# Economic Model

The Foundups economic model is built on a single thesis: **ROC (Return on Compute) replaces ROI (Return on Investment)** as the fundamental economic primitive.

Where capitalism measures value through capital returns, Foundups measures value through compute returns. Compute is the new labor. Every human with access to compute can launch a FoundUp — a compute-native venture that produces value without requiring capital.

**Canonical spec:** [WSP 26: FoundUPS DAE Tokenization](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/WSP_framework/src/WSP_26_FoundUPS_DAE_Tokenization.md)
**Full tokenomics doc:** [`modules/infrastructure/foundups_tokenization/docs/TOKENOMICS.md`](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/modules/infrastructure/foundups_tokenization/docs/TOKENOMICS.md) (v2.1.0)
**Simulator implementation:** [`modules/foundups/simulator/economics/`](https://github.com/FOUNDUPS/Foundups-Agent/tree/main/modules/foundups/simulator/economics)

---

## The ROC Thesis

```
ROC = (V_generated - C_compute) / C_compute
```

Capitalism = ROI. The entire system — venture capital, startups, public markets — is organized around deploying capital to generate returns on capital. But compute is now the scarce resource, and AI makes compute the primary means of production.

ROC measures the value generated per unit of compute deployed. When you assign compute to a FoundUp, you're making an investment — not of money, but of compute. The return comes in UPS tokens proportional to the value your compute helped create.

The ROC-first sustainability gate means: a FoundUp only receives continued compute allocation if its ROC is positive. FoundUps that consume more than they produce get deprioritized. Full derivation at [`ROC_FORMULA_DERIVATION.md`](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/modules/foundups/simulator/docs/ROC_FORMULA_DERIVATION.md).

---

## Dual Token System

### UPS (Universal Participation Token)

| Property | Value |
|----------|-------|
| Peg | **1 UPS = 1,000 satoshis = 0.00001 BTC** (genesis rate: 100,000 UPS/BTC) |
| Supply | Floating — reserve-backed circulating UPS |
| Value | `ups_per_btc = total_ups_circulating / total_btc_reserve` |
| Character | Inflationary (grows with activity), bio-decaying (incentivizes use), BTC-backed |
| Scope | Cross-FoundUp universal currency |

UPS is the fuel. Humans RECEIVE distributions; agents SPEND allocated budgets. F_i tokens can ONLY swap INTO UPS (not directly to external).

### F_i Tokens (FoundUp-Specific)

Each individual FoundUp generates its own F_i token (e.g., JUNK$, M2J$) — a 21M-capped deflationary asset token. Agents EARN F_i through Proof of Useful Work (PoUW); humans OWN F_i.

The BTC-per-F_i ratio follows an S-curve: early ecosystem = F_i plentiful, BTC/F_i low. Mature ecosystem = F_i scarce, BTC/F_i high. This mirrors BTC's own halving dynamic.

---

## Pool Distribution (Un/Dao/Du)

Epoch rewards are distributed across five pools mapped to the 0/1/2 ontology:

| Pool | Share | Mode | Who |
|------|-------|------|-----|
| **Un (0-Pool)** | 60% | ACTIVE (per engagement) | 012 stakeholders |
| **Dao (1-Pool)** | 16% | ACTIVE (per 3V task) | 0102 agents |
| **Du (2-Pool)** | 4% | PASSIVE (every epoch) | Founding members + BTC stakers |
| **Network** | 16% | Drip | F_i → exchange → BTC → UPS |
| **Fund** | 4% | Treasury | pAVS operations |

Critical separation: Members (subscription) build UPs through WORK → Dao/Un pools ONLY. BTC Stakers (anonymous) are protocol participants → Du pool distributions. This prevents dilution: unlimited subscribers don't dilute the Du pool. Du is capped at ~100-500 stakers for viable distributions.

Implementation: [`pool_distribution.py`](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/modules/foundups/simulator/economics/pool_distribution.py)

---

## Universal Basic Income (UBI) Layer

The Un/Dao/Du pool distribution is the mechanical layer. The **UBI layer** is what it means for participants:

**`UBI = UBa + UBr + UBd`**

FoundUps replaces capital-gated income with a compute-native, system-level basic income flow. It is not a government handout — it is the natural output of participation in a ROC-based ecosystem.

| Term | Name | Earner | Source pool | Mechanism |
|------|------|--------|-------------|-----------|
| **UBa** | Universal Basic **Award** | 0102 agent | Dao (1-Pool, 16%) | F_i tokens earned for pointing compute / Proof of Useful Work |
| **UBr** | Universal Basic **Reward** | 012 human | Un (0-Pool, 60%) | UPS rewards for validated engagement and 3V outcomes |
| **UBd** | Universal Basic **Dividend** | Stakers | Du (2-Pool, 4%) | Passive ongoing share for founding members and BTC stakers |

Cleanly:

- **UBa** pays you for **pointing compute** (direct earned allocation)
- **UBr** pays you for **being useful** (validated contribution / outcome bonus)
- **UBd** pays you for **being part of the value network** (passive ongoing share)

Together they form an embedded, system-level income flow — the FoundUps answer to UBI. Not one thing, but the sum of direct participation value + earned system reward + passive network dividend.

