> For the complete documentation index, see [llms.txt](https://docs.ledgity.finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.ledgity.finance/ldy-token/value-capture-buyback-flywheel.md).

# Value Capture (Buyback Flywheel)

The LDY token is designed as a **value capture asset**:\
as the protocol grows, **real yield generated from the RWA portfolio flows back to LDY stakers.**

Yield does **not** come from emissions or inflation.\
It comes from **performance fees generated by real economic activity**.

***

### **How the Flywheel Works**

1. Users deposit stablecoins (USDC / EURC) into Ledgity vaults
2. The collateral is allocated to **short-duration, diversified RWA strategies**
3. These assets generate **real cash flows** (yield)
4. The protocol collects **performance fees** on that yield
5. Fees are used to **buy LDY on the open market**
6. Purchased LDY is **distributed to stakers (veLDY)** or **burned**, depending on governance decisions

```
Deposits → Real Yield → Fees → Buybacks → Distributed to stakers → More incentive to stake & hold
```

This links **protocol growth → token demand → staker rewards** directly.

***

### **Fee Flow Structure**

| Step | Flow                             | Description                                       |
| ---- | -------------------------------- | ------------------------------------------------- |
| 1    | Performance fees collected       | A fixed % of yield generated from the portfolio   |
| 2    | Fees sent to **FeeCollector**    | Held transparently in stablecoins                 |
| 3    | **BuybackManager** executes buys | Purchases LDY from the open market                |
| 4    | LDY is allocated to two pools    | **veLDY Community Pool** & **veLDY Council Pool** |

***

### **Allocation Breakdown**

| Destination              | % of Buybacked LDY | Purpose                                                         |
| ------------------------ | ------------------ | --------------------------------------------------------------- |
| **veLDY Community Pool** | **80%**            | Distributed to users who stake LDY and contribute to governance |
| **veLDY Council Pool**   | **20%**            | Aligns Council incentives with long-term protocol performance   |

> **Stakers always receive the majority of value capture.**

***

### **Why This Model Is Sustainable**

| Feature                                  | Result                               |
| ---------------------------------------- | ------------------------------------ |
| Real yield → No inflation                | Rewards do not dilute holders        |
| Buybacks come from revenue               | Higher TVL = higher buyback pressure |
| veLDY locking reduces circulating supply | Creates natural supply scarcity      |
| No reliance on speculative incentives    | No “farm and dump” dynamics          |

### **Economic Impact**

| Metric                           | Effect on LDY                                            |
| -------------------------------- | -------------------------------------------------------- |
| **TVL Growth**                   | Increases buyback volume                                 |
| **Higher Staking Participation** | Reduces circulating supply & increases governance weight |
| **Protocol Longevity**           | Reinforces token utility and long-term alignment         |

In other words:

> The more the protocol is used, the more LDY is **bought**, **locked**, and **distributed** to aligned participants.


---

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