> For the complete documentation index, see [llms.txt](https://lanterns-organization.gitbook.io/lantern-finance/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://lanterns-organization.gitbook.io/lantern-finance/tokenomics/ltrn-token.md).

# LTRN Token

## Tokenomics: Lantern Token (LTRN)

### Overview

**Lantern (LTRN)** is a utility token with a capped total supply of 10,000 tokens, designed for a lightweight DeFi protocol on a high-speed blockchain (e.g., Sonic). It features a **debase** mechanism that reduces the token supply when the proportion of staked LTRN (including staking and LP staking) drops below 80% of the issued tokens. Importantly, staked LTRN and LTRN in liquidity pools (LP staking) are not affected by the debase, incentivizing active participation while penalizing idle holders.

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### Token Details

* **Name**: Lantern
* **Symbol**: LTRN
* **Ticker**: $LTRN
* **Initial Total Supply**: 10,000 LTRN
* **Maximum Supply**: 10,000 LTRN (no additional minting; supply can only decrease via debase).
* **Purpose**: Governance, staking rewards, liquidity provision, and fee payments within the protocol.

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### Initial Distribution

* **30% (3,000 LTRN)**: Community Incentives (staking rewards, airdrops).
* **5% (500 LTRN)**: Team (vested over 6 months).
* **50% (5,000 LTRN)**: Liquidity Provision (initial pools).
* **10% (1,000 LTRN)**: Treasury (governed by LTRN holders).
* **5% (500 LTRN)**: Development Fund (for protocol upgrades).

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### Debase Mechanism

The **debase** feature reduces the token supply when staking participation (including LP staking) falls below a critical threshold, but only affects non-staked tokens, rewarding active users.

#### How It Works

* **Trigger Condition**: Debase is activated if the combined total of staked LTRN (direct staking) and LTRN locked in liquidity pools (LP staking) falls below 80% of the total issued supply for 24 hours.
  * Example: If 10,000 LTRN are issued, debase triggers when staked + LP-staked LTRN < 8,000 LTRN.
* **Debase Event**:
  * Total supply is reduced by a fixed percentage (e.g., 5%).
  * Only non-staked LTRN balances (in wallets or unstaked liquidity) decrease proportionally.
  * Staked LTRN and LP-staked LTRN remain unchanged.
* **Frequency**: Limited to once every 24 hours to avoid excessive adjustments.
* **Minimum Supply Cap**: Supply cannot drop below 1,000 LTRN to preserve utility.

#### Example

* Initial state: 10,000 LTRN issued.
  * 6,000 LTRN staked (direct staking).
  * 1,500 LTRN in LP staking.
  * Total staked + LP = 7,500 LTRN (75%, below 80%).
* Debase triggered: 5% reduction applied to non-staked LTRN only.
  * Non-staked LTRN = 2,500 LTRN → Reduced by 5% = 2,375 LTRN.
  * New total supply = 6,000 (staked) + 1,500 (LP) + 2,375 (non-staked) = 9,875 LTRN.
* User A (non-staked): 200 LTRN → 190 LTRN.
* User B (staked): 200 LTRN → 200 LTRN (unaffected).
* New staking threshold: 80% of 9,875 = 7,900 LTRN.
* Goal: Penalize idle holders and incentivize staking or LP participation.

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### Incentive Structure

* **Staking**: Holders stake LTRN to earn 50% of protocol fees. Staked LTRN is exempt from debase, protecting participants.
* **LP Staking**: LTRN in liquidity pools (e.g., LTRN/ETH pairs) earns rewards and is also exempt from debase.
* **Fee Burn**: 10% of protocol fees are used to buy back and burn LTRN from the non-staked supply, enhancing deflation.
* **Governance**: Staked LTRN (direct or LP) grants voting rights on parameters (e.g., debase percentage, staking threshold).

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### Economic Dynamics

* **Debase Impact**: Reduces supply only for non-staked tokens when staking + LP participation drops below 80%, creating a strong incentive to stake or provide liquidity.
* **Burn Synergy**: Fee burns target non-staked supply, amplifying deflation for inactive holders.
* **Active Participation**: Rewards stakers and LP providers by shielding them from supply reductions.

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### Key Metrics

* **Initial Supply**: 10,000 LTRN.
* **Staking + LP Threshold**: 8,000 LTRN (80% of initial supply).
* **Post-Debase Example (after 5 events)**: \~9,523 LTRN (assuming 5% debase on non-staked supply each time, with 75% initially staked).
* **Burn Rate**: Varies with usage (e.g., 10 LTRN burned monthly at low volume).

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### Advantages

* **Staking Reward**: Protects staked and LP-staked LTRN, strongly incentivizing participation.
* **Targeted Debase**: Only penalizes idle holders, preserving value for active users.
* **Scarcity**: Reduces supply over time, especially for non-participants.

### Risks

* **Non-Staker Disadvantage**: Idle holders may feel unfairly targeted by debase.
* **Liquidity Pressure**: If too many users stake or LP, circulating supply could shrink excessively.
* **Adoption Barrier**: Requires users to stake or provide liquidity to avoid losses.