# Burn Program & Deflation Model

As the protocol generates real yield, a portion of the performance fees is used to **buy LDY from the open market**.\
Governance can then choose to **redistribute or burn** part of this repurchased supply — gradually reducing circulating tokens over time and reinforcing scarcity.

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### **Deflation Model Overview**

| Mechanism                     | Effect                                 | Why It Matters                           |
| ----------------------------- | -------------------------------------- | ---------------------------------------- |
| **Fixed max supply**          | No new tokens can ever be created      | Holders are never diluted by emissions   |
| **Buybacks from real yield**  | Sustained, organic buy pressure        | Token value scales with protocol usage   |
| **Governance-directed burns** | Circulating supply decreases over time | Increases scarcity & long-term alignment |

This ensures that **value flows toward long-term participants** rather than short-term speculators.

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### **Buyback Distribution Structure**

Performance fees flow through the **FeeCollector** and are executed by the **BuybackManager**.\
Purchased LDY is then allocated into two pools:

| Destination              | Share   | Purpose                                             |
| ------------------------ | ------- | --------------------------------------------------- |
| **veLDY Community Pool** | **80%** | Distributed to locked stakers (veLDY) as real yield |
| **veLDY Council Pool**   | **20%** | Incentivizes governance execution & risk oversight  |

> **Stakers receive the majority of captured value.**

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### **DAO-Controlled Burn Program**

The **DAO (via veLDY voting)** controls how repurchased LDY is treated:

* ✅ **Redistribute 100% to stakers** (default, increases yield APR)
* 🔥 **Burn a portion** (accelerates deflation & scarcity)
* 🔄 **Adjust buyback intensity** (based on TVL + liquidity conditions)

**Burns are not automatic.**\
They are **intentional and governed** to avoid destabilizing token liquidity.

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### **Strategic Burn Capacity**

Up to **30% of the total LDY supply is controlled by the DAO** and may be:

* **Distributed** as long-term staking rewards
* **Burned** to reduce circulating supply
* **Re-allocated** to partnerships or liquidity incentives

This allows governance to balance:

| Objective                             | When It Applies                                |
| ------------------------------------- | ---------------------------------------------- |
| **Boost yield APR**                   | When staking demand is high                    |
| **Increase scarcity & price support** | When liquidity is deep and TVL is accelerating |
| **Support strategic growth**          | For integrations & ecosystem alignment         |