💰 SECTION 9: TOKENOMICS & ECONOMIC MODEL

Section 9: Tokenomics

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✅ SEC CATEGORY 1 COMPLIANT | Issuer-Sponsored Tokenized Securities pursuant to SEC Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Joint Statement dated January 28, 2026

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⚠️ Critical Token Classification Distinction

Before examining tokenomics, it is essential to understand that OTCM Protocol operates two distinct token types with fundamentally different characteristics and regulatory treatment:

Token	Classification	Asset Backing	Regulatory Framework
📜 ST22 Tokenized Securities	Securities	1:1 Preferred Series "M" shares	SEC Category 1 (Issuer-Sponsored)
🎫 OTCM Utility Token	Utility Token	None	Utility token analysis

⚠️ For the avoidance of doubt: This section addresses the OTCM Utility Token, which is NOT backed by securities and serves platform utility and governance functions. ST22 Tokenized Securities are addressed separately under Section 7 (Regulatory Framework) as Category 1 compliant securities.

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9.1 🎫 OTCM Utility Token Parameters

The OTCM utilityUtility tokenToken serves as the native utility currency of the OTCM Protocol ecosystem, providing governance rights, fee discounts, staking rewards, and access to premium platform features. ThisUnlike sectionST22 detailsTokenized the fundamental parameters governingSecurities, the OTCM token'sUtility supply,Token backing,is andNOT economicbacked design.by preferred shares or any other securities.

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9.1.1 📊 Total Supply & Denomination

// OTCM Utility Token Parameters (TypeScript)Configuration
interface OTCMTokenParametersOTCMUtilityToken {
    /**/ *Token CoreIdentity
    name: 'OTCM utilityUtility tokenToken';
    specificationssymbol: *'OTCM';
    Deployedstandard: on Solana mainnet using 'SPL Token-2022 standard
   */2022';
    
    // Supply parametersParameters
    totalSupply: 1_000_000_000;  // 1 billion tokens
    decimals: 9;
    //mintAuthority: Standard Solana precision
  minimumUnit: 0.000000001;'DISABLED';   // 1Immutable lamport equivalentsupply
    
    // TokenCRITICAL standardDISTINCTION
    standard:classification: 'SPL_TOKEN_2022'UTILITY_TOKEN';  extensions:// NOT a security
    assetBacking: 'NONE';             // NOT backed by securities
    regulatoryFramework: 'Utility token analysis';
    
    // Utility Functions
    primaryFunctions: [
        'TRANSFER_HOOK'Platform governance (DAO voting)',
        //'Trading Compliancefee enforcementdiscounts (10-50%)',
        'METADATA'Staking rewards (8-40% APY)',
        //'Premium On-chainfeature metadata
    'PERMANENT_DELEGATE',             // Protocol operationsaccess'
    ];
    
    // Authority configuration
  authorities: {
    mintAuthority: null;              // Disabled (fixed supply)
    freezeAuthority: Pubkey;          // Compliance enforcementFeatures
    transferHookAuthority:transferHook: Pubkey;true;
    //ofacScreening: Hooktrue;
    programcircuitBreakers: authoritytrue;
};
// On-chain metadata
  metadata: {
    name: 'OTCM Protocol Token';
    symbol: 'OTCM';
    uri: 'https://otcm.io/token-metadata.json';
    image: 'https://otcm.io/assets/otcm-logo.png';
  };
}

---

9.1.2 🔗🔧 1:1Token BackingClassification: Structure

EveryWhy OTCM tokenIs a Utility Token

The OTCM Utility Token is backedstructured 1:1and bymarketed Preferred Series "M" shares held in custody at Empire Stock Transfer,as a SEC-registered transfer agent. This backing structure ensures intrinsic value and enablesutility token holderswith tofunctional redeempurposes, underlyingdistinct equity:from ST22 Tokenized Securities:

❌

"Unlike unbacked utility tokens common in the cryptocurrency industry,What OTCM tokensUtility representToken fractionalIs ownership of real equity securities. Each token is mathematically guaranteed to be backed by proportional Series M preferred shares."

✅

typescript

// 1:1 Backing Structure Implementation
interface BackingStructure {
  /**
   * 1:1 backing verification system
   * Empire Stock Transfer provides real-time attestations
   */
  
  // Backing parameters
  backingAsset: {
    type: 'PREFERRED_SERIES_M';
    issuer: 'OTCM Protocol, Inc.';
    cusip: string;
    parValue: 0.001;               // $0.001 per share
  };
  
  // Custody verification
  custody: {
    custodian: 'Empire Stock Transfer';
    custodyType: 'QUALIFIED_CUSTODY';
    auditFrequency: 'MONTHLY';
    attestationFrequency: 'EVERY_SOLANA_SLOT';  // ~400ms
  };
  
  // Redemption capability
  redemption: {
    enabled: true;
    minimumRedemption: 1000;       // 1,000What OTCM minimumUtility processingTime:Token '3_5_BUSINESS_DAYS';IS

deliveryMethod:['DRS','PHYSICAL_CERTIFICATE'];};Backingverificationformula//backingRatio=circulatingTokens

Utility //Function	Description
🗳️ custodiedSharesGovernance /Rights	DAO //voting Muston equalprotocol parameters, fee structures, upgrades
💰 Fee Discounts	10-50% trading fee reductions based on holdings/staking
🥩 Staking Rewards	8-40% APY through protocol staking mechanism
⚙️ Platform Access	Premium features, priority issuer onboarding, analytics
🏛️ Protocol Participation	Validator node operation, liquidity provision incentives

