> For the complete documentation index, see [llms.txt](https://soundmoney.gitbook.io/lite-paper/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://soundmoney.gitbook.io/lite-paper/protocol.md).
# Protocol
SoundMoney Protocol
Sound Money is a social finance protocol (i.e., “SocialFi”) and social token cross-chain DEX built on Bitcoin-Networked-Blockchains that enables creators to launch, engage, and expand liquid, content economies using their own social tokens.
My Thesis is this: As of Oct 2024\* The Bitcoin Ecosystem has undergone a DeFi explosion w/the Bitcoin L2 ecosystem flourishing and Booming Many innovations have allowed for the building of DApps/DEX's that interact with Bitcoin Directly thus unlocking 1.39 trillion in Value and allowing Bitcoin HODL'rs to earn yield from protocols built on Bitcoin.
We seek to empower creators to capture up to 100x more value from the $1.39 trillion global, social media marketplace that they create by building their own engage-to-earn economic rails portable to any application or exchange.
Creators can use their social tokens to token-gate content, experiences, exclusive drops, allow their fans to purchase non-fungible assets from their digital footprint, such as their youtube streams, Instagram lives, etc.
All social tokens minted by the SoundMoney protocol are token bonded to the $TRAP token, which doubles the protocol’s unit of governance to (1) determine which social tokens should launch next, (2) update the crypto-economic parameters of the protocol, and (3) determine which aspects of the SoundMoney ecosystem should be further supported.
The first application to launch atop of the SoundMoney protocol will be the UniSwap cross-chainDEX then 360 Mobile Wallet, an invite-only, engage-to-earn self-custody wallet and social token marketplace that serves as the mainstream world’s passport to the multi-trillion dollar crypto-universe.
The old model of social media is to make your users the product, and sell them off to the nearest advertiser, rather than rewarding them for growing the platform itself with their viral creativity.
To put it plainly, creators create billions of dollars of content and are forced to provide it at a 99% discount with no guarantee they’ll see proportional success to the value they provide.
highlight Black culture in some way or another, particularly given the communities disproportionate contributions to pop-culture through the music and entertainment industries (e.g., Hip-Hop, USE CASE #1)
SocialFi for The Culture.
Social tokens are different from non-fungible tokens (NFTs) in that they’re fungible and represent the ‘social value’ tied to a particular brand or influencer. Social value can be defined as exclusive access and experiences the token holder can gain simply by being a token holder - much like a membership pass to an exclusive club. Unlike other protocol tokens, which generally provide governance rights and speculative increases in value based on how the underlying protocol is doing (or how well it is marketed),
Social tokens benefit token holders in an unlimited number of ways only limited by the token creator’s creativity. On SoundMoney, all social tokens are ERC20 tokens minted on the
Bitcoin Network blockchain and are token bonded to SoundMoney’s governance token ($TRAP). Doing so allows creators to launch EVM-compatible assets that can take advantage of cross-chain protocols and begin within immediate, secondary market liquidity. Social tokens could be integrated across existing social media and e-commerce(shopify & stripe) platforms and provide fans an immediate way to uniquely engage with content and experience on a regular basis.
More broadly, social tokens better express the breadth and depth of a community. Rather than judging fandom based on how much money they are willing to spend to access certain experiences, social tokens can be used (and earned) for showing support that provides more sustainable growth to the creators careers - such as retweeting an album release, following a social account, and supporting them on patreon earlier in their careers.
This is particularly true for creators that place strict earn-to-engage restrictions as to how their social tokens can be accessed. Not enabling speculators (i.e., non-fans) to just purchase a creator's social token ensures that the integrity of their content economy is incredibly high and protected from secondary market speculation only seeking to use the creator’s success.
