stsato is a receipt token for burned sato. when you mint stsato, sato enters the contract. a 1% entry fee is split: 0.9% accrues to the backing pool — enriching all existing holders — and 0.1% is sent to the null address and destroyed permanently. the remainder mints new stsato at the current backing rate. when you burn stsato, you redeem your share.

there is no recovery mechanic for the burned sato. it does not go to a treasury, a dao, or a multisig. it is addressed to the zero address and stays there. every mint reduces sato circulating supply permanently.

sato has a hard cap of 21 million. each mint of stsato permanently removes sato from that 21 million. stsato itself has no supply cap (∞) — anyone can mint at any time. but the 0.1% volume burn means that protocol activity continuously shrinks supply from below while backing grows from above.

although stsato has no explicit cap, sato's 21 million hard limit acts as an indirect ceiling. you cannot mint stsato without depositing sato, and you cannot deposit sato that does not exist. as minting consumes sato and the burn further erodes supply, the pool of mintable sato contracts — placing a real, compressing upper bound on stsato supply.

sato holders benefit from reduced supply. stsato holders benefit from rising backing. both benefit from increased protocol activity.

just as bitcoin inspired communities and projects that build economies around it, stsato is designed to encourage long-term holding and the burning of sato — aligning incentives between holders, the bonding curve, and the broader sato ecosystem.

every actor in the system benefits from the same thing: sustained, growing trading volume. sato holders see supply compress. stsato holders see backing rise. the protocol has no treasury to extract value and no governance to capture. the only way to benefit is to participate.

this is the central relationship. the absolute size of the pool does not determine yield — only how much volume flows through it relative to its supply. a $1m pool trading $10m per year earns the same percentage as a $100m pool trading $1b per year.

the mechanism is self-balancing. high yield attracts capital, which increases tvl. more tvl means the same volume produces a smaller % return. the equilibrium apr is set by whatever turnover the market sustains — not by any governance parameter.

corollary: if tvl doubles but volume stays constant, turnover halves and yield halves for all holders. growth in tvl without proportional growth in volume dilutes yield. this is a direct consequence of the math and cannot be changed.

fees are the mechanism, not a side effect. they are also the primary downside.

if you mint and immediately burn you lose approximately 2% of your principal. this is by design and cannot be waived.

the yield is not a dividend. it is appreciation in the sato-per-stsato exchange rate. you do not claim it; you realize it when you burn.

sources: swap fees (0.9% of volume), borrow interest, loan origination, liquidation income. all additive. all go to backing automatically.

no oracle. no governance vote. no distribution event. the more active the protocol, the higher the backing per stsato.

the stsato bonding curve is nearly flat. over the entire 20.8m sato hard cap, the mint price rises by only ~3.4%. that figure is a lower bound: it assumes every stsato is minted and never sold, with no liquidations, no borrowing, no trading fees. in practice the same supply can cycle in and out repeatedly, each pass collecting fees and compressing the curve further. early minters hold no meaningful price advantage over late ones. the fee is 1% regardless of when you mint, how large your deposit is, or what block you mint in.

same-block mint-burn cycles cannot be profitably exploited. any actor minting and immediately burning in the same transaction pays two 1% fees, a net 2% loss. of that loss, 1.8% enriches existing holders as backing and 0.2% of sato is destroyed permanently. the attack benefits holders, not the attacker.

mev bots attempting sandwich attacks face the same economics as everyone else: 1% in, 1% out. there is no price impact to front-run and no state to manipulate. no same-block lock is needed. no flash loan guard is required. the fee structure is the defense.