13. Return on Investment (ROI)

ROI for UST Protocol / USTD is multi-dimensional. It includes (a) straightforward financial payback on the build cost, (b) the dollar value we can channel into burning LUNC/USTC, (c) how quickly our Reserves (safety buffer) grow, (d) the percent of supply we can retire each year, and (e) the fresh capital USTD can attract onto Terra Classic.

Baseline assumptions (edit by governance as needed):

• Average strategy APR: 20%
• Development cost: $265,000
• Yield allocation policy: 50% of yield → Reserves, then from Reserves: 48% → buy-back & burn, 48% → DeFi collateral pool, 2–4% → infrastructure (Akash, Jackal, GetBlock, domains/IP).
• TVL scenarios shown: $1M, $10M, $100M, $500M, $1B

This means, at 20% APR:

• Burn budget = 24% of yield = 4.8% of TVL / year
• Collateral added to Reserves = 24% of yield = 4.8% of TVL / year
• Infra = 1–2% of yield (depending on the 2–4% of Reserves setting)

13.1. Year-1 ROI vs. Development Cost (investor/protocol view)

This view answers a simple question: how fast does Year-1 yield cover the build cost? (OPEX excluded; infra is paid from Reserves per policy.)

Formulas:

• Annual gross yield = APR × TVL
• Net profit (Year-1) = Annual yield − $265,000
• ROI (Year-1) = Net profit ÷ $265,000
• Payback time ≈ $265,000 ÷ Annual yield

Takeaway: Below ~$10M TVL, payback is months; above that, the build cost becomes negligible.

13.2. Burn ROI (how fast / how much we can burn)

With the adopted policy, 24% of total yield funds buy-back & burn (i.e., 4.8% of TVL per year at 20% APR).

Takeaway: Even at modest TVL, the burn pipe is meaningful; at scale, it becomes a powerful, predictable supply sink.

Conversion to token units (LUNC/USTC) is in §13.4.

13.3. Reserves Accretion ROI (safety buffer growth)

From Reserves, 48% is routed into the DeFi collateral pool (retained by the protocol), which equals 24% of total yield = 4.8% of TVL per year at 20% APR.

(If infra runs at 2% of Reserves instead of 4%, an extra 1% of yield remains as idle reserves, lifting effective accretion to ~5.0% of TVL; we show the conservative 4% case below.)

Takeaway: Reserves scale linearly with TVL, improving safety and policy flexibility as adoption grows.

13.4. Supply-Impact ROI (percent of supply retired)

This section converts the dollar burn budget from §8.2 into percent of supply for LUNC and USTC.

For illustration (editable by governance), we use:

• LUNC price: $0.0000604; circulating supply: 5.8T
• USTC price: $0.0137; circulating supply: 9.8B
• Burn split: 50:50 between LUNC and USTC (policy-driven; can change)

Method:

• Annual burn (USD) = 4.8% of TVL
• Per-asset burn (USD) = 50% of annual burn
• Tokens burned = (per-asset USD) ÷ price
• % of supply = tokens burned ÷ circulating supply

Takeaway:  At $100M TVL, policy implies retiring roughly 0.69% of LUNC and 1.79% of USTC annually at the stated prices/supplies (with a 50:50 split). Governance can adjust the split to target LUNC or USTC more aggressively.

Prices and supplies change; the table should be regenerated periodically (live spreadsheet recommended).

13.5. External Liquidity ROI (capital inflow to Terra Classic)

This measures net new USD attracted to Terra Classic because USTD exists (e.g., USDC via CCTP V2, IBC stable inflows), after natural outflows. We model Low / Base / High adoption funnels.

Assumptions (tunable):

• Share of TVL that is new capital bridged in: 20% / 40% / 60%
• Retention after outflows: 90% / 95% / 97%`
• Quarterly net inflow = TVL × inflow% × retention

Takeaway: USTD can act as a bridge magnet. At $100M TVL, a Base case implies roughly $38M of net new stables per quarter settling on Terra Classic—supporting liquidity depth, market efficiency, and validator economics indirectly.

13.6. Important notes

• These are policy-driven mechanics, not promises. Live APR, token prices, and volumes will move the results.

• Governance controls the burn split, infra range (2–4% of Reserves), and interoperability levers (e.g., CCTP/IBC/Thorchain), which in turn shape ROI across the five lenses.

• We will maintain a small, public ROI workbook so the community can refresh tables with live prices/supplies and approved parameters.

13.7. Summary - Why this ROI matters

One project, five flywheels:

• The ROI views show how UST Protocol / USTD creates value in multiple ways at once: (1) fast payback on build cost, (2) predictable burns of LUNC/USTC, (3) steady Reserves growth (safety), (4) measurable % of supply retired each year, and (5) new capital attracted onto Terra Classic.

Clear inflection point:

• Around $10M TVL, the protocol covers its build cost within weeks and begins to retire supply at visible pace. Above that, effects scale linearly with TVL.

Programmatic burn engine:

• With today’s policy, ~4.8% of TVL per year becomes a dollar-denominated burn budget (24% of total yield at 20% APR). This converts directly into transparent supply reduction, aligning community incentives with protocol growth.

Growing safety buffer:

• Approximately ~4.8% of TVL per year is added to the DeFi collateral pool (i.e., Reserves routed to collateral; 24% of total yield at 20% APR). This strengthens shock-absorption and long-term stability without dilution; a small slice of Reserves also covers infra (2–4% of Reserves).

Chain-level benefits beyond fees:

• Validator/delegator fee uplift is intentionally small on Terra Classic (low fees by design), but the bigger win is supply contraction, deeper liquidity, and net capital inflows (via CCTP/IBC/Thorchain), which improve market efficiency and confidence across the ecosystem.

Actionable, auditable targets:

• The tables convert strategy assumptions into simple KPIs the community can track: TVL milestones, burn dollars/day, % of supply retired, Reserves added per quarter, and net inflow per quarter. These are easy to verify and difficult to game.

Governance control, policy levers:

• The community can tune burn splits (LUNC vs USTC), the infra allowance (2–4% of Reserves), and interoperability rollout to optimize outcomes without touching core contract safety.

Transparency by design:

• Publishing the results (not the optimizer) protects the protocol’s competitive edge while keeping performance verifiable. That balance is essential for sustainable adoption.

These ROI frames turn USTD from an idea into a measurable economic engine for Terra Classic—paying back its build, strengthening safety, retiring supply at scale, and pulling fresh liquidity on-chain. This is the core rationale for supporting UST Protocol / USTD in governance and for tracking its progress post-launch.