Rather than relying upon general market metrics, such as transaction volume and price, (which both can be easily manipulated by speculative investors), marketers can gain better insight from engage-to-earn transaction volume or market sales volume related to a specific creator’s economy. Of course, fans, just like crypto HODLers (i.e., people that hold crypto rather than day-trade it), will likely desire to own multiple social tokens to engage with the various creators that they support. Thus, the SoundMoney protocol will not only support social market commerce, but also serve as an exchange for trading social tokens
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1.Exclusivity - Social token holders may gain access to exclusive merchandise and events only purchasable in the social token (or open to holders of that social token). For example, this could include:
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Digital Collectibles (NFTs, digital assets such as the creator’s tweets and posts)
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Limited Edition Merchandise
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Exclusive Content, Music, Video, Blog Access
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Access to virtual and live events
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2\. Recognition - Social tokens paired with engage-to-earn models can serve as a great way for creators to recognize their most engaged fans by simply knowing how many tokens they have. Fans that have surpassed certain milestones could be rewarded with non-transferable NFTs recognizing their engagement and differentiating themselves from others
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Governance - Potential community governance capabilities, including voting on which
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Merchandise for the artist to drop
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Songs / Videos to release
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Features / Collaborations to pursue with other creators
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Airdrops / Rewards - Free rewards from creators to their followers based on predefined distribution criteria to keep fans engaged and guessing what’s next
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Automatic Liquidity - Since social tokens launched on SoundMoney are token bonded to the $TRAP token, social token users will be able to on and off-ramp to/from USD to social tokens without worrying about low liquidity
2.0 An Introduction to SoundMoney
SoundMoney is a SocialFi (i.e., social finance) protocol that enables creators to bootstrap their own content economies in ways that monetize their digital footprint and rewards their supporters. The purpose of the SoundMoney protocol is to increase treasury revenues through genuine engagement and marketplace activity with the protocol’s assets, be it the $TRAP token, social tokens launched via the protocol, or tokenized cultural assets exchanged in the form of NFTs produced by the protocol’s participants. $TRAP token holders help govern the economic parameters of all engagement and marketplace activity that take place across the protocol to ensure that the SoudndMoney ecosystem expands fairly and transparently. SoundMoney has six principles that govern its cryptoeconomics:
1. \
All Forms of Capital Are Equally Valuable. The SoundMoney protocol produces and exchanges several types of assets: (1) the $TRAP token, which is used as a unit of exchange and governance, (2) Social Tokens, which are used as a units of exchange within creator-focused content economies launched on the protocol, and (3) Cultural Assets, which materialize in the form of tokenized content and items (both represented as NFTs). Each of these asset types are all equally important to the sustainability of the protocol’s economy and provide a strong foundation for cultural secondary markets outside of the protocol as well. Additionally, this means that those who contribute their scarce time and attention toward producing and curating content for others are just as valuable as those who contribute their scarce cash.
2. \
A Circular Economy Must be Maintained. Since the $TRAP token supply is fixed, and oncoming social tokens launched on the protocol can have either fixed or variable token supplies, a circular economy must exist to prevent value from stalling. Affordable, inflationary sinks must exist to recycle value spent within marketplaces built atop of the protocol and re-distribute that value in the form of rewards and treasury revenue to keep participants engaged and protect the protocol from recurring crypto winters.
3. \
Economic Participation & Content Contribution Deserves Compensation. $TRAP and social token rewards should be paid out to any protocol participants that have taken economic actions because they ultimately support the sustainability and growth of the protocol.
4. \
Cost of Engagement Rewards Must be Less than Protocol Revenue. The total cost of reward disbursement should be less than the revenue generated by the protocol.
5. \
Localized Economies are Just as Important as the High-Level Economy. Since Sound Money is an economy of content economies, ensuring the health and growth of local, content economies will ensure the health and growth of the protocol overall.
6. \
Only Protocol Members Should Vote. A massive issue with the vast majority of protocols is that cash-rich speculators can accrue the governance token of the protocol and immediately begin to influence the protocol’s direction. This level of unconstricted plutocracy is not good for the protocol or the protocol’s more active community members because it provides undue influence & ecosystem power to the uninvolved. Thus, in order to vote within the TRAP DAO, a wallet must possess (1) a SoundMoney Membership token, and (2) any amount of
$TRAP tokens. SoundMoney Membership tokens are non-transferable NFTs that are provided to users “invited” to the protocol based on the social stake of an existing protocol user. Additional details are provided in Section 5.4.
2.1 SoundMoney Overview
There are five core components to the SoundMoney protocol: Engagement, Content Tokenization, Governance, Marketplace Activity, and Social Token Minting. The subsections below provide a summary of each component.
2.1.1 Governance
$TRAP token holders govern the SoundMoney protocol. Key decisions that SoundMoney governors are able to make include the following:
1. \
Deciding to change key economic parameters that control the distribution of $TRAP and social token rewards
2. \
Deciding to fund community initiatives to expand the SoundMoney ecosystem
3. \
Deciding which assets the protocol’s treasury invests in
4. \
Deciding to support the launch of social tokens on the SoundMoney protocol for certain creators
Of course, the aforementioned decisions aren’t the only ones governors can make, but we believe that they are the most consequential decisions as it relates to the protocol’s crypto-economic sustainability. More detail on SoundMoney’s governance model can be found in Section 7.0.
