neuron-tai/docs/adr/0002-dual-token-payment-model.md

# TAI token: revenue-backed rewards for nodes, USDT/SOL payments for clients

## Token

The native token is named **TAI**. Fixed total supply (BTC-inspired — exact number TBD, see open questions). No ongoing minting after the initial issuance. Inflation is near-zero by design; any small scheduled emission follows a halving-style curve so early node operators earn disproportionately more, creating the viral early-adopter incentive.

Clients never hold or see TAI. They pay in USDT or SOL. Nodes earn TAI. This separation keeps the client experience frictionless while giving node operators early-adopter upside.

## Revenue-backed price model

TAI is not traded on any open market during the bootstrap phase. The only way TAI enters circulation is as a node reward for completed inference work. The price is therefore organically backed by real compute revenue, not speculation.

**Conceptual price anchor:**
```
TAI backing ratio ≈ USDT in protocol treasury / TAI in circulation
```

Price starts very low (near zero) and only rises as inference payments accumulate in treasury. There is no initial liquidity pool or AMM. The team sets a symbolic starting price (e.g. $0.0001) as the baseline for first reward calculations.

## Payment and reward flow

```
Client pays $100 USDT for inference
    └─ Protocol treasury receives $100 USDT

Node completes compute work
    └─ Node earns TAI worth $95 at current TAI price
       (team transfers TAI from team holdings to node wallet)
    └─ Protocol keeps $5 as operating spread (~5% of inference volume)

Node wants to exit (sell TAI):
    └─ Team buys back at 95% of current price
    └─ Node receives $90.25 USDT (95% × $95)
    └─ Team recovers the TAI + keeps $9.75 total on the round-trip

Node holds TAI:
    └─ Team keeps $95 USDT in treasury (backs future appreciation)
    └─ Node benefits from price appreciation as more inference happens
```

The 5% spread on issuance + 5% spread on buyback compounds to ~9.75% protocol revenue on fully round-tripped volume. Nodes who hold TAI instead of selling immediately retain the full $95 value and benefit from price appreciation — a natural incentive to hold.

## Team distribution schedule

The team begins holding ~100% of the total TAI supply. Over approximately 5 years, the team distributes TAI to nodes as inference rewards, reaching a long-term target of **36% team holding**. The remaining ~64% is in the hands of node operators and, eventually, open-market participants.

The distribution is not linear — it follows a halving-style decay so early nodes earn more TAI per USDT of compute than later nodes. This rewards the bootstrapping risk.

**Open market listing:** Only after the network reaches a healthy market cap (specific threshold TBD). At listing, only a defined percentage of team holdings is made available — not the full 36%. This prevents a supply shock.

## Wind-down guarantee

If the project is shut down before reaching sustainable scale, the protocol guarantees it can buy back every TAI it has ever issued as a compute reward at the price at which it was originally issued. This is made possible because:

1. Every inference payment flows into treasury first
2. The protocol only distributes TAI worth 95% of each inference payment
3. The 5% spread per transaction accumulates as the wind-down reserve
4. Even if all nodes sell immediately at 95%, the protocol collects ~9.75% of every dollar of inference volume as reserve

Net effect: the protocol is always solvent to honor its obligations to node operators. No node that earned TAI through legitimate compute work can lose money if the project closes — they can always redeem at the issue price they received.

## Protocol tax on volume

The protocol collects approximately **10% of inference volume** as operating revenue, composed of:
- ~5% spread on TAI issuance to nodes (client pays $100, node gets $95 of TAI)
- ~5% spread on TAI buybacks (node sells $95 TAI, receives $90.25 USDT)

This ~10% accumulates in the protocol treasury and serves three purposes in priority order:
1. Wind-down reserve (guarantee buyback of all circulating TAI at issue price)
2. Operating costs (infrastructure, legal, development)
3. Team profit (only after 1 and 2 are fully funded)

## Prototype contract boundary

The `packages/contracts` settlement layer tracks three ledgers:
- `caller_balance[api_key]` — USDT/SOL prepaid by clients
- `node_tai_balance[wallet]` — TAI earned by nodes, unredeemed
- `node_tai_stake[wallet]` — TAI locked as fraud collateral
- `protocol_usdt_reserve` — accumulated spread, earmarked as wind-down reserve

Epoch settlement: debits caller USDT for consumed compute, credits node TAI rewards weighted by layers served × node speed benchmark. No live Solana settlement in prototype — contract boundary is a deterministic local adapter (see ADR-0007).

## Considered Options

- **SOL only**: no early-adopter upside for nodes, no viral growth mechanic — rejected
- **Own token only**: clients must acquire TAI — high friction, kills adoption — rejected
- **AMM / open market from day one**: exposes early price to speculation and manipulation before real volume establishes a floor — rejected
- **Revenue-backed TAI, no open market during bootstrap**: chosen — price is anchored to real compute work, wind-down guarantee is mathematically fundable, speculation cannot crash price before network effect is established

## Open questions (to be resolved before token launch)

- Total TAI supply (21M BTC-style? 100M? 1B?)
- Exact halving schedule for node emission rate
- Specific market-cap threshold for open-market listing
- Percentage of team holdings offered at listing vs. held long-term
- Rate limit on buybacks (max USDT/day per wallet to prevent bank-run drain)
- Node staking bootstrapping: how do new nodes acquire stake TAI before they have earned any (given TAI is not on open market)?
- Legal structure for token distribution in target jurisdictions