Incentive Mechanism

The Incentive Mechanism turns the abstract utility of $TAXC into measurable economic gravity that attracts and coordinates four core constituencies—users, validators, developers, and governors—­around correct, timely, and jurisdiction-accurate tax reporting. It is implemented entirely on-chain through a mesh of smart-contract modules (FeeVault, StakingManager, PluginRegistry, and BuybackTreasury) that interact deterministically once per epoch.

1 Token Supply & Monetary Base

Parameter
Value
Contract Variable
Upgradeability

Genesis supply

250 000 000 $TAX

SUPPLY_GENESIS

Immutable

Inflation model

Disinflationary: i₀ = 5 %, ↓ 0.5 pp / year to 1 % floor

inflRate(year)

DAO-modifiable floor (≥ 1 %)

Epoch duration

4 960 blocks ≈ 1 day (Arbitrum)

EPOCH_LEN

Immutable

Max circulating in year 10

≈ 350 M $TAX

–

Derived

Inflation is minted at the start of each epoch by StakingManager.mintEpochInflation() and distributed immediately via streaming contracts (Sablier-style) to stakers, plugin authors, and the DAO treasury according to the formulas below.

2 Fee Flow & Epoch Accounting Pipeline

┌───── User pays fee (PDF report, pNFT, API) ────┐
│                                                │
│   FeeVault.deposit{value: X TAXC}(user, tag)   │
└─────┬───────────────────────────────────────────┘
      │ 1. Tag‐weighted splitter logic
      ▼
+------+------+------+------+
| Node | Devs | DAO  | Burn |
+------+------+------+------+
  0.40   0.25   0.25   0.10   ← default routing vector (modifiable by DAO)
      │ 2. Stream tokens to recipients (Sablier v2)
      ▼
┌────────────┐
| S. Manager | ← fetches Δfees, Δinflation at epoch break
└────┬───────┘
     │ 3. Calculates per-stake reward rᵢ = (Δfees + Δinfl)·wᵢ / Σw
     ▼
  Stakers receive continuous flow → unlock after `UNBOND_DELAY`

  • Fee tags (txReport, advisorGrant, apiCall, …) allow future DAO votes to fine-tune distribution (e.g., higher developer share for API calls).

  • Burn slice creates permanent negative supply shock (deflation) proportional to protocol usage.

3 Staking & Validator Yields

Validators stake $TAX to run:

  1. Chain listeners (TxEvent indexers)

  2. Cartesi roll-up executors (classification VM)

  3. Snapshot compilers

Stake-weighted reward formula

Rewardi,epoch=(wi∑jwj)⋅(Δfnode+α⋅ΔFglobal+β⋅Iepoch)\text{Reward}_{i,\text{epoch}} = \Bigl(\frac{w_i}{\sum_j w_j}\Bigr)\cdot \bigl(\Delta f_{\text{node}} + \alpha \cdot \Delta F_{\text{global}} + \beta \cdot I_{\text{epoch}}\bigr)

Term
Meaning
Typical value

wiw_i

Validator stake weight

50 k – 2 M TAX

Δfnode\Delta f_{\text{node}}

Fees generated by this node’s index-range

dynamic

ΔFglobal\Delta F_{\text{global}}

Total protocol fees this epoch

120 k TAX

IepochI_{\text{epoch}}

Newly minted inflation tokens

~45 k TAX

α\alpha

Global fee share coefficient (0 – 1)

0.6

β\beta

Inflation share coefficient

1.0

Rationale: • High-traffic nodes earn extra via Δfnode\Delta f_{\text{node}}. • A global slice (α\alpha) prevents geographic luck. • Inflation rewards (β\beta) guard early bootstrap when fees are low.

Unbonding period UNBOND_DELAY = 14 days with progressive penalty if a validator is slashed during exit.

4 Slashing & Performance Bonds

Misbehaviour
Detection Source
Penalty

Double anchoring (posting wrong root)

BeaconRoot challenge window

15 % stake burn + profit redistribution

Missed uptime > 1 h / epoch

Network heartbeat monitors

5 % stake burn

Misclassification (fraud proof)

Cartesi roll-up fraud-proof contract

30 % burn + blacklisting plug-in version

Data leakage / KYC breach

DAO investigation vote

10 % burn + immediate ejection

Slashed amounts flow to a VictimCompensationPool; users who filed a valid fraud proof auto-claim.

