Tokenomics design

Two tokens solve different problems. ICY handles daily rewards and transactions. DFG enables governance and long-term value capture. Bitcoin backing provides stability and growth potential that pure utility tokens can't match.

Token architecture

ICY token (utility token)

Core properties

• Symbol: ICY
• Type: ERC-20 Utility Token
• Total supply: Dynamic (starts at 100M, adjusts based on protocol activity)
• Decimals: 18
• Value backing: Bitcoin-backed through treasury reserves

Supply mechanics

• Inflation rate: 2-5% annually based on protocol growth
• Burn mechanisms:
  • 1% of transaction fees
  • Governance-voted burn events
  • Unused treasury allocations (quarterly burn)
  • Bitcoin-triggered buyback and burn (automatic)
• Maximum supply: 1B ICY tokens (hard cap)

Value backing system

ICY tokens are backed by Bitcoin held in the protocol treasury, creating a dynamic value floor:

• Backing ratio: Variable based on BTC treasury size and ICY circulation
• Initial conversion: Approximately 0.00003 BTC per ICY (adjusts with market)
• Value calculation: ICY Value = (BTC Treasury Size / ICY Circulation) × BTC Price
• Liquidity pools: Separate BTC and ICY pools maintain market pricing

Utility functions

1. Contribution rewards: Primary reward mechanism for all protocol activities
2. Staking: Stake ICY to earn protocol yield and voting power multipliers
3. Transaction fees: Pay for premium protocol services
4. Liquidity provision: Provide liquidity for protocol DEX pairs
5. Reputation boost: Burn ICY to increase contributor reputation scores

Earning mechanisms

Contributors earn ICY through verified activities:

DFG token (governance token)

Core properties

• Symbol: DFG
• Type: ERC-20 Governance Token
• Total supply: 10M DFG (fixed supply)
• Decimals: 18
• Initial price: $10.00 (bootstrap pricing)

Supply distribution

• Core team: 20% (2M DFG) - 4-year vesting
• Early contributors: 15% (1.5M DFG) - 2-year vesting
• Community treasury: 25% (2.5M DFG) - governance-controlled
• Liquidity provision: 10% (1M DFG) - immediate
• Strategic partners: 10% (1M DFG) - negotiated vesting
• Public distribution: 20% (2M DFG) - various methods

Governance rights

1. Proposal submission: Minimum 1,000 DFG required
2. Voting power: 1 DFG = 1 vote (with staking multipliers)
3. Dividend rights: Quarterly profit distribution to DFG holders
4. Treasury access: Vote on treasury fund allocation
5. Protocol upgrades: Vote on technical and economic changes

Dividend mechanism

• Source: Protocol revenue from consulting, partnerships, and services
• Distribution: 70% to DFG holders, 30% to protocol treasury
• Frequency: Quarterly distributions
• Calculation: Pro-rata based on DFG holdings and staking duration

Bitcoin-backed value layer

Treasury management strategy

Bitcoin acquisition principles

1. Gradual and scheduled purchase

   • Dollar-cost averaging: Regular, consistent BTC purchases regardless of price
   • Schedule: Monthly purchases from consulting profits (10-15% of revenue)
   • Transparency: Public announcement of purchase schedule and amounts
   • Market timing: Additional purchases during significant price corrections
   • Anti-speculation: Avoid large one-off purchases to prevent market manipulation

2. Profit allocation framework

   • Source: Consulting business profits (from existing 10-15% treasury reserve)
   • Conversion: Automatic conversion of allocated profits to Bitcoin
   • Frequency: Monthly conversion aligned with financial reporting cycles
   • Minimum threshold: $10,000 minimum per purchase to optimize fees

Treasury composition

• Bitcoin reserve: 60-80% of treasury value in BTC
• Stablecoin buffer: 15-25% in USDC/USDT for operational expenses
• Protocol tokens: 5-15% in ICY/DFG for ecosystem support

ICY buyback and burn mechanism

Automatic triggers

1. Bitcoin growth trigger

   • Threshold: When BTC treasury grows >20% month-over-month
   • Action: Automatic buyback of 5-10% of monthly ICY trading volume
   • Execution: Gradual buyback over 1-2 weeks to minimize price impact

2. Surplus profit trigger

   • Threshold: When monthly profits exceed 150% of 6-month average
   • Action: Convert 25% of excess profits to ICY buyback
   • Burn: Immediate burn of purchased ICY tokens

Governance-controlled burns

1. Quarterly review burns

   • Frequency: Every quarter based on treasury health
   • Proposal: DFG holders vote on burn amounts (minimum 1,000 DFG to propose)
   • Execution: Burns between 0.1-2% of circulating ICY supply

2. Strategic burns

   • Purpose: Market stabilization or value enhancement
   • Threshold: Requires 60% DFG holder approval
   • Limits: Maximum 5% of circulating supply per year

Transparent treasury dashboard

Real-time metrics

1. Bitcoin holdings

   • Current BTC amount and USD value
   • Historical purchase prices and dates
   • Average cost basis and unrealized gains/losses
   • Percentage of total treasury in BTC

2. ICY token metrics

   • Current backing ratio (BTC per ICY)
   • Circulating supply and recent burns
   • Value floor based on BTC backing
   • Liquidity pool status and depth

3. DFG token metrics

   • Total supply and distribution status
   • Staking participation rates
   • Governance proposal activity
   • Dividend distribution schedule

4. Operational transparency

   • Monthly profit allocation to BTC purchases
   • Upcoming scheduled BTC purchases
   • Recent buyback and burn activities
   • Treasury diversification ratios