2.1.2 Engagement
The basis of SoundMoney’s crypto-economics is an earn-to-engage (i.e., “E2E”) model where users (i.e., Bitcoin wallet holders) are incentivized to engage with content and item-focused marketplaces built atop of the protocol (i.e., “social marketplaces”). In exchange, users may earn $TRAP tokens and/or social tokens based on the content they are engaging with. The dynamics of engagement rewards are further expounded upon in Section 5.0, “Protocol Rewards.”
2.1.3 Content Tokenization
SoundMoney tokenizes content because we strongly believe that true ownership means that everyone owns the cultural assets that comprise their own digital footprint. For creators, this is particularly important, as these cultural assets could later generate a massive amount of value for the rest of the cultural market if gone viral. It is our hypothesis that the content that has the highest cultural value, by means of its engagement metrics, also carries the highest capital value. Thus, by tokenizing content and distributing rewards to higher quality content as voted upon by other protocol users, SoundMoney is naturally creating a secondary market for the exchange of culturally relevant content that can coexist with more traditional social commerce markets like the sale of merchandise and access to experiences. We further expound on the details behind content tokenization in Section 4.0, “Social Marketplaces.”
2.1.4 Item Tokenization
Similarly to content tokenization, the SoundMoney protocol also tokenizes “Items,” which represent physical merchandise and/or digital collectibles sold by creators to supplement lower content production revenues. The goal is to intermix content and item marketplaces to form a more representative and unified social commerce marketplace where cultural value is exchanged in all its forms. We further expound on the details behind item tokenization in Section 4.0, “Social Marketplaces.”
2.1.5 Marketplace Activity
SoundMoney believes the only way a protocol can sustain itself is to have good unit economics. This is why protocol revenues must always outpace engage-to-earn rewards disbursement, and that inflation sinks must be mandated across token economies (i.e. both $TRAP and social token economies). More importantly, the protocol must attract natural usage, rather than leverage yield generation as a way to rent transaction volume and TVL (i.e., “total value locked” on the protocol). Rather, SoundMoney should be focused on becoming a social financial infrastructure atop of which creator economies can thrive by selling content and access. To do so, SoundMoney supports the sale of “Items,” or NFTs that represent some asset in exchange for another, fungible protocol asset such as the $TRAP token or social tokens launched on the protocol.
Any address can create an “item” to sell, set that item’s token price, and set a supply quantity for that item. Such basic functionality will be the foundation of social token marketplaces hosted on both the 360 Mobile Wallet and other applications.
2.1.6 Social Token Minting
Social tokens can be proposed and approved to be minted via the SoundMoney protocol (and thus natively supported by any application built atop the protocol). The naming convention of the social token can be whatever its creator prefers, as long as it is uniquely named in contrast to the social tokens minted before it.
2.2 SoundMoney Economy
Figure 1.0: SoundMoney Protocol Overview\
Table 1.0, shown below, breaks down the actions of each of the protocol’s stakeholders and what
aspects of the protocol those actions interface with.
Figure 1.0: SoundMoney Protocol Stakeholders & Actions
2.3 Protocol Flywheel
SoundMoney’s flywheel is essential toward ensuring its sustainability as a market activity driven system for cultural assets to be exchanged. Figure 2.0, shown below, visualizes the protocol’s flywheel.
Figure 2.0: SoundMoney Protocol Flywheel
SoundMoney NFT market activity exchanging Items and pieces of Content between $TRAP token holders and creators is at the center of the SoundMoney protocol’s economic engine. Such activity triggers DEX usage so that market participants may exchange and access other social tokens to increase their cultural purchasing power.
3.0 Liquidity
Liquidity of the $TRAP token is essential to ensure that all social tokens minted via the SoundMoney protocol will have immediate, secondary market liquidity. Thus, the following sections detail $TRAP token’s distribution model and liquidity strategies.
