$SHIELD Tokenomics: The Deflationary Flywheel
See also: Whitepaper (PDF) — Complete technical documentation with formal mathematical notation and architecture diagrams.
Overview
$SHIELD is designed with a deflationary tokenomics model that creates constant buying pressure and reduces supply over time. Every time users earn yield on the Shield Finance platform, a portion of the fees automatically goes toward buying and permanently burning $SHIELD tokens.
The result? A self-reinforcing economic flywheel where platform growth directly benefits token holders.
How It Works
The Buyback & Burn Mechanism
┌─────────────────────────────────────────────────────────────────┐
│ │
│ Users Deposit Platform Earns Revenue Split │
│ ───────────────► ───────────────► ───────────────► │
│ XRP/FXRP Yield Fees 50/40/10 │
│ │
│ ┌────────────────┬────────────────┬──────────┐ │
│ │ │ │ │ │
│ ▼ ▼ ▼ │ │
│ ┌───────────┐ ┌───────────┐ ┌──────────┐ │ │
│ │ BUYBACK │ │ STAKER │ │ PROTOCOL │ │ │
│ │ & BURN │ │ BOOST │ │ RESERVES │ │ │
│ │ (50%) │ │ (40%) │ │ (10%) │ │ │
│ └─────┬─────┘ └─────┬─────┘ └──────────┘ │ │
│ │ │ │ │
│ ▼ ▼ │ │
│ ┌───────────────────────────────────────────────────┐ │
│ │ FXRP ──► SparkDEX ──► $SHIELD ──► 🔥 BURNED │ │
│ │ FXRP ──► StakingBoost ──► Pro-rata to stakers │ │
│ └───────────────────────────────────────────────────┘ │
│ │
│ Supply Decreases ──► Scarcity Increases ──► Value Up │
│ │
└─────────────────────────────────────────────────────────────────┘Step-by-Step Process
Users Earn Yield When users deposit XRP or FXRP into Shield Finance vaults, they earn competitive APY through our yield strategies.
Platform Collects Fees A small performance fee (0.2%) is collected from the yield generated.
Revenue is Split
50% goes to the Buyback & Burn contract (FXRP swapped to SHIELD, then burned)
40% goes to StakingBoost (FXRP distributed pro-rata to SHIELD stakers)
10% goes to Protocol Reserves (for development, security audits, partnerships)
Automatic Market Buy The RevenueRouter swaps accumulated FXRP to $SHIELD on SparkDEX V3.
Permanent Burn Purchased $SHIELD tokens are permanently burned - sent to address
0x000...deadwhere they can never be recovered or used again.Supply Shrinks With each burn, the total $SHIELD supply decreases, making remaining tokens more scarce.
The Flywheel Effect
The Shield Finance tokenomics create a positive feedback loop:
Why this matters: As the platform grows, more tokens are burned, creating natural scarcity. Users who stake $SHIELD also receive APY boosts on their deposits, creating additional demand for the token.
Key Numbers
Total Supply
10,000,000 SHIELD
Fixed, immutable - can only decrease
Performance Fee
0.2%
Small fee on deposits/withdrawals
Burn Allocation
50%
Half of fees buy and burn SHIELD
Boost Allocation
40%
40% of fees distributed to SHIELD stakers
Reserve Allocation
10%
10% kept for protocol development
Staking Lock Period
30 days
Lock $SHIELD to boost your vault APY
Global Boost Cap
25%
Maximum boost percentage (2500 bps)
Token Distribution
The initial $SHIELD supply of 10,000,000 tokens is allocated as follows:
Treasury Allocations
Team
9.00%
900,000
Core team allocation
Advisors
5.00%
500,000
Strategic advisors
Ecosystem Development
15.00%
1,500,000
Protocol development & growth
Airdrops
20.00%
2,000,000
Community distribution
Marketing
3.50%
350,000
Marketing & awareness
Ambassadors
2.50%
250,000
Community ambassadors
Ecosystem Rewards
0.00%
0
Reserved for future use
Staking Rewards
0.00%
0
Reserved for future use
Treasury
10.00%
1,000,000
Protocol treasury
Liquidity / MM / Exchanges
10.00%
1,000,000
Initial DEX liquidity
Future Liquidity Adds
25.00%
2,500,000
Future liquidity expansion
Total
100%
10,000,000
Fixed supply
Key Highlights
35% for Liquidity - Combined 10% initial + 25% future ensures deep trading liquidity
20% Airdrop - Largest single allocation goes directly to the community
15% Ecosystem Development - Significant budget for protocol growth
9% Team - Modest team allocation aligned with long-term success
Important: Initial liquidity pool tokens will be locked for 12 months via Team Finance, ensuring the team cannot remove liquidity. (TBC - Launch pending)
Staking for APY Boost
Holding $SHIELD isn't just about price appreciation - you can stake it to boost your vault yields through real revenue-share.
