The economic model behind Unido’s UDO token is closely tied to the success of the Enterprise Platform. The burn model captures and incinerates 60% of the Consumption Fees generated by the Enterprise Platform on a quarterly basis, up to the point where the total supply of UDO will be reduced by 20%.
As such, a key aim of the UDO token is to capture the value created within Unido such that the UDO token’s value will reflect the increase in network usage. At its core, the UDO token has three primary utilities that give it value:
The initial use cases for the UDO token will be as follows:
Network Access Licence: access to Unido Enterprise Platform and the underlying technology, Unido Core, will only be accessible with the UDO token.
Consumption Fees: both Unido Enterprise Platform and 3rd part dApps built on top of Unido Core will charge a consumption fee based on the volume of usage.
DAO Governance: voting rights within the DAO tasked with distributing resources from the Ecosystem Development Fund.
A key objective is to support the stability of the network and UDO token in the early stages of adoption. To achieve this, we have created a Burn & Recycle Programme for the UDO token that will reduce total supply by 20% from 115 million to 92 million, similar to the burn program we have seen implemented by Binance which has helped their token appreciate over 4200%.
Unido’s native token, UDO, has a deflationary price mechanism via “Burn & Recycle” model which is designed to capture the value resulting from increased adoption of all the products in the Unido ecosystem.
A key element of this is the “Consumption Fee” model which works like this:
UDO is paid for use of the platform (“Consumption Fee”)
At the outset, 60% of the consumption fees are burnt, 20% is allocated to reserve and 20% is allocated to the ecosystem development fund (EDF)
This continues until the supply of UDO is reduced from 115m to 92m tokens overall ie. this rule applies until 23m UDO tokens have been burnt.
Thereafter, tokens are not burnt but recycled, re-injecting liquidity back in the Unido ecosystem in a perpetual cycle.
The Burn & Recycle function of the Consumption Fees was due to go live once the Polkadot side of the platform was built to enable this real-time collection and burning of UDO tokens as the individual apps are used.
However, as Unido is already a working product with an early client base, we have decided to bring the UDO token burn forward via the introduction of a new solution called the “Consumption Fee Burn Function” (CFBF).
The CFBF is an interim measure that will use the revenue generated by Unido products to buyback and burn UDO tokens from the open market on a monthly basis. This will continue until the development of the Polkadot work token which will then upgrade this feature into a real-time event.
How CFBF Works
Whilst Polkadot network is under development, clients will be paying for Unido services via a portion of the outbound currency transaction fees instead of UDO. Therefore it means that if Party A sends Party B 100 ETH, they will be charged in ETH; if 100 BTC, charged in BTC and so on.
Subsequently, Unido will accumulate in its Treasury any cryptocurrencies being transacted on the platform — this includes BTC, ETH, USDT etc.
Subject to the published financial policy, Unido will exchange these accumulated funds for UDO on the open market, and will then place this UDO into the CFBF receiving address.
In the context of Eqibank, our first major client, the system will works as follows:
Eqibank clients perform transactions using BTC, ETH and USDC.
Unido accumulates BTC, ETH and USDC from a portion of transaction fees from every client exchange in their outbound currency.
Unido uses these funds on DEX/CEX to purchase UDO token
Of the purchased UDO, 60% is sent to CFBF wallet and burnt; 20% sent to Ecosystem Fund, 20% used to fund ongoing development.
UDO Buyback Statement
The revenue from all Unido products, be it cash or crypto, will be used by Unido to purchase $UDO on the open market on a regular basis. The price and order duration of the $UDO on market purchases will be at Unido’s sole discretion.
The acquired $UDO will be transferred as described in the whitepaper under Token Emission Program — Burn/ Recycle Model, being in Phase 1, 60% of UDO acquired will be burnt, 20% paid to the EDF and 20% paid to the PAC Reserve, and once total UDO on issue is reduced to 92mm tokens, Phase 2 recycle will commence, being 50% paid to the EDF and 50% paid to the PAC Reserve.
A summary of the on-market $UDO acquisition activities will be reported on a quarterly basis.
We believe this new mechanism will bridge the temporary gap between the user adoption of the Unido platform and the value capture mechanism of the UDO token caused by the ongoing development of the Polkadot network, helping our community better share in the successful adoption of Unido products.
In Phase 1 of this model, we intend to burn 60% of UDO fees collected through “Consumption Fees’’ on a quarterly basis, until such a point that the overall token supply is reduced to 92,000,000 UDO tokens.
After this point is reached, Phase 2 will commence where the “Burn” mechanic will turn into a “Recycle” mechanic, where no further tokens collected from “Consumption Fees” will be burnt, but rather 50% distributed to the “Reserve” to support ongoing development and network maintenance of Unido Core and the remaining 50% distributed to the Ecosystem Development Fund to continue subsidizing the growth of 3rd party applications in the ecosystem.
The amount of time it takes for this pivot point to occur will depend on the adoption rate of the Unido Enterprise Platform and Unido Core API.