3.1 $TRAP Token Distribution Strategy
The SoundMoney Economy will TGE an initial token supply of 210M tokens out of 5B over 5 year Cliff. The token distribution is as follows:
3.1 $TRAP Token Distribution Strategy
3.2 $TRAP Liquidity Strategy
We leverage three macro-liquidity strategies to ensure sustainable cross-chain liquidity:
1. \
Immediate Liquidity via Token Bonding with $sRLY Using the Token Bridge. Bitcoin-bridged $TRAP will be token bonded with $RLY (i.e., Rally Network token on the Ethereum blockchain) so that 360 Mobile Wallet holders can easily on and off-ramp to/from USD and $TRAP at the beginning - not needing to wait until $TRAP’s market capitalization or trading volume increases. A portion of the $TRAP tokens from the “Liquidity Pool Funding” token allocation budget will be placed into a $RLY token bonding pool to ensure such liquidity prior to launch.
2. \
Enable Liquidity between $BTC & $TRAP with UniTrap DEX. The ability to on and off-ramp between BTC and $TRAP is essential to ensure that mainstream 360Mobile Wallet holders can easily access the ecosystem’s native token. To do so, we must enable a pool between $TRAP and $BTC on crosschain DEX, UniTrap. At the time of this writing (July 2022), Trader Joe has over $130M in TVL. The token pair will be introduced at the initial token-bonded price that $TRAP will have with $sRLY ($0.10 $USD) and arbitrageurs will close the price difference between the two pools to create price parity.
3. \
Protocol Owned Liquidity on Olympus Pro. Instead of renting liquidity while also guaranteeing the permanence of liquidity to facilitate transactions, SoundMoney is leveraging the Protocol-Owned Liquidity (POL) model introduced by Olympus DAO via Olympus Pro. Rather than leveraging a typical liquidity mining program, where users stake their LP (liquidity provider) tokens for farming rewards in a pool 2, users can exchange their LP tokens (i.e., from raydium) for the protocol's governance tokens at a discounted rate. This is done through a process called Bonding. As the protocol never sells these LP tokens, the liquidity is effectively locked within its treasury. Since Olympus Pro supports the Avalanche blockchain, the TRAP POL model will use the original $TRAP tokens minted on the blockchain
(in contrast to the $RLY-$TRAP token bonded pool, which uses Avalanche-to-Ethereum bridged $TRAP).
SoundMoney has allocated 6M tokens toward liquidity funding, which envelops seeding TRAP’s liquidity mechanisms (i.e., liquidity pools and the protocol owned liquidity model). Table 3.0, displayed below, details the various liquidity pools that UniTrap will host.
3.2.1 $RLY Token Bonding Pool
2M $TRAP tokens will be token bonded to $RLY to have immediate secondary market liquidity. For background, $AUDIO is the governance token of the AUDIUS Protocol on Solana. The Audius Protocol is a music streaming platform that enables creators to bootstrap their own economies to create ‘liquid fandom.’ As of this writing, the $RLY token market capitalization is approximately $109M, and $RLY is already listed on Coinbase. Creating an initial token bonded curve (i.e., “TBC”) with the Rally Network token not only enables liquidity, but it also anchors the $TRAPtoken to focus less on market price and more on platform utility (i.e., governance, reward distribution, etc.).
3.2.2 Protocol Owned Liquidity (POL)
Today, protocols set aside a large percentage of their token supply in order to incentivize liquidity providers. This negatively impacts the sustainability of the protocol in these ways:
1. \
Significant Sell Pressure. Inflationary token emission incentivizes short-term behavior that increases sell pressure on the farm tokens. Mercenary liquidity providers (LPs) often sell their rewards to recoup their investments. Current solutions, such as time-locked staking, don't solve the core issue at hand and simply prolong the liquidity attrition.
2. \
Goal Misalignment between Protocol and LP. LPs are incentivized by high reward rates, rather than a strong belief in the success of the protocol. Hence, once the LP rewards are exhausted, the LPs will remove their capital and move on to the next opportunity.
3. \
Impermanent Loss (IL). The success of a protocol causes price appreciation in its native token, causing a significant impermanent loss scenario for liquidity providers. This misalignment disincentivizes long-term LPs, even if they're long-term believers in the protocol.
4. \
No Buyer of Last Resort. During a market crash or in times of uncertainty, LPs tend to remove their liquidity from the pool as they are wary of the market state. It's at these moments, however, that the protocol needs liquidity the most.
Figure 3.0: Liquidity Shortfall Cycle
In fact, according to an analysis from MasterChef from Nansen.ai, 42% of the yield farmers that enter a farm on the day it launches exit within 24 hours. Around 16% leave within 48 hours, and by the third day 70% of these users would have withdrawn from the contract.