How APY Boost Works
The boost is distributed strictly pro-rata to locked SHIELD positions using a Synthetix-style reward accumulator:
Formula (from whitepaper):
Revenue Flow
Example Distribution
Assume $10,000 in weekly vault fees (wFLR):
50% Burn
$5,000
Buy SHIELD → Burn address
40% Boost
$4,000
Swap to FXRP → StakingBoost
10% Reserves
$1,000
Protocol treasury
The $4,000 FXRP is then distributed to stakers pro-rata:
Alice
10,000 SHIELD
50%
$2,000 FXRP
Bob
6,000 SHIELD
30%
$1,200 FXRP
Carol
4,000 SHIELD
20%
$800 FXRP
When they call claim(), the FXRP is converted to shXRP shares minted directly to their wallets.
Key Technical Details
Synthetix Accumulator: O(1) gas complexity for reward distribution
Late-Joiner Safety: New stakers only earn from distributions after joining
Lock Period: 30 days minimum
Global Cap: Maximum 25% boost (configurable by governance)
Non-Staker Exclusion: Users who don't stake receive zero boost
One-liner for website: "Every week the protocol donates FXRP bought with real revenue. 100% of that donation is distributed pro-rata to SHIELD lockers. No minting. No inflation. Pure revenue-share."
See STAKING_BOOST_SPEC.md for complete technical specification.
Why This Model Benefits You
For Investors
Deflationary Supply - Token supply only goes down, never up
Real Utility - Stake for APY boosts, not just speculation
Aligned Incentives - Platform success = more burns = more scarcity
Transparent Burns - All burn transactions verifiable on-chain
For Yield Farmers
Competitive APY - Earn yield on XRP/FXRP deposits
Boost Earnings - Stake $SHIELD for up to +10% additional APY
Compound Growth - Higher APY compounds into more yield
For the Ecosystem
Sustainable Model - Burns funded by real revenue, not inflation
Growing TVL - More deposits = more burns = flywheel accelerates
Long-term Focus - Locked liquidity and team tokens show commitment
Smart Contract Security
All $SHIELD tokenomics contracts are:
Open Source - Fully auditable on GitHub
Immutable - Key parameters cannot be changed after deployment
Verified - Verified on Flare block explorer
Battle-tested - Using OpenZeppelin's audited contract libraries
Key Contracts
ShieldToken
ERC-20 token with burn capability
Fixed supply, no mint function
RevenueRouter
Splits FXRP fees 50/40/10
Owner-configurable allocations
BuybackBurn
Swaps wFLR → SHIELD → burn
Permissionless, anyone can trigger
StakingBoost
Stake for APY boost
Time-locked withdrawals
Frequently Asked Questions
General
Q: Can the total supply ever increase? A: No. The ShieldToken contract has no mint function. The 10M supply cap is permanent and can only decrease through burns.
Q: How often are burns executed?
A: Burns can be triggered at any time by anyone. The protocol typically executes burns weekly, but anyone can call the buyAndBurn() function when there's sufficient wFLR accumulated.
Q: Where can I see burn history?
A: All burns are on-chain events. You can view them on the Flare block explorer by looking at the BuybackBurn contract's BuybackAndBurn events.
Staking
Q: Can I unstake early? A: No. Once you stake $SHIELD, it's locked for 30 days. This ensures committed participation and prevents manipulation.
Q: Do I lose my tokens if I unstake? A: No. After the 30-day lock period, you can withdraw your full staked amount. You keep all tokens.
Q: Does staking compound? A: The APY boost is applied to your vault deposits, which do compound. The staked $SHIELD itself doesn't earn yield - it unlocks higher APY on your vault positions.
Technical
Q: What DEX is used for buybacks? A: SparkDEX V3 on Flare Network. The smart contract swaps wFLR to $SHIELD using the wFLR/SHIELD liquidity pool.
Q: What happens if there's no liquidity? A: The buyback transaction would fail. However, with locked liquidity and trading volume, this is extremely unlikely. The contract accepts any swap rate to ensure burns always execute.
Q: Can the team change the 50/40/10 split? A: Yes. The RevenueRouter has configurable allocations (up to 80% each, max 100% total) for burn/boost. Any changes are transparent on-chain.
Conclusion
$SHIELD tokenomics are designed for long-term value creation:
Fixed Supply - 10M tokens, only decreasing
Real Utility - Stake for APY boosts
Automatic Burns - Platform revenue = token burns
Aligned Incentives - Everyone benefits from growth
As Shield Finance grows, the flywheel accelerates: more users → more fees → more burns → more scarcity → more demand → more users.
Links & Resources
Website: shyield.finance
App: shyield.finance/app
Block Explorer: View contracts on Flare Explorer
SparkDEX: Trade $SHIELD on SparkDEX
Discord: Join our community
Last Updated: December 2025 Document Version: 2.0
Last updated