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2.3 Crypto Economics Thesis

Zypher Network is adopting a comprehensive and disruptive approach to crypto economics, aimed at sustainably scaling the ecosystem and establishing a community-owned, financially autonomous cross-border social contract.

In designing the Zypher Network incentive system, we envision it as akin to the economic framework of nation-states—balanced by currency and fiscal policy, taxation, and governance committees. In line with the spirit of fully on-chain gaming, where the asset generation process is entirely autonomous and contract-managed, Zypher has also initiated a composable new paradigm of autonomous economic systems that automate not only asset generation but also asset policy.

The system is designed to maximize the collective interests of the platform (developers) and participants, granting governance entities moderate power for effective decision-making and policy execution, while maintaining automated monetary policy most of the time. The design features two core assets:

$Gold Points Create Value

$Gold Points reflect the fundamental functions of currency and circulate throughout the Zypher ecosystem, converting between various assets—covering everything from $ETH/LST conversions, destruction, to minting NFTs, or for treasury reserves. $Gold Points help maintain the balance and yield generation of the Zypher ecosystem, ensuring its growth is tied to the internal growth of the system rather than simply following the nominal value of inflation. In short, for Zypher DAO, $Gold Points are the key monetary tool for cross-game promotional activities within its ecosystem.

$ZYPHER Provides Value-Added Opportunities

$ZYPHER token holders enjoy substantial benefits through staking (including governance, revenue sharing, gas fee redemption, etc.), leveraging governance functions to jointly determine the parameters of financial policy and the overall strategy of the platform.

3. Universal Game Token $Gold Points

3.1 What are $Gold Points

$Gold Points are universal open game tokens that facilitate the operation of the entire Zypher platform. $Gold Points are crucial to Zypher's economic structure, but they are not governance tokens.

3.2 Basic Functions of $Gold Points

$Gold Points reflect the fundamental functions of currency:

• Unit of account: $Gold Points are the primary currency unit for all economic activities on the platform, including but not limited to:

• Staking: Players can stake $Gold Points to earn "Tax Revenue" and $ZYPHER rewards.

• Payments: Purchase in-game items, including loot boxes, tickets, season passes, etc.

• Taxes: Pay in-game taxes at specified tax rates.

• Depository Pass minting: Mint Depository Pass NFTs (which can be traded on NFT markets).

• Medium of exchange: $Gold Points can be used across all games on the platform.

• Store of value: Each $Gold Point is backed by a corresponding $ETH reserve (at a fixed rate).

3.3 $Gold Points Minting Protocol

• Direct $ETH deposits: Players can deposit $ETH / LST tokens to receive $Gold Points at a fixed exchange rate (1 $ETH exchanges for 2,000,000 $Gold Points). This system operates similarly to the gold standard, running on an "Ether standard." Reserve assets are directed to dedicated reserves to support the liquidity supply of Depository Pass NFTs.

• Staking yields: Players can stake supported tokens to earn $Gold Points. Behind the scenes, the staked tokens (e.g., USDC) earn yields through partnered DeFi protocols. These yields will be converted into ETH tokens, serving as reserves for newly minted $Gold Points.

• Debt obligations: Our debt obligation model is similar to the fiscal policies adopted by the U.S. Treasury. This approach allows us to mint $Gold Points for community initiatives and explicitly commits to repaying this debt through future tax revenues. The structure of the treasury bonds issued in this case is interest-bearing, ensuring financial sustainability and accountability.

3.4 Platform Debt Determines Taxes

New $Gold Points ($GP) can be minted by accounting treasury bond tokens (marked as $TB) on the debt ledger (actual wallet addresses in implementation). This process ensures that the financial ledger remains balanced and orderly.

Imagine a scenario where 1,000,000 $GP are minted and marked as "bonds." The system also records a "note" priced in $TB tokens, corresponding to the issuance of the newly minted $GP. This organized record ensures seamless alignment between the newly minted $GP and the recorded note.

The debt within this ecosystem is fundamentally supported and issued by tax revenues, establishing a closed loop that repays with future tax revenues; $GP is transferred from the tax reserve to repay the debt. Each $GP moved and canceled from the tax reserve will correspondingly cancel treasury bond tokens in the debt ledger, facilitating a systematic debt resolution process.

Dynamic Tax Rate Mechanism

Of course, we aim to resolve debt quickly, minimize interest expenses, and maximize tax commissions per game. However, achieving balance to optimize the overall utility of the system is crucial. Therefore, we introduce a dynamic tax rate mechanism, formulated as follows:

Y = Debt acceleration factor * x² + Base commission rate

Here, Y represents the tax rate, and x represents the debt ratio within the system (total debt / total outstanding $GP). Simply put, as the platform's debt ratio increases, the tax rate will also rise to accelerate debt repayment, and vice versa.

