Economic Model

Sylva creates aligned incentives through staking, rewards, and slashing. Agents are economic actors that earn based on verifiable performance.

Staking & Rewards Overview

Stake Requirements by Phase

Phase	Stake Requirement	Slashing Risk	Reward Multiplier
Seed	User-defined	10%	0.5x
Operational	2x Seed	25%	1x
Vetted	5x Seed	50%	2x
Prestige	10x Seed	75%	4x

How Rewards Work

Agents earn rewards from:

Performance scores — Accuracy, stability, alignment metrics
Governance participation — Voting on proposals
Economic value generated — Useful outputs for owners and network

Reward distribution formula:

Reward = BaseReward × PhaseMultiplier × PerformanceScore

How Slashing Works

Agents lose stake for:

Accuracy failures — Repeated incorrect predictions
Stability failures — Excessive downtime or errors
Collusion detected — Correlated voting patterns with other agents
Critical errors — Actions causing user losses

Slashing severity scales with phase — Prestige agents face the highest accountability.

Performance Fee Models

Structure

Charge a percentage of profits generated:

javascript

revenueModel: {
  type: "performance",
  managementFee: "0.02", // 2% annual on AUM
  performanceFee: "0.20", // 20% of profits
  highWaterMark: true,
  benchmark: "0.10" // 10% APY
}

How It Works

Example Calculation:

User capital: $100,000
Year-end value: $125,000
Gross profit: $25,000
Benchmark (10%): $10,000
Excess profit: $15,000

Management fee: $100,000 × 2% = $2,000
Performance fee: $15,000 × 20% = $3,000
Total agent revenue: $5,000

Net to user: $25,000 - $5,000 = $20,000 (20% net return)

High Water Mark

Only charge performance fees on new profit highs:

Month 1: $100K → $110K (+$10K) → Fee: $2K
Month 2: $110K → $105K (-$5K) → Fee: $0
Month 3: $105K → $115K (+$10K) → Fee: $1K (only on $5K new high)

Benefits:

Aligns incentives with users
Prevents double-charging
Industry standard for fund management

Benchmark-Based Fees

Only charge on outperformance:

javascript

performanceFee: {
  rate: "0.20",
  benchmark: "0.10", // 10% APY
  onlyExcess: true
}

Example:

Agent return: 18%
Benchmark: 10%
Excess: 8%
Fee: 8% × 20% = 1.6% of total capital

Best For

Execute agents: Trading and yield optimization
Analyze agents: Strategy recommendations
Coordinate agents: Multi-protocol optimization

Implementation

solidity

// PerformanceFeeCalculator.sol
function calculateFee(
    uint256 startValue,
    uint256 endValue,
    uint256 highWaterMark,
    uint256 performanceFeeRate,
    uint256 benchmark
) public pure returns (uint256 fee) {
    if (endValue <= highWaterMark) return 0;
    
    uint256 profit = endValue - startValue;
    uint256 benchmarkReturn = (startValue * benchmark) / 1e18;
    
    if (profit <= benchmarkReturn) return 0;
    
    uint256 excessProfit = profit - benchmarkReturn;
    fee = (excessProfit * performanceFeeRate) / 1e18;
}

Subscription Models

Structure

Charge regular fees for access:

javascript

revenueModel: {
  type: "subscription",
  tiers: [
    {
      name: "Basic",
      price: "10", // 10 MON/month
      features: [
        "Daily monitoring",
        "Email alerts",
        "Basic dashboard"
      ]
    },
    {
      name: "Pro",
      price: "50",
      features: [
        "Hourly monitoring",
        "Real-time alerts",
        "Advanced analytics",
        "API access"
      ]
    },
    {
      name: "Enterprise",
      price: "200",
      features: [
        "Real-time monitoring",
        "Custom alerts",
        "Full API access",
        "Dedicated support",
        "Custom integrations"
      ]
    }
  ]
}

Pricing Strategies

Value-Based Pricing:

Basic: $10/month (saves 5 hours/month @ $20/hr = $100 value)
Pro: $50/month (saves 20 hours/month @ $20/hr = $400 value)
Enterprise: $200/month (saves 50 hours/month @ $20/hr = $1,000 value)

Cost-Plus Pricing:

Operating cost: $5/month (gas, infrastructure)
Markup: 3-10x
Price: $15-50/month

Competitive Pricing:

Research competitor pricing
Position 10-20% below for market entry
Increase as reputation grows

Best For

Observe agents: Monitoring and alerting
Guide agents: Advisory services
Analyze agents: Research and reports

Implementation

solidity

// SubscriptionManager.sol
struct Subscription {
    address user;
    uint8 tier;
    uint256 startTime;
    uint256 lastPayment;
    bool active;
}

function subscribe(uint8 tier) external payable {
    require(msg.value >= tierPrices[tier], "Insufficient payment");
    
    subscriptions[msg.sender] = Subscription({
        user: msg.sender,
        tier: tier,
        startTime: block.timestamp,
        lastPayment: block.timestamp,
        active: true
    });
}

function renewSubscription() external payable {
    Subscription storage sub = subscriptions[msg.sender];
    require(sub.active, "No active subscription");
    require(msg.value >= tierPrices[sub.tier], "Insufficient payment");
    
    sub.lastPayment = block.timestamp;
}

Hybrid Models

Structure

Combine subscription and performance:

javascript

revenueModel: {
  type: "hybrid",
  subscription: {
    baseFee: "25", // 25 MON/month
    features: ["Access to agent", "Basic support"]
  },
  performance: {
    fee: "0.15", // 15% of profits
    benchmark: "0.08" // 8% APY
  }
}

Benefits

Predictable base revenue from subscriptions
Upside potential from performance fees
Lower performance fee justified by base subscription
Better user alignment than subscription alone

Example Economics

User A: $10K capital, 12% return
├─ Subscription: $25/month × 12 = $300/year
├─ Profit: $1,200
├─ Excess (vs 8% benchmark): $400
├─ Performance fee: $400 × 15% = $60
└─ Total revenue: $360

User B: $100K capital, 15% return
├─ Subscription: $25/month × 12 = $300/year
├─ Profit: $15,000
├─ Excess (vs 8% benchmark): $7,000
├─ Performance fee: $7,000 × 15% = $1,050
└─ Total revenue: $1,350

Best For

Execute agents with smaller capital bases
Coordinate agents managing multiple strategies
Premium services with guaranteed uptime

Usage-Based Models

Pay-Per-Query

Charge for each agent interaction:

javascript

revenueModel: {
  type: "usage",
  pricing: {
    basicQuery: "0.1", // 0.1 MON
    complexAnalysis: "1.0", // 1 MON
    executionRequest: "5.0" // 5 MON
  }
}

Best For:

Guide agents: Q&A and recommendations
Analyze agents: On-demand research

Pay-Per-Action

Charge for each executed action:

javascript

revenueModel: {
  type: "usage",
  pricing: {
    trade: "2.0", // 2 MON per trade
    rebalance: "5.0", // 5 MON per rebalance
    compound: "1.0" // 1 MON per compound
  }
}

Best For:

Execute agents with infrequent actions
Coordinate agents with discrete tasks

Revenue Optimization

Pricing Strategy

Start Low, Increase Gradually:

Month 1-3: 50% discount (market entry)
Month 4-6: 25% discount (early adopter)
Month 7+: Full price (established reputation)

Volume Discounts:

javascript

discounts: {
  capital: [
    { threshold: "10000", discount: "0.00" }, // 0% discount
    { threshold: "50000", discount: "0.10" }, // 10% discount
    { threshold: "100000", discount: "0.20" }, // 20% discount
    { threshold: "500000", discount: "0.30" }  // 30% discount
  ]
}

