Tax system

[Nuel-code]

Hey,
Was going through your architecture and I kinda hit a snag and needed clarification
What exactly does the ‘Tolerant Fortress’ tax system entail, and how does it function within the token’s economic model?

Hey, Was going through your architecture and I kinda hit a snag and needed clarification What exactly does the ‘Tolerant Fortress’ tax system entail, and how does it function within the token’s economic model?

Hello!

Thank you very much for your very important and relevant question regarding our protocol architecture. We greatly appreciate your interest and effort to understand the core mechanisms we are building. Transparency and community understanding are our top priorities.

We will be happy to explain in detail our 'Tolerant Fortress' tax system. This system is a fundamental pillar of the AetherCycle economic model, designed to ensure the long-term stability, sustainability, and liquidity efficiency of AEC tokens.

What is the 'Tolerant Fortress' Tax System?

'Tolerant Fortress' is a multi-tier tax system (AECToken.sol) that intelligently differentiates various types of transactions to apply appropriate tax rates. Its main goal is to guide market behavior for the overall health of the ecosystem, without completely blocking interactions. This is an automatic and unchangeable on-chain mechanism.

This system is divided into three main categories after the initial launch period (24 hours):

Tax-Free Zone (The VIP List):

Mechanism: Peer-to-peer token transfers (regular wallet-to-wallet) and transfers involving internal protocol addresses that we have excluded (e.g., PerpetualEngine contract, TokenDistributor).

Function: Ensures basic transfers and internal operations of our protocol run without cost. This is essential for the smooth functioning of our protocol.

Tax Rate: 0% (zero).

Normal Tax Zone (The Main Highway):

Mechanism: Buy or sell trades that occur on the official Automated Market Maker (AMM) pair whitelisted by our protocol. For AetherCycle, our primary official pair is AEC/USDC.

Function: Collects revenue for our protocol from the healthiest and most efficient trading activity. This revenue is then processed by our autonomous PerpetualEngine.

Tax Rate (after the initial 24 hours):

Buy: 2%

Sell: 2.5%

"Deterrent" Tax Zone (The Back Roads with Tolls):

Mechanism: AEC token trades or interactions that occur through other smart contracts that are NOT whitelisted as official AMM pairs by our protocol. This includes community-created liquidity pairs (e.g., AEC/WETH or other AEC/USDC pools that we do not regulate as official) or interactions with unofficial DApps.

Function: This is an economic disincentive mechanism designed to strongly discourage traders and liquidity providers from interacting with pools or contracts not regulated by our protocol. Although technically not blocked (because blockchain is permissionless), economically it becomes very inefficient for its users.

Tax Rate:

Buy: 10%

Sell: 12.5%

How Does This System Work in Our Token Economic Model?

This 'Tolerant Fortress' system is key to maintaining the integrity and sustainability of the AetherCycle economic model, especially due to its close synergy with our PerpetualEngine:

Maximum Liquidity Consolidation:

Our main goal is to centralize all AEC token liquidity into one main pool (official AEC/USDC). High taxes on other pairs effectively prevent liquidity fragmentation across various DEXs.

This results in a very deep AEC/USDC pool, drastically reducing slippage, and making trading more efficient for traders.

Preventing Value Leakage to Arbitragers:

With only one main pool, arbitrage opportunities that exploit price differences between pools (which cause Impermanent Loss for Liquidity Providers) are eliminated.

Value that would have "leaked" out of fragmented pools to arbitragers now remains within the single AEC/USDC pool, benefiting LPs (including our own protocol).

Optimizing Our PerpetualEngine Performance:

All tax revenue from trading then flows into the AECToken contract and is withdrawn by our PerpetualEngine.

The PerpetualEngine relies on this concentrated revenue stream to efficiently perform its core functions: burning tokens (20%), automatically adding liquidity (40%), and replenishing staking rewards (40%). Without this consolidation of tax revenue, our engine would not function optimally.

Price Stability and Long-Term Trust:

With deep and controlled liquidity, the price of AEC tokens becomes more stable and predictable. This builds trust for holders and traders.

This system reflects our commitment to market health and the long-term sustainability of our token.

We hope this explanation provides the clarification you need and enhances your understanding of AetherCycle's fundamental design. We are always open to further discussion and feedback from our community.

Best regards,
AetherCycle Team

[Nuel-code]

Wow — really detailed explanation btw. I love the way you laid out every single thing I was trying to understand, especially the part about consolidating liquidity to one main pool to minimize arbitrage and leakage
Still tryna wrap my head around the whole concept tbh, just got my hands on the docs and I’m browsing through it. Appreciate the transparency.

Who could I reach out to incase I have questions, do I keep raising issues?

Wow — really detailed explanation btw. I love the way you laid out every single thing I was trying to understand, especially the part about consolidating liquidity to one main pool to minimize arbitrage and leakage Still tryna wrap my head around the whole concept tbh, just got my hands on the docs and I’m browsing through it. Appreciate the transparency.

Who could I reach out to incase I have questions, do I keep raising issues?

We are absolutely thrilled to hear that our detailed explanation helped you grasp the core concepts, especially the strategic consolidation of liquidity to minimize arbitrage and value leakage. Your feedback is incredibly valuable to us, and it validates the extensive thought put into our architecture.

It's completely understandable that you're still wrapping your head around the full concept – tokenomics, especially one designed for long-term sustainability and efficiency, can be quite intricate. We encourage you to take your time browsing through the docs.

Regarding your questions about who to reach out to:

Yes, please feel free to keep raising issues on our GitHub repository for any further questions or clarifications you might have. This is an excellent way for us to track community inquiries, ensure transparency, and provide comprehensive answers that can benefit everyone.

We are committed to maintaining open communication and ensuring our community fully understands the mechanics of AetherCycle. Your engagement helps us strengthen the protocol and its documentation.

Thank you again for your keen interest and active participation!