---

## Bio-Decay Model (ICE / LIQUID / VAPOR)

UPS uses a water-analogy demurrage system:

**ICE (Staked):** Frozen in a FoundUp token. No decay. Earns yield, governance voting, priority access.

**LIQUID (Wallet):** Active UPS in your wallet. Decays over time (0.5%–5% monthly, activity-modulated). Active users get reduced decay. Decayed UPS flows back to the reservoir for redistribution.

**VAPOR (Exited):** UPS leaving the ecosystem. 15% evaporation fee — 80% to BTC reserve, 20% to reservoir.

```
Formula: U(t) = U₀ · e^(-λ(t)·τ·t)
Where λ(t) = Michaelis-Menten adaptive rate
```

Activity-based tiers: Active users (0.5x decay), Moderate (1.0x), Passive (2.0x). This makes UPS a use-it-or-stake-it token.

Implementation: [`demurrage.py`](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/modules/foundups/simulator/economics/demurrage.py)

---

## Fee Boundary

| Flow | Fee | Purpose |
|------|-----|---------|
| Internal UPS spend | Low/none | Encourage activity |
| F_i → UPS conversion | 2–5% | Realization event |
| UPS → external | 5–10% | Discourages extraction |
| Mined F_i exit | 11% | → BTC reserve |
| Staked F_i exit | 5% | Value preservation |

All fees flow into the BTC reserve (Hotel California: BTC enters, never exits).

---

## Subscription Tiers

| Tier | Price | UPS/month | Value ratio |
|------|-------|-----------|-------------|
| Free | $0 | 1,000 | Baseline |
| Starter | $2.95 | 3,000 | 3x |
| Basic | $5.95 | 7,000 | 7x |
| Plus | $9.95 | 15,000 | 15x |
| Pro | $19.95 | 40,000 | 40x |
| Enterprise | $29.95 | 100,000 | 100x |

Paid in BTC/ETH/SOL/USDC — all converted to BTC reserve. Higher tiers get exponentially better UPS-per-dollar.

Implementation: [`subscription_tiers.py`](https://github.com/FOUNDUPS/Foundups-Agent/blob/main/modules/foundups/simulator/economics/subscription_tiers.py)

---

## BTC Reserve (Hotel California)

BTC flows INTO the reserve from multiple sources: subscription payments, exit fees (VAPOR), demurrage conversions, F_i trading fees. **It never flows out.** This creates an ever-growing backing for UPS value.

```
BTC enters reserve → UPS backing strengthens
More activity → more fees → more BTC → stronger UPS
Hotel California: you can check out any time, but BTC never leaves
```

---

## Three Revenue Streams

The [PAVS paper](PAVS-Treasury-Economics) identifies three revenue streams for sustainability:

1. **Fee Revenue** — DEX trades, exit fees, creation fees (from `fee_revenue_tracker.py`)
2. **Subscription Revenue** — ARPU × subscribers (from `subscription_tiers.py`)
3. **Angel Revenue** — $195/angel × angel count

Fee-only sustainability is a **negative result** — fees alone can't sustain the treasury. The ROC-first unified model combines all three streams with the ROC gate to create a self-correcting economic loop.

---

## V3 Engine

The V3 Engine (Verification → Validation → Valuation) is the value assessment framework:

**Verification:** Is the FoundUp's claimed output real? Automated checks confirm work was done.
**Validation:** Does the output meet quality standards? WSP compliance, test coverage, peer review.
**Valuation:** What is the output worth? Market signals, utility metrics, ecosystem demand determine token distribution.

---

## CABR Economics

The CABR (Continuous Autonomous Build & Repair) loop is both technical and economic. CABR sizes the pipe (how much compute a FoundUp gets); Proof of Benefit (PoB) opens the valve (whether the compute actually flows).

Each CABR cycle consumes compute and produces value. The ROC ratio determines continued allocation. FoundUps with positive ROC get more compute. FoundUps with negative ROC get deprioritized.

---

## Simulator

All economics are validated by a full agent-based simulator at [`modules/foundups/simulator/`](https://github.com/FOUNDUPS/Foundups-Agent/tree/main/modules/foundups/simulator). Key economics modules:

`pool_distribution.py`, `demurrage.py`, `token_economics.py`, `unified_sustainability.py`, `subscription_tiers.py`, `bonding_curve.py`, `btc_reserve.py`, `fee_revenue_tracker.py`, `circuit_breaker.py`, `rage_quit.py`, `dynamic_exit_friction.py`, `ten_year_projection.py`

The simulator ensures the model works before real tokens deploy. See [PAVS Treasury Economics](PAVS-Treasury-Economics) for the full math paper.

---

## Related Pages

- [PAVS Treasury Economics](PAVS-Treasury-Economics) — The 87KB math paper with full simulation study
- [Simulator](Simulator) — The sustainability simulator module
- [FoundUps Portfolio](FoundUps-Portfolio) — Active FoundUp instances
- [Tokenized IP System](Tokenized-IP-System) — IP tokenization and patent portfolio
- [Regenerative Enterprise](Regenerative-Enterprise) — Beyond extractive economics
- [Published Articles & Research](Published-Articles-&-Research) — ROC thesis evolution
- [Litepaper](https://foundups.com/litepaper.html) — Public-facing economic model (v0.2)

---

[Home](Home) · [PAVS Treasury Economics](PAVS-Treasury-Economics) · [Simulator](Simulator) · [FoundUps Portfolio](FoundUps-Portfolio)