Technical Appendix

This appendix makes the PCA program fully evaluable from the docs. It explains the model inputs, allocation logic, yield math, revenue baselines, and how everything translates into buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry, unlocks, and potential supply outcomes. All figures are illustrative and subject to market conditions.

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Note: Nothing here is investment advice. Backing capitalBacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry allocations and rates are variable. Yields are not guaranteed.

A) Methodology & Assumptions

Objective. Estimate the annual dollars available to retire FT from (i) backing capital yieldbacking capital yieldYield generated by deploying backing capital into low‑risk venues. Priority is to fund ecosystem development first (salaries/marketing/infra/ops); surplus funds buyback-and-burn of FT.View glossary entry and (ii) protocol revenue & feesrevenue & feesCashflows generated by Flying Tulip products (e.g., ftUSD/settlement rails, Spot, Lend, Futures, Insurance) routed to buyback-and-burn and used to govern unlocks.View glossary entry, then translate those dollars into FT retired under different average buyback prices. Also show ExitExitAction that exercises the Perpetual PUT at par; the original asset/amount is returned.View glossary entry/Withdraw scenarios and their supply effects.

Allocation approach (illustrative, conservative, liquid, no leverageleverageTrading with exposure greater than posted collateral; in FT futures, leverage constraints are set using depth‑aware metrics.View glossary entry):

• Major stables (AaveAaveA decentralized lending protocol used for conservative yield and collateralization in several Flying Tulip flows.View glossary entry v3 supply)
• stETHstETHA liquid‑staking representation of ETH used for conservative staking yield.View glossary entry (ETH staking)
• jupSOLjupSOLA liquid‑staking representation of SOL used for staking yield in conservative allocations.View glossary entry (SOL LSTLSTA tokenized claim on staked assets that remains liquid (e.g., stETH).View glossary entry)
• AVAXAVAXAvalanche’s native token and its wrapped ERC‑20 representation used for staking and liquidity.View glossary entry staking
• sUSDesUSDeA yield‑bearing form (sUSDe) and its base asset (USDe) used in certain strategies and as accepted assets in the PCA.View glossary entry (for USDeUSDeA yield‑bearing form (sUSDe) and its base asset (USDe) used in certain strategies and as accepted assets in the PCA.View glossary entry)

Approximate mix: ~½ in stables, balance across staked ETH/SOL/AVAXAVAXAvalanche’s native token and its wrapped ERC‑20 representation used for staking and liquidity.View glossary entry and sUSDesUSDeA yield‑bearing form (sUSDe) and its base asset (USDe) used in certain strategies and as accepted assets in the PCA.View glossary entry exposure. Policy weights may evolve with liquidity, rates, and risk.

Cadence & accounting.

• Backing capital yieldBacking capital yieldYield generated by deploying backing capital into low‑risk venues. Priority is to fund ecosystem development first (salaries/marketing/infra/ops); surplus funds buyback-and-burn of FT.View glossary entry accrues continuously on‑chain.
• First, it funds the ecosystem development budget (salaries/marketing/infra/ops).
• Remainder flows to buyback‑and‑burn.
• Protocol revenue & feesrevenue & feesCashflows generated by Flying Tulip products (e.g., ftUSD/settlement rails, Spot, Lend, Futures, Insurance) routed to buyback-and-burn and used to govern unlocks.View glossary entry from the product suite are routed to buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry and also govern unlocks (see Section E).
• Exits at par return collateralcollateralAssets allowed as collateral and the maximum per‑asset size configured to manage concentration and risk.View glossary entry; Withdrawals invalidate Perpetual PUTs and release backing capitalbacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry for buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry.

B) Backtested Yield (12‑Month Illustrative; $1.0B PCA)

Estimated annual carry by component (USD):

Component	Annual carry (USD)
AaveAaveA decentralized lending protocol used for conservative yield and collateralization in several Flying Tulip flows.View glossary entry v3 – USDCUSDCStablecoins accepted in PCA contributions and used across products; each has distinct risk/peg mechanics.View glossary entry	$6.58m
AaveAaveA decentralized lending protocol used for conservative yield and collateralization in several Flying Tulip flows.View glossary entry v3 – USDTUSDTStablecoins accepted in PCA contributions and used across products; each has distinct risk/peg mechanics.View glossary entry	$6.04m
AaveAaveA decentralized lending protocol used for conservative yield and collateralization in several Flying Tulip flows.View glossary entry v3 – USDSUSDSStablecoins accepted in PCA contributions and used across products; each has distinct risk/peg mechanics.View glossary entry (proxy)	$4.38m
sUSDesUSDeA yield‑bearing form (sUSDe) and its base asset (USDe) used in certain strategies and as accepted assets in the PCA.View glossary entry	$9.43m
stETHstETHA liquid‑staking representation of ETH used for conservative staking yield.View glossary entry	$9.00m
jupSOLjupSOLA liquid‑staking representation of SOL used for staking yield in conservative allocations.View glossary entry	$6.70m
AVAXAVAXAvalanche’s native token and its wrapped ERC‑20 representation used for staking and liquidity.View glossary entry staking	$2.15m
Total	$44.27m

Yield → Burn Conversion

If annual backing capitalbacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entrybacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry carry surplussurplusBacking capital yield remaining after the ecosystem budget; the surplus is used for buyback-and-burn.View glossary entrysurplusBacking capital yield remaining after the ecosystem budget; the surplus is used for buyback-and-burn.View glossary entry available for buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry is $Y$ dollars and the average buyback price is $P$ dollars per FT, then:

$$FT_{\text{retired\_from\_yield}} \approx Y / P$$

The surplussurplusBacking capital yield remaining after the ecosystem budget; the surplus is used for buyback-and-burn.View glossary entrysurplusBacking capital yield remaining after the ecosystem budget; the surplus is used for buyback-and-burn.View glossary entry $Y$ is after funding the ecosystem development budget $E$. With total carry $B$, we have $Y = \max(B − E, 0)$.

Sensitivity for $P = \$0.10$ (illustrative):

Ecosystem budgetEcosystem budgetThe first call on backing capital yield to fund the organization: salaries, marketing, infrastructure, and operations.View glossary entry E	SurplusSurplusBacking capital yield remaining after the ecosystem budget; the surplus is used for buyback-and-burn.View glossary entry Y = max(44.27 − E, 0)	FT retired (Y / $0.10)
$0.00m	$44.27m	442.7m FT
$10.00m	$34.27m	342.7m FT
$20.00m	$24.27m	242.7m FT
$30.00m	$14.27m	142.7m FT
$40.00m	$4.27m	42.7m FT
≥$44.27m	$0.00m	0 FT

Other average prices (same $Y$):

• $P = \$0.05 \rightarrow FT \approx 2 × (Y / 0.10)$
• $P = \$0.20 \rightarrow FT \approx 0.5 × (Y / 0.10)$

C) Protocol Revenue & Fee Capture (Illustrative Baselines)

These baselines allocate a conservative market share across product verticals near ~$1B Total Value LockedTotal Value LockedThe total value of assets deposited in a protocol, market, or strategy.View glossary entry (TVL) / activity.

Revenue Baseline (illustrative)

• Futures/CLOBCLOBAn exchange mechanism that matches bids and asks; integrated with Flying Tulip’s permissioned lending for cross‑collateralized trading while deposits continue to accrue.View glossary entryCLOBAn exchange mechanism that matches bids and asks; integrated with Flying Tulip’s permissioned lending for cross‑collateralized trading while deposits continue to accrue.View glossary entry analog: $57.00m
• Lending analog: $2.87m
• Delta‑neutralDelta‑neutralA portfolio whose net directional exposure is approximately zero, constructed by balancing long and short legs.View glossary entry stable/hedging analog: $3.16m
• AMMAMMOn‑chain market using formulas instead of a central order book to quote prices and execute swaps.View glossary entry fee‑switch analog: $18.38m

Total ≈ $81.41m → at P = $0.10, ~0.814b FT retired annually.

Fee Distribution (token‑first integration; alternative lens)

• Futures/CLOBCLOBAn exchange mechanism that matches bids and asks; integrated with Flying Tulip’s permissioned lending for cross‑collateralized trading while deposits continue to accrue.View glossary entryCLOBAn exchange mechanism that matches bids and asks; integrated with Flying Tulip’s permissioned lending for cross‑collateralized trading while deposits continue to accrue.View glossary entry analog: $58.00m
• Lending analog: $17.53m
• Delta‑neutralDelta‑neutralA portfolio whose net directional exposure is approximately zero, constructed by balancing long and short legs.View glossary entry/hedging analog: $31.63m
• AMMAMMOn‑chain market using formulas instead of a central order book to quote prices and execute swaps.View glossary entry fee‑switch analog: $18.38m

Total ≈ $125.54m → at P = $0.10, ~1.255b FT purchased annually.

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Note: Depending on product mechanics, users can still receive the same yield %, with distributions delivered in FT while buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry is executed in the background.

D) Exit / Withdraw Scenarios: Supply Effects

• ExitExitAction that exercises the Perpetual PUT at par; the original asset/amount is returned.View glossary entry (ExitExitAction that exercises the Perpetual PUT at par; the original asset/amount is returned.View glossary entry at par): returns the same asset and amount contributed.

• Withdraw (invalidate PUT; keep FT): releases backing capitalbacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry equal to the original contribution for that portion. At the average buyback price P:

  $FT_{\text{retired\_from\_withdrawals}} \approx \text{Released\_backing\_capital} / P$

  Illustrations at P = $0.10:

  • $100m released → ~1.0b FT
  • $250m released → ~2.5b FT
  • $500m released → ~5.0b FT

E) Unlock Logic: Alignment

• Only revenue‑funded buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry unlocks Foundation/Team/Incentives one‑for‑one, at 40:40:20.
• Backing capital yieldBacking capital yieldYield generated by deploying backing capital into low‑risk venues. Priority is to fund ecosystem development first (salaries/marketing/infra/ops); surplus funds buyback-and-burn of FT.View glossary entry‑funded buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry does not trigger unlocks.
• There is no inflation beyond PCA minting; unlocks are releases from pre‑allocated buckets tied to real revenue performance.

F) One‑Year Combined Illustration (for Intuition)

Assume a $1.0B PCA:

1. Backing capitalBacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry carry total: $B \approx \$44.27m$. After funding ecosystem development $E$, suppose $Y = \max(B − E, 0)$ remains for buyback-and-burnbuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entrybuyback-and-burnA mechanism that buys FT on the open market and sends it to an irrecoverable address, permanently reducing supply. May be funded by backing capital yield surplus, protocol revenue/fees, or released backing capital from withdrawals.View glossary entry → retires $Y/P$ FT at average price $P$.
2. Revenue baseline: ≈ $81.41m → ~0.814b FT retired at P = $0.10.
3. Withdrawals: if 25% of original capital is Withdrawn, ~$250m of backing capitalbacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entrybacking capitalThe contributed assets that back each primary FT position while the Perpetual PUT remains open.View glossary entry is released → ~2.5b FT retired at P = $0.10.

These forces combine: yield surplusyield surplusThe remaining annual backing capital carry after the ecosystem budget (E) has been funded: Y = max(B − E, 0). Converted to retired FT by Y / P, where P is the average buyback price.View glossary entry + revenue + withdrawals can retire a substantial share of supply in year one. Outcomes are path‑dependent and sensitive to prices, volumes, budgets, and adoption.

G) Quick Reference: Key Formulas

PCA minting: $FT_{\text{minted}} = 10 \times USD_{\text{equivalent\_contributed}}$

Yield surplusYield surplusThe remaining annual backing capital carry after the ecosystem budget (E) has been funded: Y = max(B − E, 0). Converted to retired FT by Y / P, where P is the average buyback price.View glossary entry after ecosystem budgetecosystem budgetThe first call on backing capital yield to fund the organization: salaries, marketing, infrastructure, and operations.View glossary entry: $Y = \max(B − E, 0)$

Yield → burn: $FT_{\text{retired\_from\_yield}} ≈ Y / P$

Withdrawals → burn: $FT_{\text{retired\_from\_withdrawals}} ≈ \text{Released\_backing\_capital} / P$

Revenue → burn: $FT_{\text{retired\_from\_revenue}} ≈ \text{Revenue\_allocated\_to\_buyback\_and\_burn} / P$