Contrax Tokenomics

6 min readOct 4, 2023

The tokenomics plan for Contrax has been voted upon and approved! The plan encompasses five use cases for earning and utilizing TRAX, the DAO token of the Contrax platform.

These use cases emerged after extensive deliberations that began with the DAO committee. They were later refined by the tokenomics committee and then presented to the DAO for further discussion and voting. Many members of the tokenomics committee have previously devised tokenomics for other projects. They conducted thorough research and planning to ensure TRAX’s tokenomics are both reliable and tailored to our platform’s needs.

Background

A refresher: the Contrax DAO is currently governed by the xTRAX token. The “x” denotes that it cannot be transferred or swapped. Rather, it is earned by staking on the platform or completing DAO tasks. This means the DAO is only controlled by actual contributor at the time. The key details about xTRAX are:

It operates on the Arbitrum chain.
It will have a total supply of 800 million.
It is non-transferable for now but retains voting rights.

However, the DAO also understands this can be limiting, and therefore, has passed this proposal which plans an upgraded version, called TRAX, which can be swapped or locked into the new vote token, vTRAX. This will give the user the option to opt into DAO governance and earn the ability to vote & earn TRAX-USDC LP tokens.

1. Earn TRAX tokens by Staking in Vaults 🔒

The Contrax DAO ensures that Contrax app users have ownership and hold the token representing the DAO’s ownership. As such, users will receive TRAX tokens when they stake through Contrax. While TRAX is currently non-transferable, the DAO might alter this to accommodate other token use cases.

Token earning this way is currently live, and you can see it on your Contrax dashboard, like this wallet here:

TRAX distribution is based on three factors: the staking amount, staking duration, and the farm’s APY. The rate of distribution is 0.002 TRAX per $1 per 1% per day. Put in another way, for every $100 deposit, users earn 2 TRAX for every 10% APY, daily.

Example: Let’s calculate TRAX in a given scenario:

A user stakes $500 in a farm with 5% APY, and another $500 in a farm with 15% APY. So, that is $1000 at 10% average APY.
He farms for a year with no change in APY in the farms or their price.
He earns at this rate: 0.002 (base) * 10 (APY) * 1000 (USD) * 365 (days) = 7,300 TRAX.

This is still simplified, because we are not assuming a change in price or APY, nor are we considering the TRAX earned on the compounded APY, but it gives is an approximate idea of distribution numbers.

2. Governance via a vTRAX Token 🏛️

Initially, direct voting will utilize the non-transferable TRAX token (xTRAX). However, after upgrading to the TRAX token, all voting or staking will employ the non-transferable governance version, vTRAX. Users can exchange TRAX for vTRAX, which has a variable lock period before it can be converted again to TRAX.

Users can decide the lock duration, which will determine their vTRAX amount. Longer lock durations yield more vTRAX, translating to increased voting power, more staking tokens, and the ability to earn more rewards for DAO participation.

Example: This table is an example of what lock-ups could look like.

User A buy and User B both earn 10k TRAX tokens.
User A locks up their 10k TRAX for 2 years, and immediately gets 25k vTRAX.
User B only does a 6 month lock-up, and gets 12.5k vTRAX.
User A now has a lot more voting power than User B, but a much longer lock-up.
At the end of their lockups, they can 1:1 redeem their vTRAX for TRAX (25k TRAX for User A, 12.5k TRAX for User B).

3. The TRAX Tax 🛂

A percentage-based tax on TRAX sales will fund a decentralized liquidity pool, likely to be a TRAX-USDC pool. Half of the taxed TRAX will be used to buy USDC from the TRAX-USDC pool. The remaining TRAX will be combined with this USDC to create an LP token, which will be deposited into the same pool. The LP is owned by the DAO treasury.

Example: Let us assume a TRAX-USDC pool, and a 5% TRAX tax.

a user has earned 10k TRAX and now wants to sell them for USDC using the TRAX-USDC pool.
If the tax is 5%, the user will lose 500 TRAX to the tax. 250 of them will be sold for USDC, then combined with the other 250 to make a TRAX-USDC LP token that will then be deposited into the same pool.
Some of the sale has converted into permanent liquidity for future trading.

4. Stake to Vote, & Earn TRAX-USDC 🙌

vTRAX will have the ability to be staked to vote and collect voting rewards. Once staked, they can easily vote with these tokens from their dashboards. By providing the service of voting, they will receive a reward in TRAX-USDC LP. The LP may be pre-staked so its automatically earning even more rewards, but can be withdrawn by the user at any time.

For every vote, the DAO can allocate a payout amount of TRAX-USDC to create and give to all voters, distributed based on votes, after the voting deadline closes. The distributions are tied to the votes, not the staking. The staking just means the vTRAX voters are “present” and willing to vote for proposals.

The DAO will have USDC from the 10% fees on the farms, which can be used for obtaining USDC for payouts. Since TRAX tokens go to stakers, we can expect a linear relationship between the demand for TRAX-USDC and the DAO’s ability to supply it.

Example:

User has earned 10k TRAX over a few weeks of staking.
They convert TRAX into vTRAX and stake on Contrax.
As proposals arrive, they vote on them.
For each proposal, TRAX-USDC LP is rewarded at the end of the voting period.

5. Boosting Farms 🚀

Users can choose which farms they want to receive a boost for the week on the dashboard. They will need vTRAX staked to vote on the farm they want to boost. The farm that receives the most votes will be boosted to a higher APY. The DAO can decide if a single or multiple farms can be winners. The boost can come in the form of reduced fees on the farm, increased TRAX, or a mix of both.

Example: