A New Paradigm in Economic Innovation? SFT Protocol Introduces an Auction and Buyback Mechanism

5 min read5 days ago

1. What is SFT Protocol?

The World’s First General-Purpose Decentralized Physical Infrastructure Network (DePIN)

SFT Chain: A Unique DePIN Ecosystem

SFT Chain and its DePIN framework are designed to disrupt traditional Web2 business models by facilitating the development of cutting-edge Web3 applications. The goal is to establish a distributed hardware network that meets the growing demand for decentralized computing power by constructing a “Chain of Chains.” This structure serves as a marketplace where transactions can be conducted using cryptocurrencies from various chains associated with deployed hardware.

A novel auction system underpins this ecosystem, ensuring sustainable and organic growth. This mechanism seamlessly integrates diverse hardware types as the network evolves while also generating a consistent revenue stream to withstand market fluctuations.

Key Features of SFT Chain and the DePIN Ecosystem:

Device Tokenization: Device owners tokenize their hardware, allowing SFT Chain to use decentralized blockchain technology to connect users with their devices. This enables consensus on real-world events and facilitates tokenized rewards within the Web3 economy.
Device Diversity: SFT Chain supports a broad range of devices, from commercially available hardware to community-driven solutions (e.g., Raspberry Pi, Arduino) and emerging Web3-focused IoT devices. This is made possible through device SDKs.
Blockchain-Based Ownership Management: Securely managing device identities and ownership using blockchain technology ensures enhanced security and efficient token distribution.
Off-Chain Data Processing: Large volumes of data are processed and stored off-chain, with only critical information submitted to the blockchain, addressing scalability and efficiency concerns.
Flexible Smart Contract Programming: Developers can customize Oracle network behavior and implement business logic using multiple programming languages, providing greater flexibility in decentralized application (DApp) development.
Decentralized Tokenomics: The governance token SPD is utilized for device registration via payment, staking, or burning. Node operators define their own value accumulation models and can accept payments in SPD or other cryptocurrencies to support DApps operating within their nodes.

2. Collaboration Between SFT Protocol and Solana, Filecoin, and BNB Smart Chain

SFT Protocol actively participates in the Solana, Filecoin, and BNB Smart Chain ecosystems. The rSPD token is deployed on the Solana network with a maximum total supply of 100 million tokens, enabling seamless swaps via Jupiter.

Integration Across Ecosystems:

Solana_DeFi: LP farming, DePIN services, Launchpad, rSPD staking, and yield farming.
Filecoin_DeFi: FIL staking, SFT staking, rSFT staking, and yield farming.
BNB Smart Chain_DeFi: FIL staking and yield farming.

Through strategic integration with various ecosystem RPC interfaces, SFT Chain is steadily constructing its early-stage decentralized infrastructure. By leveraging asset tokenization, node redemption, and liquidity destruction mechanisms, the protocol aims to establish a self-sustaining economic cycle.

3. rSPD Tokenomics

The total supply of rSPD tokens is fixed, with a distribution model designed to ensure long-term ecosystem sustainability. The token release mechanism adheres to strict parameters that balance supply and demand, fostering a robust economic cycle.

To maintain transparency and security, all token distributions are managed through multi-signature wallets and automated smart contracts.

On-Chain Distribution of rSPD:

4. Deflationary Mechanism and Buyback Model

How the Auction and Buyback Model Establishes rSPD as a Deflationary Asset

4.1 Core Principles of the Deflationary Mechanism

rSPD follows a deflationary economic model, systematically reducing the circulating supply via periodic token burning. As demand remains steady or increases, this mechanism enhances rSPD’s scarcity, ensuring long-term economic sustainability within the ecosystem.

4.2 Objectives of the Buyback and Burn Mechanism

The buyback and burn mechanism is designed to achieve four primary goals:

Hardware Asset Tokenization: Onboarding real-world hardware onto the blockchain by assigning it digital value, thereby enabling on-chain validation of DePIN devices.
Establishing a Circular Economy: Forming a closed-loop economic system that promotes ecosystem stability through token buybacks, burns, and incentive models.
Market-Driven Pricing via Auctions: Using an open auction model to determine rSPD buyback prices, ensuring fair market valuation and transparency.
Dynamic Token Release: Balancing supply and demand to mitigate volatility and maintain the overall stability of the rSPD token economy.

4.3 Auction and Buyback Execution

(1) 35-Round Auction Mechanism

A total of 35 auction rounds will be conducted, with each round offering 1 million rSPD tokens.
Bidding is denominated in SOL, and winning participants receive rSPD tokens proportionally, ensuring fairness and transparency.

(2) Market-Based Pricing

The auction model determines the token price based on demand, reducing risks associated with centralized price controls.

(3) Incentive and Long-Term Release Model

rSPD tokens acquired via auctions are subject to a 12-month linear release schedule, preventing short-term sell-offs and encouraging long-term holding.

(4) Smart Contract-Driven Buybacks

All buyback and burn transactions are executed through automated smart contracts, ensuring transparency and immutability.
Transaction records are stored on-chain, guaranteeing full traceability.

4.4 Execution of Buyback and Burn Mechanism

Revenue Generation:

DePIN hardware infrastructure operates under a Proof-of-Work (PoW) mechanism, generating stable daily revenue.

Price Calculation and Conversion:

Revenue assets are priced using time-weighted average price (TWAP) or volume-weighted average price (VWAP) models or via decentralized oracles, with conversion to USDT (U).

Fund Allocation and Buyback Execution:

50% of daily revenue is allocated to rSPD buybacks through the auction system.
The remaining 50% is paired with the repurchased rSPD to create liquidity pools (LPs).
All LP tokens are permanently burned (sent to a black hole address), ensuring locked liquidity and strengthening deflationary pressure.

5. Advantages of the Model and Future Outlook

5.1 Advantages of the Model

Enhanced Token Value: Continuous buybacks and token burns increase rSPD scarcity, maintaining economic stability.
Sustainable Circular Economy: The combination of hardware asset tokenization, node redemption, and liquidity destruction fosters a self-sustaining ecosystem.
User Confidence: Smart contract execution guarantees transparency and decentralized governance, preventing manipulation.

5.2 Future Outlook

Expansion of DePIN Applications: Scaling DePIN use cases to accelerate the ecosystem’s maturity.
Strengthening Governance: Enhancing rSPD’s role in community governance to drive further decentralization.
Mainnet Transition: Facilitating a seamless transition between rSPD and SPD tokens to strengthen the long-term economic foundation of the DePIN ecosystem.

5.3 About SPD

SPD is the native token of the SFT Chain mainnet. Currently, rSPD functions as an early-stage points system within the SFT Protocol ecosystem. Upon the launch of SFT Chain’s mainnet, rSPD can be exchanged for SPD at a 1:1 ratio.

Holders of rSPD can engage with DePIN services and interact within the open-source ecosystem of SFT Protocol, without being tied to any centralized entity or organization.

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