Academic findings and economic thresholds for revnets from CryptoEconLab research. Use when: (1) explaining cash-out vs loan decision thresholds, (2) discussing loan solvency guarantees, (3)...
Explaining revnet mechanics to sophisticated users requires citing academic sources and understanding the mathematical foundations: why loans are always solvent, when rational actors should choose loans vs cash-outs, and which revnet configurations suit different use cases.
All findings from CryptoEconLab (cryptoeconlab.com):
The redemption (cash-out) curve is NOT linear. It's a convex bonding curve:
C_k(q; S, B) = (q/S) × B × [(1 - r_k) + r_k × (q/S)]
Where:
q = tokens being cashed outS = total supplyB = treasury backing (surplus)r_k = cash-out tax rate (0 to 1)Key insight: Cashing out a larger fraction of supply returns proportionally less per token.
Example: r_k = 0.5 (50% tax)
- Cash out 1% of supply → get 0.505% of treasury (per-token: 50.5%)
- Cash out 50% of supply → get 37.5% of treasury (per-token: 75%)
- Cash out 100% of supply → get 50% of treasury (per-token: 50%)
Revnet tokens trade within a bounded price corridor:
P_floor ≤ P_AMM ≤ P_ceil
Floor Price (P_floor): Cash-out value per token
Ceiling Price (P_ceil): Issuance price (mint cost)
"These arbitrage mechanisms establish a self-enforcing price corridor that persists regardless of market conditions." - Cryptoeconomics of Revnets
Theorem: The revnet remains solvent for any sequence of loans, regardless of their number, sizes, or whether they default.
Proof sketch:
"Since collateral tokens are burned upon loan origination, the effective supply decreases, which mechanically increases the floor price for all remaining token holders."
A rational actor should take a loan instead of cashing out when the cash-out tax rate exceeds approximately 39.16%.
r_k ≈ 0.3916 is the crossover point
r_k < 39.16%: Cash out is more efficient (lower tax)r_k ≥ 39.16%: Loan is more efficient (avoid tax, keep upside)Mathematical basis: At high tax rates, the bonding curve penalty on cash-outs exceeds the loan fees. Loans preserve upside exposure while providing liquidity.
A rational actor should take a loan instead of holding when expected returns exceed the fee cost:
R > (1 - a) / a
Where:
R = expected return on borrowed capitala = loan-to-value ratio (typically 80-90%)If you can deploy borrowed capital at returns exceeding this threshold, borrowing is rational.
The papers identify three canonical configurations:
Characteristics:
Use case: New token launches seeking price appreciation through supply scarcity.
Example params:
initialIssuance: 1_000_000 tokens/$
issuanceCutPercent: 10%
issuanceCutFrequency: 7 days
cashOutTaxRate: 0%
splitPercent: 20% (to team, decreasing)
Characteristics:
Use case: Loyalty programs, stablecoins, commerce applications where price stability matters.
Example params:
initialIssuance: 100 tokens/$
issuanceCutPercent: 0%
cashOutTaxRate: 80%
splitPercent: 10% (to treasury operations)
Characteristics:
Use case: Projects wanting structured fundraising rounds (seed, series A, etc.)
Example params:
Stage 1 (Seed):
duration: 90 days
issuance: 500_000 tokens/$
splitPercent: 30%
Stage 2 (Series A):
duration: 180 days
issuance: 250_000 tokens/$
splitPercent: 20%
Stage 3 (Public):
duration: unlimited
issuance: 100_000 tokens/$
issuanceCutPercent: 5%
splitPercent: 10%
From the whitepaper analysis:
| Fee Type | Rate | Recipient | Economic Effect |
|---|---|---|---|
| NANA Network | 2.5% | NANA project | Protocol sustainability |
| REV | 1% | REV project | Cross-network value |
| Prepaid Interest | 2.5-50% | Treasury | Loan time-value compensation |
| Liquidation | N/A | Protocol | Bad debt prevention |
"The fee structure is designed to align incentives: internal fees return value to the revnet, while external fees support the broader infrastructure."
The floor price follows an ODE:
dP_floor/dt = f(inflows, outflows, supply_changes)
Key properties:
Test thresholds with modeler:
Citing findings in user explanation:
"Based on the CryptoEconLab research, with your current 50% cash-out tax rate, taking a loan is more economically efficient than cashing out. The crossover point is approximately 39% - above that, loans preserve your upside exposure while still providing liquidity."
"Revnet loans are mathematically proven to be solvent regardless of defaults. When you take a loan, your collateral is burned (not locked), which actually increases the floor price for all remaining holders. If you default, the treasury keeps your borrowed funds and the burned tokens stay burned."