Governance

2factor's efficiency gain is large enough to carry a fee. Leverage here is funded by the market for stable yield rather than the market for shorts, and the spread between those two is wide enough that an AUM fee can sit inside it while both sides still beat what they would get elsewhere — BTC-Jr paying less for leverage than the market charges, BTC-Sr earning more than parked capital earns. Protocol revenue is used to buy the token back on the open market.

Holders direct the parameters that decide what 2factor supports and how it behaves:

• Whitelisting assets — which underlyings the protocol supports beyond Bitcoin.
• Band configuration — the productive band each supported asset targets.
• Protocol configuration — the protocol settings that shape how the structure operates.

The protocol will initially launch without AUM fees and be governed by a multisig held by members of the genesis development team. Token-based governance, fees, and buybacks will be switched on together, at TGE.

The token name, the fee level, the buyback cadence, and how proposals are put and settled will be published at a later date. To help ground expectations, we'd like to set down how we are thinking about the problem — this broader reasoning will outlast any particular parameter.

The essay Tokens Are Dead. HYPE Is Soaring. argues that value capture has stopped being a mystery and become a formula: utility, plus buy-and-burn, plus a grounded launch valuation. Here is how we think about effective buy-and-burn systems:

• Revenue has to come from utility. It should come from people using the product, not from emissions and not from the next buyer. A buyback funded by token sales and emissions is fundamentally different from a buyback funded by utility.
• The fee cannot come out of the holder's edge. If a fee only works by making the product worse than its alternatives, it is not a business model — it is an exit. Ours has to fit inside the efficiency gain, leaving both sides better off than the market they came from.
• At the right multiple, valuation stops needing consensus. Priced low enough against the revenue funding it, the buyback does the work alone — no one has to know the token exists for it to capture value.^[1] Priced high, it needs a story to hold it up, and stories leave.

[1] Hyperliquid launched in November 2024 with roughly $1.4B of circulating value against a buyback already running about $300M a year — 4.7× revenue, retiring a fifth of the float's value annually. It trades near thirteen times today.