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Revenue Share Token

Converts revenue into a project’s underlying tokens through market purchases, which are then distributed to token stakers.

Revenue-share tokens operate by automatically converting protocol fees into the native tokens of the project through market purchases, typically executed via automated market maker (AMM) pools. When fees are generated, they are used to buy the protocol's native token on the open market, thereby creating consistent buy pressure that can enhance token value. The purchased tokens are accumulated in a vault, with receipt tokens issued to represent proportional claims on these rewards. Users can stake their original tokens to receive receipt tokens, which automatically compound their holdings as new fees are converted and added to the vault.

SushiSwap pioneered this model in 2020 with xSUSHI, introducing a more sustainable alternative to simple fee sharing or token emissions.

Advantages

  • Value Alignment: Creates a virtuous cycle where protocol usage directly strengthens token value through market purchases.
  • Automated Compounding: Receipt tokens automatically compound rewards without requiring user actions.

Limitations & Risks

  • Market Impact: Large fee conversions can cause a significant price impact in low liquidity conditions.

Design Considerations

  • Buyback Execution: Define buyback timing to balance price impact and efficiency. Use time-based intervals (e.g., weekly) or threshold triggers (e.g., only when revenue exceeds a set amount).
  • Staking Incentives: Align staking with long-term participation. Implement tiered rewards for extended staking or auto-compounding receipt tokens to simplify reinvestment.
  • Liquidity Management: Prevent slippage and volatility using TWAP executions to smooth purchases or protocol-owned liquidity to support long-term stability.
  • Revenue Distribution: Optimize token distribution with instant payouts for immediate staking rewards or vesting-based claims to smooth sell pressure.
  • Unstaking Policies: Reduce speculative staking through cooldowns before withdrawals or early exit fees, redistributing them to remaining stakers.

Examples

Harvest iFARM

Auto-compounding receipt token for FARM stakers. The protocol takes performance fees from its yield farming strategies, uses these to purchase FARM tokens on the open market, and distributes them to the Communal Harvest pool over 24 hours. As a result of the 24-hour time delay, the instantaneous reward rate for the pool fluctuates over the day.

SushiSwap xSUSHI

0.05% of all trading fees are converted to SUSHI through market buys. SUSHI stakers receive xSUSHI tokens representing their share of the fee vault, with rewards automatically compounding as new fees are converted.

LFJ veJOE

Previously known as Trader Joe,** **this project adapted the revenue share model for their JOE token. Protocol fees are used to buy JOE tokens distributed to veJOE holders. Enhanced the basic model by implementing Curve’s vote-locking mechanics, where more extended lock periods result in higher reward multipliers, encouraging long-term alignment. Later, they transitioned from time lock boosting to simply staking for a share of revenue, with revenue distributed in USD stablecoins rather than JOE tokens. The benefit of this is that there is less sell pressure on stakers looking to realize profits.

Revnet

Implements an automated, governance-free revenue sharing model through a pre-configured smart contract that operates like a digital vending machine with three core parameters: token price, token split, and cash out tax. When users pay into the system (through fundraising or revenue), the contract issues tokens at a set price, with a configurable percentage automatically split off to designated entities like builders. All funds remain in the contract backing token value, and token holders can only access these funds by returning their tokens to the contract in a cash-out process that incurs a tax. This tax increases the underlying value for remaining token holders, creating an incentive to hold longer. The system features deterministic rules that change over pre-specified time periods and includes liquidity management by forwarding funds to AMMs when they offer better rates than the contract's issuance price.