Within the POL model, protocols sell their governance token at a discount in exchange for liquidity provider (LP) tokens so that they may own their own liquidity via a process known as ‘bonding.’ Bonding is a mechanism in which a user can sell assets to a protocol in exchange for its native token.
So what is a better liquidity strategy than using liquidity mining and rewards? The protocol-owned liquidity (POL) model, originally developed by OlympusDAO and now productized via Olympus Pro, provides a strong alternative that the SoundMoney team has confidence in to avoid the pitfalls of traditional liquidity retention. To incentivize users to sell to the protocol, rather than the open market, bonds are offered at a discount rate. Bonds also have a vesting period to prevent users from selling all the discounted tokens at once for a quick profit. Bond price is determined by the supply and demand of bonds. It trends higher when there is more demand. As a result, bonding is a very competitive space - bonders compete with each other to grab the largest discount. Bond price can also be controlled by BCV (Bond Control Variable). It is a parameter set by the policy team to adjust bond capacity. When BCV increases, bond price increases, thus resulting in a smaller bond capacity. Bonds are linearly vested over a period of time (5 days by default) to reduce sell pressure due to arbitrages.
Currently, Olympus Pro supports EVM compatible blockchains such as Bitlayer, Arch Network, BoB, and Merlin. Because the core of the SoundMoney protocol will be launched on the Blockchain, we will be able to leverage the original $TRAPtoken within a POL model hosted by Olympus
3.2.2.1 Benefits of POL
Using a POL model, SoundMoney gains the following benefits:
1. \
Protocols now own their liquidity, rather than relying on mercenary LPs. This ensures permanence of liquidity and provides security for the protocol and its users.
2. \
This leads to a shift in market dynamics. With pool 2, LPs take farming rewards for granted and because they could come and go as they please, their goal is not aligned with the protocol. With bonds, users are incentivized (through discounted tokens) to help the protocol succeed.
3. \
As more liquidity is accumulated, the pool can support larger trades and guarantee price stability and protection from massive liquidity exits. This in turn creates a healthy price action, attracting long-term holders.
4. \
Protocols can unlock new revenue streams by capturing liquidity fees as they also become the liquidity providers themselves.
5. \
Protocols through their Olympus Pro partnership gain extra exposure as their bonds will be featured on Olympus Pro X, a unified marketplace for bonds.
6. \
Protocols gain access to experienced policy and engineering teams who provide market expertise and ensure success from deployment to maintenance.
For the broader SoundMoney community, Olympus Pro offers the following:
1. \
Opportunities to buy discounted tokens. Long-term holders do not need to speculate on price action in order to obtain more tokens. Through bonds, they can supply LP tokens to the protocol of their choice in exchange for its native tokens at a discounted rate. This is a win-win scenario for both the token holders and the protocol itself.
2. \
No exposure to impermanent loss. Long-term holders aren't incentivized to provide liquidity, as they would experience impermanent loss. Shifting this loss to the protocol better aligns both LPs and the protocol.
3. \
Confidence in the liquidity availability. The community can be assured that the liquidity will permanently reside within the protocol and that there will always be ample liquidity for users to trade their tokens
3.2 Social Token Liquidity
Social tokens are digital currencies native to subcultures driving what’s relevant in society. They allow creators, who produce the subcultures that people subscribe to, to materialize their own content economies without relying on exploitative Web2 infrastructure, such as YouTube, Instagram, Instagram, and TikTok. These platforms all represent centralized, social marketplaces in which the currency exchanged for content is either (1) fiat currency, which is earned from advertising revenue and paid out to creators (barely) or (2) personal data extracted from the followers of the platform’s creators.
Creators need to be provided with economic infrastructure that can capture the value of their content (of which they own and should be able to freely sell) and community engagement so that they no longer need to rely on paywalled tools such as Patreon to sustain a living doing their work.
The SoundMoney protocol provides creators with open source infrastructure to launch and expand their own content economies using their own unit of value tied to engaging with their content. In a world where creators commonly create content and monetize said content by selling merchandise and access to themselves across a variety of centralized platforms, it makes much more sense to unify such economic activity around content into a single unit of value that is universally used and earned by their community.
it is much more practical to integrate content currencies (i.e., social tokens) into existing Web2 marketplaces than to redevelop these platforms and compete against multibillion dollar incumbents.
