> For the complete documentation index, see [llms.txt](https://surf-2.gitbook.io/surfliquid-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://surf-2.gitbook.io/surfliquid-docs/usdsurf-token/deflationary-buyback-flywheel.md).

# Deflationary Buyback Flywheel

<figure><img src="/files/L8ktb8hy7yGYGHYNG2vr" alt=""><figcaption></figcaption></figure>

Surf is designed as a vault-based savings and participation protocol that compounds value back into its own ecosystem.

Instead of relying on continuous token inflation, Surf runs a closed-loop buyback and redistribution system funded by real on-chain performance.

This creates a deflationary pressure over time while aligning user returns, protocol revenue, and long-term token value.

***

### **Performance Fees**

Surf charges a performance fee on realised yield generated by its vaults.

* Current structure:

  10% of realised profit when yield is realised inside vaults.
* Applied at the vault performance layer, not at deposit.
* Only taken when users make money.

This ensures:

* No rent extraction on idle capital.
* Fees scale with real performance.
* Protocol revenue is directly tied to user success.

Future vault types such as Liquidity Vaults and institutional routing vaults will follow the same profit-based fee model.

***

### **Open-Market Buybacks**

All performance fees are routed into the Surf Treasury and used to:

* Buy $SURF directly from the open market.
* Execute programmatic and transparent buyback operations.
* Accumulate protocol-owned liquidity and reserves.

Buybacks are:

* Non-dilutive.
* Market-driven.
* Executed at prevailing prices.
* Fully on-chain and auditable.

This links protocol growth and TVL expansion to continuous market demand for $SURF.

As of May 2026, the Surf Treasury has executed 127K+ $SURF in open-market buybacks from vault performance fees.

***

### **Treasury Accumulation**

The Surf Treasury acts as the long-term capital base of the protocol.

It accumulates $SURF through:

* Vault performance fees.
* Protocol revenue streams.
* Ecosystem and partner allocations.

Treasury reserves are used for:

* Strategic liquidity support.
* Long-term protocol sustainability.
* Backing of incentive programs.
* Future risk buffers and insurance mechanisms.

Treasury growth reflects real economic activity, not token issuance.

***

### **Redistribution and Burns**

Treasury-held $SURF is deployed in three controlled ways:

#### 1. Redistribution

* Surf Leagues rewards.
* Staking incentives.
* Ecosystem participation programs.
* Partner and ecosystem alignment.

This ensures that value flows back to active users and long-term contributors.

#### 2. Strategic Locking

* Future long-term locking programs.
* Liquidity depth protection.
* Governance weight stabilisation.

#### 3. Deflationary Burns

* When treasury reserves exceed operational and incentive requirements.
* Surplus $SURF will be permanently removed from circulation.
* Burn events will be rule-based, transparent, and publicly verifiable.

***

### **The Flywheel Effect**

The system compounds in a closed loop:

User deposits and activity

→ Vault performance generates yield

→ Performance fees accrue to treasury

→ Treasury buys $SURF from the market

→ Circulating supply tightens

→ Incentives and rewards strengthen

→ Participation and TVL grow

→ More performance fees are generated

This replaces inflation-driven growth with:

* Revenue-backed token demand
* Performance-linked value accrual
* Long-term supply compression
* Sustainable incentive funding

\
Not a farm. Not emissions-driven.\
**A protocol-native economic engine designed to compound real yield into long-term network value.**