When an operator tops up a Revenue Pool with reward tokens (USDT), the funds don't all go to depositors. They pass through a FeeRouter that splits them three ways:
- Providers, stays as stablecoins in the pool, building credit for depositor rewards
- Worker pool, converted to SQD and sent to the network's worker reward pool
- Burn, converted to SQD and sent to a dead address, permanently removed from supply
How the SQD Buy Works
The worker and burn portions need to be converted from stablecoins to SQD. This happens through an automatic and autonomous system built into the FeeRouterModuleV2.
When the pool routes fees, the non-provider share flows to the FeeRouter contract. The router accumulates these stablecoins until the balance crosses a configurable threshold. Once it does, the auto-buy kicks in, the stablecoins are swapped to SQD through PancakeSwap V3 in the same transaction. The purchased SQD is then split proportionally between the worker pool and burn based on the fee config ratios.
For example, with a 50/45/5 split and a $1000 top-up:
- $500 stays as USDC → providers (pool credit)
- $500 goes to the FeeRouter → auto-buy triggers, swapped to SQD via PancakeSwap
- Of the SQD received: 90% (45/50) goes to the worker reward pool, 10% (5/50) gets burned
If the reward token is already SQD (not a stablecoin), the router skips the swap entirely and just splits the SQD directly between workers and burn.
Slippage Protection
Swapping on a DEX carries the risk of getting a bad price, especially from MEV sandwich attacks. The router protects against this using a TWAP (time-weighted average price) oracle from PancakeSwap V3.
Before executing a swap, it checks what the average price has been over the last 30 minutes and sets a minimum acceptable output. If the current price is too far from the average (more than 3% by default), the swap reverts instead of executing at a bad rate.
The admin can adjust the TWAP window (how far back the average looks). The operator can adjust the maximum allowed slippage while topping up rewards.
Important Information
The Fee Routing and SQD conversion mechanism is a technical feature of the SQD Network that automatically allocates and processes fees strictly in accordance with predefined, transparent protocol parameters embedded in smart contracts. Any "buy" or conversion refers to an automated, non-discretionary token swap via third-party decentralised exchanges, without any commitment to purchase SQD, support its price, or generate returns. The mechanism involves no asset management or expectation of profit, and outcomes depend on external market conditions. Reward pools are optional features that can be deployed by any independent third-party operators.