3.5 Depository Pass NFTs

Zypher's Depository Pass (DP) NFT adopts the ERC1155 token standard and represents the top assets within the ecosystem. These NFTs represent a portion of the platform's future revenue and can be traded on our partnered NFT markets, where Zypher provides liquidity and matching support.

DPs are minted based on $GP, which, after minting, will be funneled back into the $GP minting protocol, effectively equivalent to being destroyed. While all DPs have the same profit-sharing rights, the minting price is dynamic, reflecting the platform's revenue performance and market expectations.

3.6 (For Game Developers) How to Use $GP

$Gold Points are designed not only to stabilize the game economy but also to enhance circulation and interoperability between games.

• Taxation: Games pay taxes in the form of $Gold Points to receive equal support from the decentralized autonomous organization (DAO) provided by the platform. These services are crucial for enhancing game visibility and functionality, including incubating user traffic, ensuring collaboration opportunities, and other technical support.

• Stable economy: By using $Gold Points as the native utility token in games, supported by ETH standards, developers can avoid death spirals or other traps in economic design. This stability ensures players can enjoy a reliable and sustainable gaming experience.

• Efficient circulation: $Gold Points are designed for efficient circulation between multiple games, facilitating asset transfers between different games and enhancing financial interoperability. This seamless experience promotes a more interconnected and extensive gaming ecosystem.

• Incentive effect: $Gold Points unify players and games under a single economic framework, with all games using them as the primary utility token. This integration maximizes marketing efficiency and enhances player engagement across the entire platform, improving user retention and community growth, especially for independent games in their early stages.

• One-click integration: For traditional game developers, adopting $Gold Points allows for more resources to be allocated to improving gameplay and integrating technology. This focus can lead to innovations in game mechanics and more immersive player experiences, attracting a broader user base.

• Reducing compliance issues: Card games or gambling projects can adopt $Gold Points to reduce compliance issues by avoiding direct inflows and outflows of tokens within the game.

4. Platform Token $ZYPHER

The $ZYPHER token is an essential utility and governance token within the Zypher Network. It supports the operational functions and governance activities of the entire ecosystem, facilitating a range of actions from transaction processing to strategic decision-making within the network governance framework.

4.1 $ZYPHER for ZK-as-a-service (like AVS) Fees

Developers on Zypher Network can subscribe to access Zypher game engine's ZK-as-a-Services, such as on-chain shuffling SDK, on-chain matchmaking SDK, z4 micro-chain nodes, etc. In upcoming updates, all services will be registered as Active Validation Services (AVS) on EigenLayer (or Babylon) to enhance security and trust guarantees. $ZYPHER can be used to provide rewards for re-staking ETH/LST to support these AVS services.

Once registered as AVS, we only need to focus on implementing specific core functionalities without worrying about whether the ZKaaS implementation reaches consensus, as the correctness of the data is recognized by the AVS operators. AVS also supports our custom reward or penalty logic, executed by AVS, to streamline the development process and ensure the correctness of rewards and penalties.

Example ZK-as-a-Service AVS Workflow

4.2 $Zypher Staking: Empowering Stakeholders

Holders of $ZYPHER tokens play an active role in the decision-making process beyond automated policy formulation. They can vote on various proposals, including but not limited to:

• Financial management: Adjust the allocation parameters of the $Gold Point Reserve to governance participants. $ZYPHER holders can benefit from governance decisions by redistributing game revenues in the form of $Gold Points from supported games.

• Strategic planning: Develop budget strategies for $Gold Points and $ZYPHER for new games and other initiatives.

• Fiscal policy: Approve fiscal/monetary policies, such as annual debt ceilings, tax rate binding curves, and other important parameters.

Zypher's governance system is driven by a precompiled contract that enhances interaction with its on-chain governance framework. This module supports the entire lifecycle of governance, including proposal submission, voting, and management. These proposals impact key decisions and strategic directions within the Zytron Pioneer network, such as adjustments to DAO/foundation finances, Grants committee operations, in-game tax rates, reward structures, and other important aspects of platform governance.

4.3 Proof-of-contribution Staking for Gas

Zypher's flagship product, Zytron Kit, is a highly customizable Layer 3 / sovereign rollup stack that supports Zypher's game engine as a precompiled contract. It aims to be one of the most viable infrastructures for production-grade MMOs, fully on-chain strategy games, and more. Zypher DAO will maintain the first pioneer Zytron Network, featuring zero gas, 0.1-second block times, and more game-specific modules.

By staking $ZYPHER tokens, users can gain zero gas privileges, represented by Soulbound Tokens (SBT). Zypher's Layer 3 contracts recognize these SBTs and activate the zero gas mechanism for users (game studios can also stake $ZYPHER to waive all gas fees associated with interacting with whitelisted contracts). This setup reduces operational costs and enhances the gaming experience, directly aligning with the network's efficiency and player satisfaction goals.