Token Value Mechanics

This document explains how Hokusai tokens derive and maintain their value within the ecosystem.

Value Sources

1. Model Performance

The primary value driver is the performance of AI models in the ecosystem:

Performance Metrics

• Hokusai models are uniquely focused on maximizing their performance against their defined performance benchmark. This is likely a touch myopic, but is designed for simplicity and clarity.

2. Usage Demand

Token value is directly tied to model usage through the AMM reserve mechanism. As models are used, profit after infrastructure costs flows into the token's USDC reserve, increasing the token price via the bonding curve:

Value Accrual Flow

API Usage → Fees Collected → UsageFeeRouter
                                    ↓
                    ┌───────────────┴───────────────┐
                    ↓                               ↓
        Infrastructure Accrual              Profit Residual
          (50-100%, per model)             (0-50%, to AMM)
                    ↓                               ↓
        InfrastructureReserve             Reserve Increases
          (pays providers)                   → Price ↑

When profit share is deposited into the reserve:

• Reserve (R) increases
• Supply (S) stays constant
• Spot price P = R / (w × S) increases proportionally

Key distinction: Token holders benefit from genuine profit (revenue minus infrastructure costs), not gross revenue. Each model's infrastructureAccrualBps parameter determines the split.

See API Fee Flow for complete details.

3. Supply Dynamics

The token supply is managed through minting mechanisms:

Supply Controls

1. Minting

   • Performance-based minting (DeltaOne rewards)
   • Governance-controlled caps

2. AMM Trading

   • Buying tokens increases both reserve and supply
   • Selling tokens decreases both reserve and supply

Price Discovery

CRR Bonding Curve

The AMM uses a Constant Reserve Ratio (CRR) bonding curve for continuous price discovery:

Spot Price = R / (w × S)

Where:
  R = USDC reserve balance
  S = Token supply
  w = Constant Reserve Ratio (CRR, typically 10-30%)

The CRR model ensures that API fees deposited into the reserve directly increase the token price, since supply remains constant while reserves grow.

Price Impact of Profit Share

When profit share is deposited (without minting new tokens):

Event	Reserve	Supply	Price Impact
$50,000 API revenue (80% infra, 20% profit)	+$10,000	No change	+10% (if reserve was $100k)
$50,000 API revenue (60% infra, 40% profit)	+$20,000	No change	+20% (if reserve was $100k)

Models with lower infrastructure costs (governance-optimized accrual rate) provide higher profit share to token holders. This mechanism creates a direct link between model usage, operational efficiency, and token value.

Value Metrics

Key Indicators

1. Performance Metrics

   • Model improvement rate
   • DeltaOne issuance
   • API fee accumulation rate

2. Market Metrics

   • Trading volume
   • Reserve depth (USDC backing)
   • Price stability

3. Usage Metrics

   • API request volume
   • Active users
   • Enterprise adoption
   • Adoption by other AI models

Next Steps

• Learn about the Automated Market Maker
• Review Bonding Curve
• Understand API Fee Flow
• Learn about DeltaOne Calculations

For additional support, contact our Support Team or join our Community Forum.