⚙️ Treasury Mechanics

A soft peg will be maintained between the FRENS token market capitalization and the treasury fund value.

The FRENS token has a fixed max supply of 10,000. If the FRENS market cap grows substantially above the treasury holdings, this indicates speculation has driven up the token price.

The treasury can then sell FRENS tokens on the open market to realize profits. This places more FRENS tokens into the liquidity pool on Uniswap, applying downward pressure on the FRENS price to restore the soft peg.

1% trading fees from FRENS token transactions go directly to the treasury. This mechanic benefits the soft peg model by allowing the treasury to profit from high trading volumes in speculative conditions.

Conversely, if panic selling crashes the FRENS market cap below the treasury value, the treasury can use funds to conduct FRENS buybacks. This applies upward pressure to restore the peg and provides price support.

This flexible buy and sell mechanic acts as a decentralized monetary policy to maintain stability between the token valuation and assets backing it. The soft peg aligns incentives between regular token holders and the treasury to prevent either from becoming under or overvalued relative to the other.

Special cases like airdropping treasury funds in response to exploits would require governance approval from FRENS holders through snapshot votes. Overall the soft peg mechanism aims to promote sustainability of growth rather than aggressive expansion at the cost of stability.