$EGY Tokenomics

The $EGY incentive model — OTM options emissions aligned with protocol growth.

Incentives and Emissions

ETH Strategy incentivizes early participants with emissions — but not through the inflationary governance token model that dilutes holders. Instead, $EGY uses a different approach: out-of-the-money (OTM) options as incentives.

OTM Options as Incentives

$EGY holders control a treasury of OTM STRAT options that are minted alongside convertible note issuance. This issuance point is deliberate — STRAT holders gain value when bonding occurs (the treasury grows), so incentive emissions are tied to the same event that creates protocol value.

Upon bonding, a percentage of the nominal value of the options bonded is deposited into the $EGY vault. The exact percentage will be set after core protocol launch based on observed bonding dynamics and market conditions.

How the OTM Options Work

OTM STRAT options have ~4.2-year tenors and strike prices set above the current STRAT price
These options hold no intrinsic value until STRAT trades above their respective strike prices
OTM options are not convertible notes — they are issued without any CDT. They represent pure upside optionality

How STRAT Options Are Denominated

STRAT options have strike prices denominated in CDT:

If an option has a strike of 0.4 CDT, STRAT must trade above 0.4 CDT to be in-the-money
Since CDT represents ~$1 of debt, the effective USD strike depends on CDT's market price
If CDT trades at $1.00, the strike is effectively $0.40. If CDT trades at $0.70, the effective strike is $0.28

This denomination ties option value to the protocol's debt dynamics, not just the spot price of STRAT.

Why This Structure Matters

To exercise an OTM option, the holder must first acquire CDT. This mechanism ensures that the protocol's treasury benefits directly:

Buy CDT on the market and burn it on exercise — reducing total protocol debt, which improves the treasury-to-debt ratio for all STRAT holders
Bond more ETH to acquire CDT — feeding the treasury growth flywheel by adding fresh capital

Either path reinforces the protocol's economic engine. Incentive emissions don't leak value — they channel it back through the protocol's core mechanics.

Parameters pending. The incentive structure, including the exact percentage of options directed to the $EGY vault, is subject to finalization after core protocol launch. The mechanism is designed, but specific numbers will be set based on observed bonding dynamics and market conditions. Follow @eth_strategy for updates.

Risks

If STRAT never trades above the OTM strike prices during the option tenor, the options expire worthless. $EGY holders should understand that these are out-of-the-money instruments — they have value only if the protocol succeeds in growing STRAT's price above the strike. This is by design: incentives are aligned with protocol success, not guaranteed regardless of outcome.