The following subsections expound upon how social tokens are minted within the SoundMoney ecosystem, what liquidity constraints are imposed on social tokens to ensure their solvent, and what interface SoundMoney provides to ensure that protocol users can swap between $TRAP and SoundMoney-minted social tokens.
3.2.1 Social Token Minting
Social tokens may only be minted once a proposal is submitted to the TRAP DAO. After the proposal is successfully passed by $TRAP token holders, the public address of the creator associated with the proposal will be whitelisted on the SoundMoney’s Creators Registry. Whitelisted public addresses on the Creators Registry may mint a social token once. After doing so, they may never mint another social token. Social tokens are minted with certain, pre-selected economic parameters available via the SoundMoney protocol. Such parameters are:
1. \
Token Supply Type - Whether the token supply is fixed or inflationary.
2. \
Token Name - Name of the token.
3. \
Initial Token Price - Determine the initial token price (denominated in $USD). The initial token price cannot be over $50 USD and cannot be less than $0.01 USD.
4. \
Token Ticker Symbol - 1 to 4 character ticker name of the token.
5. \
URI - Logo image for token (hosted on IPFS).
6. \
Token Inflation - The percentage of inflation that the token supply has per year. If the “Token Supply Type” is “fixed” then the “Token Inflation” is 0.
7. \
Token Supply Amount - The number (integer) of total tokens that exist. If the “Token Supply Type” is “fixed” then this amount is only the initial token supply and the token owner will be able to mint more tokens as they see fit.
8. \
Social Token DEX Liquidity Pool - Fixed amount of tokens that will be allocated to Uni-Trap Social Token DEX to sustain a liquidity pool between $TRAP and the social token.
9. \
Token Availability -\
Token Availability determines whether or not the token can be swapped on Uni-Trap’s DEX for other tokens. If not, then the token may only be earned by the user or airdropped by the token owner. If so, then the token may be swapped on the Uni-Trap DEX in exchange for another token (i.e., purchased). Tokens that are not allowed to be listed on the Uni-Trap DEX are denominated as “Earn-Only.”
10\. Token Owner - The public address of the person or entity that is minting the token (i.e., the Creator). The Token Owner may mint, airdrop, or burn tokens as they see fit. Though it is recommended that they do so with consensus across their community first.
11\. Engage-to-Earn Allocation - The percentage of the total token supply allocated to user’s engaging with the Creator’s content (i.e., the NFTs minted by the Creator minted via SoundMoney). The E2E Allocation cannot be less than 20% of the creator’s token supply. If a creator’s E2E Allocation becomes zero, an additional 2.5% tax will be levied across their item and content sale transactions to sustain the allocation so that engagement rewards may be continually distributed to their community.
Once these parameters have been set by the Token Owner (i.e., the creator), they cannot be changed.
3.2.2 Social Token Liquidity Constraints
As you might have noticed in Section 3.2.1, some of the social token minting parameters present constraints on the creator as to how their token distribution strategy (i.e., monetary policy) should be formed. The SoundMoney protocol levies several core requirements for social tokens to ensure that they may (1) sustain itself in the secondary market, and (2) reward the communities that popularize their economies. The social token requirements are as follows:
1. \
The unit economics of how the token is paid out and paid in must be sustainable.
2. \
The token must have a pragmatic, market-focused use case.
3. \
The token must be exchangeable for other currencies or time.
4. \
The token must be token bonded to $TRAP.
SoundMoney’s social token requirements materialize in the form of liquidity constraints, which are displayed in Table 4.0 below.
3.2.3 Social Token DEX
To ensure that SoundMoney protocol users can access all the fungible assets minted, SoundMoney will support a social token decentralized exchange, referred to as the “Social Token DEX.” The DEX will be a fork of Uniswap and be integrated into the SoundMoney protocol. The Social Token DEX will allow users to swap $TRAP for any SoundMoney-minted social token, as well as enabling the swap of social tokens between each other. Of course, the only social tokens that will be available via the DEX are ones that were denominated as not “earn-only.” As mentioned in Section 3.2.1, token owners of social tokens can determine how available their tokens are to the secondary market. “Earn-Only” social tokens can only be earned through engagement with that creator’s Content and Items.
The SoundMoney protocol will earn a percentage fee based on the swaps that take place on the DEX and this revenue will be split by the TRAP DAO’s Reserve Treasury and its Engagement Rewards Treasury.
