How These Mechanisms Create an Economic Flywheel

This is an idealized prototype of the economic flywheel mechanism, intended for educational purposes rather than precise details. It intuitively illustrates how the protocol self-regulates and adjusts the incentives of the three main parties—market/bonding, stakers, and the protocol. The model shows how the implementation generalizes the economic forces of supply and demand to match or offset runaway reflexivity in the market.

The reward rate combined with the volume of bond sales determines the rate of supply inflation.

·Supply increases → Price decreases

·Price decreases → Lower premium

·Lower premium → Price increases (as the price returns to the standard multiple of RFV)

·Price increases → More bonding/selling

·More bonding/selling → Higher APY

·Higher APY → More demand/staking (3,3)

·More demand/staking → Price increases

This cycle creates a self-sustaining mechanism, driving growth and stability within the ORIZON ecosystem.