62 lines
2.6 KiB
Markdown
62 lines
2.6 KiB
Markdown
# How It Works
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## The Basics
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KRK tokens trade on Uniswap (Base network). Behind the scenes, a **trading vault** holds ETH that backs every KRK token. This creates a **floor price** — the absolute minimum value your tokens are worth.
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## Earning by Staking
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When you stake KRK tokens, you claim **owner slots** — a percentage of the protocol's staking pool. Every time someone buys KRK on the open market, new tokens are minted, and stakers get a proportional share. The more slots you hold, the more you earn.
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### Choosing Your Rate
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When you stake, you pick an **earning rate** (called a "tax rate" in the contracts). This is the yearly cost of holding your position:
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| Rate Level | Yearly Cost | Trade-off |
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|-----------|------------|-----------|
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| Low (1-5%) | Cheap to hold | Easy for others to challenge |
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| Medium (12-30%) | Moderate cost | Balanced protection |
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| High (50%+) | Expensive to hold | Very hard to challenge |
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**The key insight:** Your earning rate is also your protection level. A higher rate costs more, but makes it harder for anyone to take your position.
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## Challenges (Snatching)
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If someone wants your staking slots and is willing to pay a higher rate than you, they can **challenge** (snatch) your position:
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1. The challenger stakes at a higher rate
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2. Your position is automatically closed
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3. You receive the **full market value** of your staked tokens — including any earnings
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4. The challenger takes over your slots
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**You never lose money in a challenge.** You get compensated at current market value. You just stop earning from those slots.
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## The Trading Vault
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The Liquidity Manager automatically manages the ETH/KRK trading pool:
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- When staking activity is high (bullish signal), it concentrates liquidity for better trading
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- When activity drops, it spreads liquidity wider for stability
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- It tracks a **volume-weighted average price (VWAP)** to set the range
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This happens automatically — no human decisions, no hidden operators. The rules are in the smart contract.
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## Floor Price
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Every KRK token is backed by ETH in the vault. The **floor price** is calculated as:
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```
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floor = ETH in vault ÷ total KRK supply
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```
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Your tokens can never be worth less than the floor. When someone buys KRK, more ETH enters the vault. When someone sells, ETH leaves. The system maintains balance.
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## Summary
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1. **Buy KRK** on Uniswap (Base)
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2. **Stake** to earn from every trade
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3. **Choose your rate** — higher = more protection, higher cost
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4. **Earn passively** as the protocol generates trading activity
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5. If challenged, you get **paid out at market value**
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→ [Getting Started Guide](./getting-started.md)
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