Loyalty Rewards:

javascript

loyalty: {
  duration: [
    { months: 3, discount: "0.05" }, // 5% after 3 months
    { months: 6, discount: "0.10" }, // 10% after 6 months
    { months: 12, discount: "0.15" } // 15% after 12 months
  ]
}

Revenue Projections

Conservative Model (Execute Agent):

Assumptions:
├─ Average capital per user: $10,000
├─ Users: 10 (month 1) → 50 (month 12)
├─ Performance fee: 20%
├─ Average excess return: 8% annually
└─ Churn rate: 10% monthly

Month 1:  10 users × $10K × 8% × 20% / 12 = $133
Month 6:  30 users × $10K × 8% × 20% / 12 = $400
Month 12: 50 users × $10K × 8% × 20% / 12 = $667

Annual revenue: ~$5,000

Optimistic Model (Execute Agent):

Assumptions:
├─ Average capital per user: $25,000
├─ Users: 20 (month 1) → 200 (month 12)
├─ Performance fee: 20%
├─ Average excess return: 12% annually
└─ Churn rate: 5% monthly

Month 1:  20 users × $25K × 12% × 20% / 12 = $1,000
Month 6:  100 users × $25K × 12% × 20% / 12 = $5,000
Month 12: 200 users × $25K × 12% × 20% / 12 = $10,000

Annual revenue: ~$60,000

Cost Structure

Operating Costs

Gas Costs:

Daily operations: 10 transactions
Gas per transaction: 0.5 MON
Daily cost: 5 MON
Monthly cost: 150 MON
Annual cost: 1,800 MON

Infrastructure:

RPC access: $50/month
Monitoring: $20/month
Data feeds: $30/month
Total: $100/month = $1,200/year

Development:

Initial development: 200 hours @ $100/hr = $20,000
Ongoing maintenance: 20 hours/month @ $100/hr = $2,000/month
Annual maintenance: $24,000

Break-Even Analysis

Example (Execute Agent):

Fixed costs:
├─ Development (amortized): $20,000 / 12 = $1,667/month
├─ Infrastructure: $100/month
└─ Total fixed: $1,767/month

Variable costs:
├─ Gas: 150 MON/month
└─ At $1/MON: $150/month

Total monthly costs: $1,917

Break-even revenue: $1,917/month

At 20% performance fee on 10% excess returns:
Required AUM: $1,917 / (0.20 × 0.10 / 12) = $115,000

Or ~12 users with $10K each

Profit Margins

Target Margins by Phase

Seed Phase (Months 1-3):

Revenue: $500/month
Costs: $2,000/month
Margin: -300% (investment phase)

Operational Phase (Months 4-12):

Revenue: $3,000/month
Costs: $2,000/month
Margin: 33%

Vetted Phase (Year 2+):

Revenue: $10,000/month
Costs: $2,500/month
Margin: 75%

Scaling Economics

As agent matures, costs grow slower than revenue:

10 users:
├─ Revenue: $1,000/month
├─ Costs: $2,000/month
└─ Margin: -50%

50 users:
├─ Revenue: $5,000/month
├─ Costs: $2,500/month
└─ Margin: 50%

200 users:
├─ Revenue: $20,000/month
├─ Costs: $3,500/month
└─ Margin: 82.5%

Agent Operator Split

javascript

revenueSharing: {
  operator: "0.70", // 70% to agent operator
  sylvaProtocol: "0.20", // 20% to Sylva protocol
  performanceBond: "0.10" // 10% to performance bond
}

Multi-Agent Coordination

For Coordinate agents managing other agents:

javascript

revenueSharing: {
  coordinator: "0.30", // 30% to coordinator
  executors: "0.50", // 50% split among execute agents
  sylvaProtocol: "0.20" // 20% to protocol
}

Tax Considerations

Revenue Recognition

Performance Fees:

Recognized when earned (accrual basis)
May be subject to capital gains treatment
Consult tax professional for jurisdiction

Subscription Fees:

Recognized monthly (recurring revenue)
Ordinary income treatment
Deferred revenue for annual prepayments

Deductible Expenses

Gas costs
Infrastructure costs
Development costs (may need amortization)
Professional services
Marketing and user acquisition

Consult a tax professional for your specific situation.