3.3 Treasury Revenue
The SoundMoney protocol earns revenue by collecting DEX swap fees (from its Social Token DEX), content sale fees, item sale fees, and social token minting fees. Table 5.0, displayed below, lists the details of SoundMoney’s revenue model.
4.0 Social Marketplaces
SoundMoney provides the building blocks for social token marketplaces at the center of creator content economies. The protocol enables the exchange between social tokens, $TRAP, tokenized Content, and tokenized Items, as this exchange is the basis for content economies to thrive. The sale of any Content or Items on the SoundMoney protocol includes a 2.5% fee (i.e., ‘protocol tax’) that is distributed to the protocol’s Reserve and Engagement Rewards treasuries. The other 97.5% of the sales revenue goes directly to the creator.
Both Content and Items are tokenized in the form of NFTs on the A-Bitcoin-Network blockchain. Content is any post that a creator has made across any of the applications built atop the SoundMoney protocol. Items represent tokenized access to any digital or physical merchandise or experience. Creators can mint Items that represent their existing merchandise, NFTs that they’re dropping, or passes to experiences they are hosting. Once a Content or an Item NFT is minted, it can be bought and sold on the secondary market, enabling creators to sell the assets that comprise their digital footprint directly to their respective audience of consumers.
Albeit simple, SoundMoney’s social marketplace features enable the protocol to be integrated into existing Web 2.0 marketplace infrastructure, such as Shopify, Eventbrite, and Etsy, via plugins while remaining at the economic center of the creator’s broader social commerce initiatives. For the first time ever, creators will be able to unify their brands' engagement and social commerce economies under one roof and enable new marketing campaigns in the process that benefit their most loyal followers. For example, creators can offer discounts on merchandise and experiences they sell on Shopify or Eventbrite if the consumer opts to use their social token as a form of payment instead of traditional fiat, and such a transaction could earn the consumer additional social tokens for their engagement within that creator’s content economy. Creators can also make their followers co-owners of their content by selling ownership of pieces of their content to them, then later use content ownership as eligibility criteria to receive social token airdrops, free merchandise, or automatic enrollment into fanbase raffles. The possibilities are, quite literally, endless.
4.1 Content Tokenization
The SoundMoney protocol tokenizes all content published atop of it in the form of non-fungible tokens (NFTs, ERC-721 Standard). Protocol users who publish content on SoundMoney inherently mint NFTs that contain that content’s metadata. Content NFTs can only be exchanged for the $TRAP token or social tokens launched on the protocol. The quality of Content NFTs is determined by weighted, on-chain voting (i.e., upvotes and downvotes) that are freely contributed by the broader SoundMoney community. Upvotes and downvotes can be equivocated to YouTube’s ‘likes’ and ‘dislikes’ and seeks to subjectively curate net positive content. Protocol users that have longer-standing reputations than newcomers have a higher amount of weight put on their votes, and net positive content earns rewards in proportion to other net positive content based on the total number of votes cast each week. The use of negative voting to keep people from abusing the system leverages the crab mentality that many people have when it is perceived that one individual is profiting at the expense of everyone else. While crab mentality normally refers to short-sighted people keeping good people down, it is also what allows good people to keep bad people down. The only “problem” with crab mentality is when people wrongly believe someone is profiting at everyone else’s expense.
4.2 Item Tokenization Deal Types
[Deal Types ](https://docs.audius.org/distributors/specification/deal-types): Pay Gated Download::Pay Gated Stream::Follow Gated Download::Pay Gated Download::$AUDIO Tip Gated Stream::NFT Gated Stream::Follow Gated Stream::Pay Gated Stream::Freemium
Item NFTs on the SoundMoney protocol can represent physical or digital merchandise and/or event passes that are meant to be sold to others. Any protocol user who holds a $TRAP VIP Pass NFT may mint and sell Items. Items can only be exchanged for the $TRAP token or social tokens launched on the protocol. Much like Content NFTs, Item NFTs have their own metadata standard that is described in Table 6.0.
5.0 Protocol Rewards
SoundMoney rewards users for their creativity and engagement on the protocol. Specifically, the protocol provides rewards to those who take actions that produce economic value (e.g., selling an item/content, purchasing an item/content, and swapping $TRAP in exchange for social tokens and vice versa). Additionally, the protocol has a reserved allocation of tokens (i.e., the “Platform Incentives” token pool) that are rewarded through applications seeking to build atop the protocol. The purpose of the Platform Incentives token pool is to increase adoption of applications built atop of the SoundMoney protocol. However, the following subsections will only provide an overview of the crypto economics of the $TRAP token and social tokens deployed on the SoundMoney protocol (as the Platform Incentives program is still in its developmental phase).
