# Dynamic Tax Protocol (DTP) Volume is the driving factor in how fast the reward pool fills and as a result, it can reach extraordinary levels during high volume trading. In previous reward tokens these volume spikes have gone unchecked, creating a false sense of reality of how much an investors rewards will be once the when the market stabilises. As trading volume decreases to a lower level, the rate at which rewards are collected also reduces until such time as trading volume increases again. In previous reward tokens, the rate at which the reward pool depletes is further accelerated by the number of holders. As the number of people who hold the token increases, so does number of tokens of which rewards are claimed against. If trading volume does not increase, it has been proven that at some point the depleting reward pool will encourage more investors to sell their $REUM tokens (it becomes less profitable to keep your money invested and claiming the decreasing rewards than selling). This scenario would create a negative imbalance between the current available liquidity in BNB and the amount of BNB in the pool. **What is the solution?** \ \ The Dynamic Tax Protocol (DTP) was created with this issue in mind. The mechanic allows for an automatic adjustment to the percentage of tax revenue which is diverted between the reward pools and the liquidity pool. The basic tax rate of 13% basic tax (excluding 1% dev and 1% marketing) will dynamically fill wherever required based on the health of the liquidity pool. This is done to ensure that maximum percentage of basic tax goes to the **reward pools** at all times. \ \ In normal trading conditions (**healthy state**) the full 13% basic tax will be sent to the Rewardeum reward pools! ### Healthy State A fully **healthy state** is achieved when value of the liquidity pool sits at 10% or more of the total market cap. The DTP then diverts the 13% transaction tax between the rewards pool and the liquidity pool at a rate of: **`13% to Rewards Pools`** **`0% Liquidity pool`** As there is sufficient liquidity in the liquidity pool, the reward pools become the priority. This ensures efficient accumulation of BNB in the reward pools which provides positive market sentiment for current and future investors (a greater reward can be claimed per $REUM held) giving them a reason to invest in more and more $REUM. {% hint style="success" %} **For example:** If market cap is $1000 and liquidity is $100 (10% of market cap) the full 13% basic tax diverts to the reward pools. If market cap is $1000 and liquidity is $120 (12% of market cap) the full 13% basic tax diverts to the reward pools. {% endhint %} ### Rejuvenation State In the event that the token price enters a downtrend for an extended period of time resulting in a liquidity pool value of less than 10% of the market cap, a **rejuvenation state** is triggered and the DTP automatically adjusts itself to prioritise adding liquidity back into the pool, whilst still retaining a portion of tax going to the BNB rewards pool. It is important to have liquidity in the pool to protect the token against price impact from larger trade, our dynamic mechanics are set in place to help slow down the rate at which liquidity is drained. This acts as a safety net for the liquidity pool and will allow it to refill at a faster rate than during a **healthy state** where the basic tax is fully diverted towards the reward pools**.** In a **rejuvenation state**, the % of transaction tax going to the liquidity pool is determined by the difference in % between the liquidity and market cap {% hint style="success" %} **For example:** If market cap is $1000 and liquidity is $50 (5%), 6.5% of basic tax will divert to the liquidity pool. {% endhint %} Considering the above, the Dynamic Tax Protocol will prioritise the reward pool at the initial launch. The added liquidity will be sufficient to induce a **healthy state**. This means that 13% of all transactions will be immediately directed toward the reward pools to fund investors claims straight from launch day. In short, the purpose of the Dynamic Tax Protocol is to sustain a healthy liquidity pool whilst enabling larger and faster growing reward pools to support investors reward claims on a consistent basis. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://rewardeum.gitbook.io/rewardeum/mechanics/dynamic-tax-protocol-dtp.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. 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