Zyfai Incentives Update

Title: [ZIP] ZyFAI Incentives Update – Protocol Fee Allocation & Operations Mandate
Author: Gauthier / Zyfai Date: 2025-12-20

Summary:
This proposal updates ZyFAI’s incentive and protocol fee allocation model to provide real yield to stakers while ensuring sustainable funding for protocol operations and development.

100% of protocol-generated fees are owned by the DAO. On a monthly basis, the DAO allocates a portion of these fees to stakers and grants an operational mandate to Ondefy Ltd to operate, maintain, and develop the ZyFAI protocol. Buyback and burn mechanisms are removed.

Proposed Allocation:

• 100% of protocol fees flow to the DAO treasury
• 50% of protocol fees are distributed to ZFI stakers in USDC (monthly, pro-rata)
• 50% of protocol fees are allocated to Ondefy Ltd under a DAO mandate for protocol operations and development
• No buybacks
• No burn

Staker Distribution:

• Rewards paid in USDC
• Monthly snapshot
• Pro-rata based on staked ZFI balance
• Optional, non-governance features:
  • Auto-convert rewards into ZFI
  • Auto-deposit rewards into ZyFAI agents

Rationale:
Direct USDC distribution provides clear, transparent, and predictable value to stakers. Buybacks introduce execution complexity, indirect economic effects, and often result in sell pressure when tokens are redistributed.

At the same time, allocating part of protocol fees under a DAO-approved operational mandate ensures the protocol can be reliably operated, maintained, and continuously improved, which is viewed as more valuable long-term at Zyfai’s current stage.

Future Adjustability:
The DAO may update allocation percentages through future governance proposals as ZyFAI matures. One possible non-binding framework for discussion could be:

• 50% stakers / 50% operations up to 20M market cap
• 70% stakers / 30% operations from 20M to 60M
• 80% stakers / 20% operations from 60M to 100M
• 90% stakers / 10% operations above 100M market cap

Decision:
Approve the protocol fee allocation model such that:

• 100% of protocol fees remain owned by the DAO
• 50% of fees are distributed to ZFI stakers in USDC
• 50% of fees are allocated to Ondefy Ltd under a DAO mandate to operate and develop the protocol
• Buyback and burn mechanisms are removed
• The DAO retains full authority to modify or revoke this allocation through governance