5.1 SoundMoney Engagement Rewards
SoundMoney Engagement Rewards are disbursed to users (i.e., wallet holders) in proportion to that user’s on-protocol engagement according to the user’s CLOUT (i.e., reputation score) and amount of engagement. The SoundMoney Engagement Rewards Treasury is funded by a pre-minted allocation of 56.5M SoundMoney tokens and a portion of the protocol’s revenues. Because Engagement Rewards will be sustained with protocol revenues, rewards will be disbursed in the form of both $TRAP tokens and social tokens, ensuring that active market participants are provided exposure to all assets within the SoundMoney ecosystem. Rewards are distributed daily using a quadratic rewards formula and are distributed to users in order of the amount of economic protocol activity that user demonstrates. The following subsections detail how engagement rewards are calculated to compensate economic participants of the protocol.
5.1.1 CLOUT & Rewards Calculations
There are two aspects of the SoundMoney’s engagement rewards algorithm:
1. \
CLOUT Score - The CLOUT Score refers to a protocol User i’s reputation score and is used to weigh how many TRAP tokens should be rewarded to users based on their level of protocol engagement (CLOUTi).
2. \
Engagement Rewards Formula - The engagement rewards themselves, which are distributed via a quadratic payout scheme.
5.1.1.1 CLOUT Formula
User reputation on the SoundMoney protocol is referred to as ‘CLOUT.’ CLOUT is both:
* \
● a measurement of a user’s economic activity and
* \
● a multiplier of the power of a users’ actions on the protocol.\
\
CLOUT is a function of multiple protocol engagement parameters, which are defined in Table 7.0. Note, that each engagement parameter is weighted based on its level of importance in the SoundMoney community / economy. Of course, there is a preference toward incentivizing actions that generate revenue for the protocol’s treasury. The more CLOUT a user has, the more influence they have on the protocol as a whole. CLOUT is recalculated on a weekly basis.
Coefficient (GC) penalizes any user that abstains from voting (upon governance being integrated into the 360 Mobile Wallet’s interface). User i’s GC starts at 1 (i.e., 0% of their CLOUT is slashed) and it decreases by 0.01 every time the user abstains from a vote. The number of times a User i abstains from a vote is accounted for by the variable j (or j,i - which is j of user i). Thus, each user’s CLOUT Score is multiplied by (GC)(j,i), which trends toward 0 every time that user abstains from a vote, potentially zeroing their CLOUT Score and thus eliminating any potential rewards they may receive from their activity. At the time of this writing, there are no plans to allow users who commit fraud to redeem themselves and increase their GC. The parameter can be updated by SoundMoney governors.
Changing the CLOUT formula will be one of the most contentious topics that $TRAPtoken holders can vote on (along with the other distribution formulas the platform uses). Equation I, displayed below, is the current CLOUT score formula (which is liable to be changed in the future as a fundamental platform parameter). User CLOUT is recalculated every week:
Equation I (Weekly SoundMoney User Reputation, CLOUT):
CLOUTi = \[(WIP \* AIP) + (WCP \* ACP) + (WAS \* AAS) + (WIM \* AIM) + (WCM \* ACM)]\*(GC)(j,i), where (0 ≤ CLOUTi ≤ 100)
The slashed rewards from abstaining voters go back to SoundMoney’s Engagement Rewards treasury.
5.1.1.2 SoundMoney Engagement Rewards Formula
SoundMoney will use a quadratic payout function to disburse rewards to users in proportion to their weekly CLOUT scores, ensuring that a user’s engagement is proportional to the rewards that they receive. Provided that there are natural upper limits to which type of engagement increases an individual’s CLOUT score, there is a maximum amount a user can earn from their engagement. Figure 3.0, displayed below, visualizes the relationship between user reputation and user engagement rewards:
\
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\*Note: This LitePaper provides an overview of the SoundMoney protocol. For detailed technical specifications and further documentation, please refer to the [corresponding documents.](https://docs.google.com/document/d/1KFpv6cbM2YrBVw-2ZNmQLjHZfDWVoEt-CgW2TlM45Ko/edit?usp=sharing)\*
\*Note: The roadmap is subject to change based on market dynamics, user feedback, and emerging trends.\*
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