | Ongoing allocation of profits to liquidity pools |
| Token Acquisition | Daily | Daily acquisition of tokens for burning |
| Token Burning | Weekly (Saturday, 00:00 UTC) | Weekly burning of acquired tokens |
| Distribution Report | Weekly (Monday) | Weekly report on profit distribution activities |
The distribution schedule may be adjusted through governance decisions, but any changes will be announced well in advance.
Governance and Adjustments
The profit distribution model is subject to governance oversight and can be adjusted through the governance process:
Governance Parameters
- Distribution Ratios: The ratio between liquidity enhancement and token burning can be adjusted through governance proposals.
- Sub-Index Allocation: The allocation among sub-indexes for token burning can be adjusted based on market conditions and strategic priorities.
- Distribution Schedule: The frequency and timing of distribution activities can be modified through governance.
- New Distribution Categories: New categories for profit distribution can be added as the ecosystem evolves.
Any proposed changes to the profit distribution model must go through the governance process, which includes a discussion period, formal proposal, and voting by governance token holders.