Tokenomics Overview

Overview

Cesta Finance will create the perfect balance between its index funds, the core product, and the token mechanism, to maximize value creation for its investors and users by creating a loop of growth.

Economic activity within the ecosystem will increase the supply of CESTA; a new CESTA can only be minted by locking an approved asset, both stablecoins and LP tokens from each index fund in the Cesta Finance Treasury.

Hence, the supply of CESTA backed by yield generating assets in the treasury will be inversely proportional to the growth of Cesta Finance ecosystem globally. There are few components of infrastructure underpinning the system

Mechanism

Bonding

Bonding is the process of trading an LP share or other tokens to the protocol for CESTA token.

The bonding smart contract will determine a bonding discount with a predetermined vesting period. Creating a bond will require participants to swap their LP share for discounted CESTA token relative to the price on the open market.

This allows the CESTA token to be backed by other LP tokens or assets via protocol controlled liquidity and increase staking rewards for all its token holders.

Staking

Staking is the profit distribution mechanism of CESTA.

Staking is designed to incentivise longer-term holding of CESTA, and to give market participants exposure to the climbing price of CESTA token. The longer participants locked and stake their CESTA, the more they compound and the more CESTA tokens they will have when they unstake.

When CESTA is staked, they receive sCESTA on a 1:1 basis. sCESTA automatically compounds via rebase operations, but it is illiquid and not officially listed on any DEX. sCESTA can, however, be transferred between wallets. When the market participants unstake, they always receive CESTA on a 1:1 ratio for their sCESTA holdings.

Rebasing

Rebasing is the process of minting new CESTA tokens that are going to be paid to stakers. It allows market participants to compound CESTA without having to do anything other than stake.

The protocol distributes CESTA rewards by sending them to the staking contract, and distributing the sCESTA from the staking to all other sCESTA holders.