Token Demand Drivers

A demand driver refers to a strategy, system, or stipulation designed to motivate users to acquire a token, thereby generating demand for it. There are multiple types of demand drivers which can be grouped into categories, 2 of which are utility and mechanisms. TEA has multiple demand drivers in each of these categories.

Utility

The value of a token is closely tied to how useful it is within a blockchain project. Essentially, if a token is needed for users to access or use the project's main features, it likely has value and, consequently, demand. People tend to buy tokens that are crucial for using a project's products or services. This idea of a token's necessity can be visualized as a range. On one end of this range, a token is needed for the project to work. On the other end, the token isn't essential.

TEA has 4 utility demand drivers: gas fees, restricted access, governance, and OSS project security.

1. Gas fees: TEA tokens are a fundamental requirement for conducting transactions on the tea Protocol, encompassing a range of essential activities. These include establishing an OSS project treasury, staking, allocating teaRank rewards, and distributing donations or grants. Simple actions such as transferring TEA tokens between users and claiming staking rewards require the use of TEA tokens.

2. Restricted Access: A project must hold and stake TEA tokens to create its own DAO treasury and earn rewards from the protocol. After setting up the treasury, the project needs to keep staking TEA to keep receiving rewards, which are given out by the protocol based on the Proof of Contribution consensus mechanism. To continue getting rewards as they increase, the project must proportionally increase the amount of TEA it stakes. These staked tokens serve the dual purpose of incentivizing security researchers to report vulnerabilities responsibly, and motivating project maintainers to expeditiously address the reported vulnerabilities.

3. Governance: Any participant can propose non-financial critical parameter changes to the tea protocol and delegate their vote to the open-source packages of their choice by staking. When users stake TEA on registered projects, projects receive staked TEA, or stTEA, which gives projects the opportunity to participate in the governance of the tea protocol. Voting delegation is proportional to the amount of TEA staked on the project from the project’s treasury and any other participant.

4. OSS Project Security: Network users can privately report bugs or vulnerabilities to OSS project maintainers. To do this, they must stake TEA tokens along with their report. If the reported bug or vulnerability is fixed within a set time, the user who reported it gets a reward from the TEA staked by those who supported the package. If it's not fixed in time, the project's staked TEA tokens and those who supported the package by staking are penalized ("slashed"), and a part of this penalty is given to the user who made the report.

Mechanisms

A demand mechanism is a strategy or requirement that motivates users to purchase a token, thereby creating demand. Demand Mechanisms are closely linked to Utility but do not always mirror it. For example, a revenue share mechanism may stimulate demand for a token for users that want to generate yield on their tokens – especially if the protocol is generating significant revenue and therefore offering attractive yield (i.e., high APR%).

However, despite holding tokens offering the potential to receive attractive returns, holding tokens is not necessarily needed to access the protocol.

TEA has 2 demand mechanisms: stake and a deflationary supply, with additional ones under evaluation for inclusion in the tea Protocol's roadmap.

1. Stake: TEA tokens can be staked on any open-source software (OSS) project that is part of the tea Protocol to earn rewards. These staking rewards are emitted from a pre-allocated pool of TEA tokens.

2. Deflationary Supply: TEA has a cap of 10 billion tokens, which is the maximum number that can ever be in circulation. The protocol includes several methods to permanently reduce the number of TEA tokens through automated "burn" processes. These include slashing a portion of the supporting users' and project treasury's stake for vulnerabilities that are not addressed within a governance-defined timeline, or the burning of rewards for projects whose dependents are registered while the projects themselves remain unregistered.

   These burn mechanisms lower the potential circulating supply of TEA over time, making it a deflationary token. As a result, TEA becomes more scarce as the protocol continues to operate.