5 Developer & Plugin Incentives

Registration Stake: 200 000 $TAX per plug-in (PluginRegistry.register()).

Revenue Share: For every ATU classified by plug-in p:

Payoutp=sp⋅Feereport ,sp=0.20 (default)\text{Payout}_p = s_p \cdot \text{Fee}_{\mathrm{report}}\,, \qquad s_p = 0.20 \text{ (default)}

Payout is streamed over 30 days; pausing the plug-in pauses the stream.

Quality Multiplier qpq_p: DAO can set qp∈[0.5,2.0]q_p ∈ [0.5, 2.0] based on F₁-score in quarterly benchmark. Effective share sp′=qp⋅sps_p' = q_p \cdot s_p (capped at 40 %).

Mis‐classifications proven via fraud proof reduce qpq_p or trigger slashing of the author’s stake.

6 User-Facing Rewards & Discounts

Action
Incentive

Annual subscription pre-pay (12 mo)

10 % $TAX rebate (streamed over year)

Referral (invite signs & pays ≥ 3 reports)

5 $TAX to referrer, 5 $TAX discount to referee

Early jurisdiction request (crowd-fund)

Top 100 contributors share 5 % of fees from first 12 mo

Governance participation (≥ 60 % votes/yr)

2 % bonus on staking yield

These are executed automatically by RewardsCoordinator reading on-chain metrics; no off-chain admin discretion.

Dynamic Fee-Split & DAO Budgeting

The default «40/25/25/10» split (Nodes / Devs / DAO / Burn) is stored in FeeVault.feeVector.

function setFeeVector(uint16 node, uint16 dev, uint16 dao, uint16 burn)
    external onlyGovernor
{
    require(node+dev+dao+burn == 10000, "not 100%");
    require(burn >= 500, "≥5% burn floor");      // hard-coded deflation guard
    feeVector = [node, dev, dao, burn];
}

DAO can raise the burn ceiling or redirect slices (e.g., extra DAO share to fund legal opinions).

Priority Gas-Lane (Surge Mode)

Users or integrators can attach Priority Credits (pc) when posting workloads (e.g., compiling 2 M tx report during tax week). Each pc costs 0.5 $TAX and grants +1 priority weight in the work queue. Nodes receive 95 % of priority payments immediately, stimulating burst capacity.

Buy-Back & Burn Program

BuybackTreasury accumulates:

  • 25 % of DAO share

  • All fines from slashing events

  • 10 % of unused integration-grant budget

If the 30-day average $TAX/USD oracle price drops ≥ 30 % from 90-day mean, a Dutch-auction buy-back triggers:

  1. Treasury swaps USDC → $TAX via 1inch over 4 hours.

  2. Purchased tokens are irreversibly burned.

  3. Buy-back capped at 2 % circulating per quarter.

Objective: defend monetary credibility while leaving ample DAO treasury runway.

Long-Term Sustainability Metrics (Modelled @ 30 k active users)

Year
Protocol Fees (USD)
Burn Rate (% supply)
Nominal Inflation
Net Circulating Δ

Y1

$1 .8 M

0.4 %

5 %

+4.6 %

Y3

$8 .5 M

1.1 %

4 %

+2.9 %

Y5

$21 M

1.9 %

3 %

+1.1 %

Y10

$85 M

2.8 %

1 %

−1.8 % (deflationary)

Simulations assume conservative 30 % YoY user growth and stable $TAXC price; by year 5 the protocol flips to net-deflationary—creating scarcity aligned with higher network utility.

Key Take-Away

The incentive mechanism weaves fee recycling, stake-weighted inflation, plug-in royalties, dynamic burns, and DAO programmability into a holistic economy. Every token spent, staked, or burned translates into better data quality, faster processing, richer jurisdiction coverage, and a more resilient compliance layer—­ensuring $TAX captures real productivity, not speculative hype.

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