8. War Chest

CO2Fi is secured primarily via the War Chest. The War Chest is a bank of funds built continuously over a two year period from the fee’s generated by the CO2Fi platform. The War Chest acts as a mitigation tool in case of a Shortfall Even within the markets that belong to the Co2fi.io ecosystem. A Shortfall Event occurs when there is a deficit.

In the instance of a Shortfall Event, part of the funds accrued within the War Chest are auctioned on the market to be sold against the assets needed to mitigate the occurred deficit. The War Chest includes a built-in backstop mechanism to prevent excess flow of assets into the open market that would further reduce the value of sold assets, thereby prompting more outflows of capital from the War Chest.

The War Chest will seek to have a diverse portfolio of Eth and stable coins, the majority of which will be staked in various defi platforms to generate yield and further grow the War Chest.

Once staking of the HCO2 Token is no longer available and locking opens, the War Chest will no longer be the primary beneficiary of platform fees, 90% of fees will be allocated to locked HCO2 Holders and 10% allocated to the war chest. If in three years’ time Co2fi.io grows rapidly in Total Value Locked, far beyond the War Chests financial fire power to cover a shortfall event, then the fee distribution between the War Chest and HCO2 holders will be 50% each. This even distribution of fee’s would remain until the War Chest reached a value large enough to a reasonably sized short fall event.

In case the War Chest is not able to cover all of the deficit incurred, the Protocol Governance can trigger an ad-hoc Recovery Issuance event. In such a scenario, new HCO2 is issued and sold in an open auction for market price prioritizing the War Chest.

The issuance of HCO2 in case of a Shortfall Event is mitigated by the existence of the War Chest. Prior to any issuance, the reserves of the War Chest must be exhausted.