Risk management

Volatility mitigation

1. Scheduled purchases: Regular buying reduces timing risk
2. Diversified holdings: Not 100% BTC to manage volatility
3. Gradual adjustments: Slow changes to backing ratios
4. Community communication: Advance notice of major treasury changes

Liquidity management

1. Stablecoin reserves: Maintain operational liquidity
2. Staged withdrawals: Gradual ICY redemptions to prevent runs
3. Emergency funds: 3-6 months operational expenses in stablecoins
4. Market making: Protocol-owned liquidity in DEX pools

Economic flows

ICY & DFG token economics flow

flowchart TD
    Contributors[Contributors 🌐] --> Contribute[Contribute]
    Contribute --> Protocol[Dwarves+ Protocol]
    
    %% Activity Chairs
    Contribute --> Engagement[Engagement & Integration]
    Contribute --> Delivery[Delivery & Consulting]
    Contribute --> Learning[Learning & Training]
    Contribute --> Marketing[Marketing & Communication]
    Contribute --> Sales[Sales & Partnership]
    
    %% ICY Flow
    Protocol --> EarnICY[Earn 💧ICY]
    EarnICY --> Accumulate[Accumulate]
    EarnICY --> StakeICY[Stake 💧ICY]
    StakeICY --> EarnDFG[Earn 💎DFG]
    
    %% DFG Flow
    Protocol --> BeStakeholder[Be a Stakeholder]
    BeStakeholder --> StakeDFG[Stake 💎DFG]
    EarnDFG --> Invest[Invest]
    
    %% Governance & Profits
    StakeDFG --> Vote[Vote 🗳️]
    StakeDFG --> Profit[Profit 💰]
    
    %% Revenue Sources
    ConsultingRevenue[Consulting Revenue 💵] --> Profit
    ProtocolFees[Protocol Fees 💸] --> Profit
    LiquidityPools[Liquidity Pools 🌊] --> Treasury[Treasury 🏦]
    
    %% Bitcoin Treasury Layer
    Profit --> BTCPurchase[BTC Purchase 🟠]
    BTCPurchase --> BTCTreasury[BTC Treasury 🟠]
    BTCTreasury --> ICYBacking[ICY Value Backing 💧]
    BTCTreasury --> BuybackBurn[ICY Buyback & Burn 🔥]
    
    %% Profit Distribution
    Profit --> Dividends[Dividends 💎]
    Profit --> Treasury
    Profit --> Reinvestment[Reinvestment 🔄]
    
    %% Dashboard Transparency
    BTCTreasury --> Dashboard[Public Dashboard 📊]
    ICYBacking --> Dashboard
    EarnICY --> Dashboard
    StakeDFG --> Dashboard
    
    %% Styling
    classDef tokenICY fill:#87CEEB,stroke:#4682B4,stroke-width:2px
    classDef tokenDFG fill:#FFD700,stroke:#DAA520,stroke-width:2px
    classDef revenue fill:#90EE90,stroke:#228B22,stroke-width:2px
    classDef governance fill:#DDA0DD,stroke:#9370DB,stroke-width:2px
    classDef bitcoin fill:#F7931A,stroke:#FF8C00,stroke-width:3px
    
    class EarnICY,StakeICY,Accumulate,ICYBacking tokenICY
    class BeStakeholder,EarnDFG,StakeDFG,Vote,Profit,Dividends tokenDFG
    class ConsultingRevenue,ProtocolFees revenue
    class Engagement,Delivery,Learning,Marketing,Sales governance
    class BTCPurchase,BTCTreasury,ICYBacking,BuybackBurn bitcoin
    class Treasury,Reinvestment,Dashboard default

Key economic flows

• Contributor value loop: Contributors earn ICY for contributions, incentivizing ongoing participation.
• DFG governance loop: Staked DFG grants governance power and dividend share, aligning long-term holders.
• Bitcoin treasury integration: Bitcoin profits enhance ICY value and fund protocol development.
• Burn mechanisms: Reduce token supply, creating deflationary pressure and supporting value.
• Revenue recycling: Protocol revenue is distributed as dividends and reinvested for growth.

Economic parameters

ICY token parameters

• Initial supply: 100,000,000 ICY
• Maximum supply: 1,000,000,000 ICY
• Annual inflation: 2-5% (governance-adjustable)
• Transaction fee burn: 1% of all ICY transactions
• Staking APY: 5-20% (variable based on lock-up and tier)
• Bitcoin buyback trigger: >20% monthly BTC treasury growth

DFG token parameters

• Total supply: 10,000,000 DFG (fixed)
• Proposal threshold: 1,000 DFG
• Voting quorum: 10-20% of circulating DFG
• Dividend share: 70% of protocol revenue
• Staking multiplier: Up to 2x voting weight for 12-month lock-up

Governance and decision-making

Parameter adjustment

• Governance proposals: DFG holders can propose changes to token parameters.
• Voting period: 7 days for most economic proposals.
• Execution: Multi-signature treasury control for parameter changes.

Treasury allocation

• Community proposals: DFG holders vote on treasury fund allocations.
• Quarterly reviews: Regular assessment of treasury performance and utilization.
• Emergency funds: Governance can approve emergency releases for critical situations.

Conclusion

The Dwarves+ Protocol tokenomics design creates a robust, self-sustaining ecosystem. By intertwining utility (ICY) and governance (DFG) tokens with a Bitcoin-backed treasury, the model incentivizes value creation, fosters decentralized decision-making, and ensures long-term sustainability and growth. This design promotes a meritocratic, community-driven approach to research and development, setting a new standard for decentralized organizations.