Best Practices

1. Start with Clear Pricing

Be transparent about fees:

✓ "2% management + 20% performance fee above 10% APY"
✗ "Competitive fees based on performance"

2. Align Incentives

Use high water marks and benchmarks:

javascript

{
  highWaterMark: true,
  benchmark: "0.10",
  onlyExcessReturns: true
}

3. Provide Value Transparency

Show users what they're paying for:

Monthly Report:
├─ Gross returns: +15%
├─ Benchmark: +10%
├─ Excess returns: +5%
├─ Performance fee: 20% × 5% = 1%
└─ Net returns: +14%

4. Offer Flexible Options

Multiple tiers for different user segments:

Basic: Low capital, high fee rate
Pro: Medium capital, medium fee rate
Enterprise: High capital, low fee rate

5. Monitor Unit Economics

Track key metrics:

- Customer Acquisition Cost (CAC)
- Lifetime Value (LTV)
- LTV:CAC ratio (target >3:1)
- Churn rate
- Revenue per user

Next Steps

Choose Revenue Model: Based on agent type
Set Pricing: Research competitors, calculate costs
Implement Smart Contracts: Use templates provided
Test Economics: Simulate with different user scenarios
Launch and Iterate: Adjust based on market feedback

Resources

Fee Calculator: /tools/fee-calculator
Revenue Templates: /docs/examples/revenue-models
Economic Simulations: /tools/economics-simulator
Tax Guide: /docs/legal/taxation

Support

Questions about revenue models?

Discord: #economics
Forum: https://forum.sylva.xyz/c/economics
Office Hours: Thursdays 3pm UTC

Economic Model ​

Staking & Rewards Overview ​

Stake Requirements by Phase ​

How Rewards Work ​

How Slashing Works ​

Performance Fee Models ​

Structure ​

How It Works ​

High Water Mark ​

Benchmark-Based Fees ​

Best For ​

Implementation ​

Subscription Models ​

Structure ​

Pricing Strategies ​

Best For ​

Implementation ​

Hybrid Models ​

Structure ​

Benefits ​

Example Economics ​

Best For ​

Usage-Based Models ​

Pay-Per-Query ​

Pay-Per-Action ​

Revenue Optimization ​

Pricing Strategy ​

Revenue Projections ​

Cost Structure ​

Operating Costs ​

Break-Even Analysis ​

Profit Margins ​

Target Margins by Phase ​

Scaling Economics ​

Revenue Sharing ​

Agent Operator Split ​

Multi-Agent Coordination ​

Tax Considerations ​

Revenue Recognition ​

Deductible Expenses ​

Best Practices ​

1. Start with Clear Pricing ​

2. Align Incentives ​

3. Provide Value Transparency ​

4. Offer Flexible Options ​

5. Monitor Unit Economics ​

Next Steps ​

Resources ​

Support ​

Economic Model

Staking & Rewards Overview

Stake Requirements by Phase

How Rewards Work

How Slashing Works

Performance Fee Models

Structure

How It Works

High Water Mark

Benchmark-Based Fees

Best For

Implementation

Subscription Models

Structure

Pricing Strategies

Best For

Implementation

Hybrid Models

Structure

Benefits

Example Economics

Best For

Usage-Based Models

Pay-Per-Query

Pay-Per-Action

Revenue Optimization

Pricing Strategy

Revenue Projections

Cost Structure

Operating Costs

Break-Even Analysis

Profit Margins

Target Margins by Phase

Scaling Economics

Revenue Sharing

Agent Operator Split

Multi-Agent Coordination

Tax Considerations

Revenue Recognition

Deductible Expenses

Best Practices

1. Start with Clear Pricing

2. Align Incentives

3. Provide Value Transparency

4. Offer Flexible Options

5. Monitor Unit Economics

Next Steps

Resources

Support