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Cash Flow Analysis

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Internal Flows

  • DEX fees. In constant-product pools the base trading fee is 0.3%:

    • 0.2% goes to liquidity providers (LPs),

    • 0.1% goes to the STON.fi protocol. → This is the main on-chain revenue source for both LPs and the protocol’s budget.

  • Distribution of protocol fees. Collected fees are converted into STON and then distributed according to DAO decisions (the distribution contract diagram is described in the whitepaper). This mechanism links DEX revenues to the STON token economy (e.g., burn scenarios, grants, liquidity incentives).

  • STON staking. When STON is deposited, derivative tokens are minted: ARKENSTON (soulbound-NFT for DAO voting) and GEMSTON (liquid engagement token). They enhance governance and engagement, but are not “cash equivalents,” as their value is determined by DAO governance.

  • Omniston aggregator. Aggregates liquidity from DEX and RFQ sources, increasing swap volumes and thereby boosting commission revenues for both LPs and the protocol.

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External Flows

  • Referral fees.

    • In DEX v1: fixed 10 bps (0.10%) per trade.

    • In DEX v2: configurable 0.01–1%. Accruals are stored in Vault contracts and can be withdrawn by referrers. Since these funds go to external addresses, they reduce the protocol’s net income.

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Revenue Dynamics

  • Volume dependence.

    • LP revenue ≈ 0.2% × pool swap volume (proportional to LP share).

    • Protocol revenue ≈ 0.1% × total DEX volume. Growth in trading volumes (including via Omniston routing) boosts both streams.

  • Fee modes.

    • Base fee: 30 bps in constant-product pools.

    • The STON.fi ecosystem also supports dynamic fee scenarios (as a tool to offset impermanent loss in volatile markets), which affect LP real income.

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Expenses and Effects on Protocol Budget

  • Fee converter and DAO distribution. Protocol fees are converted into STON and distributed by contracts according to DAO parameters. Allocation may include burns, grants, liquidity incentives, etc. → This directly influences net supply expansion or reduction and impacts incentives for staking/farming.

  • Referral payouts. A portion of fees is directed to referrers (on-chain/through Vaults). This functions as a marketing expense that increases turnover but reduces the protocol’s “net” margin.

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Risks and Sustainability

  • Volume contraction: Lower trading activity compresses fees. Since LP and protocol revenues are linearly dependent on volume, liquidity incentives (LP rewards, Omniston routing) become critical to sustain commission flows.

  • Impermanent loss risk for LPs: In cases of sharp price movements, IL can eat into LP profits. Higher or dynamic fees partly mitigate but do not eliminate this risk.

  • Governance risk in fee allocation: DAO decisions on what share of fees goes to burns/incentives/grants determine net STON outflow/burning and indirectly affect both price and the motivation of stakers/LPs.

  • Referral economy risk: Misconfigured referral rates in v2 (up to 1%) can siphon too large a share of fees externally. Careful parameter control and Vault balance monitoring are required.

For the sustainability of STON.fi cash flows, it is important to:

  • Preserve pool depth and routing via Omniston (to maintain trading volumes).

  • Maintain a balanced scheme for protocol fee distribution (conversion → STON → burn/incentives/grants according to metrics).

  • Carefully calibrate referral rates.

  • Continue strengthening staking utility to loop value back into the on-chain economy.

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