How $FAIR Works

The mechanics of $FAIR are designed to align incentives, provide flexibility, and maintain the capital pool's stability. Here’s a breakdown of how the $FAIR token operates within the Fairside ecosystem:

1. Depositing ETH and Receiving $FAIR When a user deposits ETH into the Fairside capital pool, they receive $FAIR tokens at a rate that reflects the current health and balance of the fund. The exchange rate between ETH and $FAIR is dynamic, adjusting in response to the fund’s overall performance and market conditions. This rate ensures that the value of $FAIR tokens is directly tied to the fund’s ability to cover claims and maintain liquidity.

2. Dynamic Value Adjustment The value of $FAIR tokens is not static; it changes based on contributions and withdrawals from the capital pool. If the pool is healthy and growing, the value of $FAIR tokens may increase, offering potential appreciation for holders. Conversely, if the fund experiences a high volume of claims or withdrawals, the value of $FAIR tokens may decrease. This dynamic adjustment mechanism ensures that the token value accurately reflects the fund’s stability and capacity to fulfill its obligations.

3. Redeeming $FAIR for ETH Members can redeem their $FAIR tokens for ETH from the capital pool at any time, provided the fund is in a stable state. This redemption process offers flexibility and liquidity to contributors, allowing them to access their ETH without unnecessary delays. However, if the fund is under stress—such as during periods of high claims or significant withdrawals—a temporary freeze may be applied to direct redemptions to protect the fund’s integrity. During these times, $FAIR tokens remain tradeable on secondary markets, providing alternative liquidity options for holders.

4. Temporary Freeze and Secondary Market Trading To maintain the capital pool's resilience, a temporary freeze mechanism may be activated if the pool's depth is compromised due to unexpected high claims or withdrawals. This mechanism prevents direct redemptions but allows $FAIR tokens to be traded on secondary markets. This flexibility ensures that members can still liquidate their holdings without directly impacting the fund’s stability, promoting long-term sustainability.

5. Monthly Rewards and Yield Distribution Holding $FAIR tokens also entitles members to earn monthly ETH rewards from the fees collected through new memberships. This yield is distributed proportionally based on the amount of $FAIR tokens held, providing a steady income stream to contributors and incentivizing long-term holding. The fluctuating APY reflects the capital pool's performance and encourages continuous participation and engagement from the community.