💡 Regulatory Distinction: The OTCM Utility Token may be analyzed under the SEC's February 27, 2025 Staff Statement on Meme Coins, which established that tokens serving "entertainment and cultural purposes" with community-driven pricing may not constitute securities. This analysis applies ONLY to the OTCM Utility Token—NOT to ST22 Tokenized Securities, which ARE securities under Category 1.0000

(100%) at all times requiredRatio: 1.0000; toleranceRange: 0.0000; // Zero tolerance }

---

9.1.3 🔧 Token Technical Specifications

// OTCM Utility Token Mint- ConfigurationSolana (Rust)SPL Token-2022 Implementation
pub struct OTCMTokenConfigOTCMUtilityToken {
    /// TotalToken supply (fixed at genesis)Metadata
    pub total_supply: u64,           // 1_000_000_000_000_000_000 (with decimals)
    
    /// Decimal precision
    pub decimals: u8,                // 9
    
    /// Token standard extensions
    pub extensions: TokenExtensions {
        transfer_hook: TransferHook {
            program_id:mint: Pubkey,
    // Hook program address
            extra_accounts: Vec<AccountMeta>,
        },
        metadata: TokenMetadata {pub name: String,           // "OTCM ProtocolUtility Token"
    pub symbol: String,         // "OTCM"
    pub uri: String,            // Metadata URI
    
    },// },Supply Configuration
    pub total_supply: u64,      // 1,000,000,000 * 10^9
    pub decimals: u8,           // Authority configuration9
    pub mint_authority: Option<Pubkey>,  // None (disabled)
    pub freeze_authority: Option<Pubkey>, // Some(compliance_multisig)Compliance authority
    
    // Transfer Hook Configuration
    pub transfer_hook_program: Pubkey,
    pub transfer_hook_enabled: bool,
    
    // Utility Token Attributes (NOT securities attributes)
    pub governance_enabled: bool,
    pub staking_enabled: bool,
    pub fee_discount_enabled: bool,
    
    // EXPLICIT: No asset backing
    pub asset_backing: Option<AssetBacking>, // None
}

impl OTCMTokenConfigOTCMUtilityToken {
    pub fn is_supply_fixed(is_security(&self) -> bool {
        self.mint_authority.is_none()false  // TrueOTCM Utility Token is NOT a security
    }
    
    pub fn has_asset_backing(&self) -> nobool new{
        tokensfalse  can// beOTCM mintedUtility Token is NOT backed by securities
    }
}

---

9.1.4 💧 Initial Liquidity Pool Configuration

The OTCM tokenUtility Token launches with an initial liquidity pool seeded with protocol capital to ensure immediate trading capability:

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9.1.5 🎓 Graduation Mechanism

The OTCM tokenUtility Token utilizes a bonding curve structure with a graduation threshold, after which it transitions to DEX trading:threshold:

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9.1.6 📊 Post-Graduation Token Economics

Upon reaching the graduation threshold, accumulated bonding curve funds are burned and permanently locked in the CPMM liquidity pool:

// Post-Graduation MechanismLiquidity ImplementationLock
interface GraduationMechanismGraduationMigration {
    /**trigger: *'Market Graduationcap fromreaches bonding$250,000';
    
    curvemigration: {
        bondingCurveFunds: 'Transferred to CPMM LP
   */
  
  // Graduation trigger
  trigger: {
    metric: 'MARKET_CAP'LP';
    threshold: 250_000;            // $250,000 USD
    checkFrequency: 'EACH_TRADE';
    automaticExecution: true;
  };
  
  // Migration process
  migration: {
    // Step 1: Pause bonding curve trading
    pauseBondingCurve: true;
    
    // Step 2: Calculate LP allocation
    bondingCurveFunds: number;     // Accumulated USDC
    remainingTokens: number;       // Unsold OTCM from curve
    
    // Step 3: Create CPMM pool
    cpmmPool: {
      usdcSide: bondingCurveFunds;
      otcmSide: remainingTokens;
      initialK: bondingCurveFunds * remainingTokens;
    };
    
    // Step 4: Lock LP tokens permanently
        lpTokens: {'Burned recipient:(sent 'BURN_ADDRESS';   //to 0x000...dead lockDuration:address)';
        liquidityStatus: 'PERMANENT'PERMANENTLY_LOCKED';
        withdrawable:withdrawalPossibility: false;
    }'MATHEMATICALLY_IMPOSSIBLE';
    };
    
    // Post-graduation state
  postGraduation:marketProtection: {
        tradingVenue:liquidityStability: 'CEDEX_CPMM'Liquidity cannot be extracted by any party';
        liquidityLocked: true;
    priceDiscovery:priceFloor: 'AMM_DRIVEN';Permanent slippageControl:liquidity 'CIRCUIT_BREAKER'provides price stability';
    };
}

✅ Permanent Liquidity Lock: Post-graduation, LP tokens are sent to a burn address, making liquidity withdrawal mathematically impossible.impossible. This creates a "rugpull-proof" structure where underlying liquidity can never be extracted by any party.

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9.2 ⏰ Token Vesting Schedule

9.2.1 📜 Vesting Philosophy

OTCM Protocol implements a structured vesting schedule designed to:

• ✅ Align issuerparticipant incentives with long-term tokenplatform success
• ✅ Prevent market manipulation through sudden large sells
• ✅ Create predictable supply dynamics that enable informed investmentdecisions
decisions
• ✅ Protect all participants from dump scenarios

💡 "Vesting ensures that token issuersrecipients maintain skin-in-the-game throughout the protocol's growth phase. Immediate large-scale selling is structurally impossible, protecting all participants from dump scenarios.participants."

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9.2.2 📊 IssuerOTCM Utility Token Allocation

When issuers mint ST22 tokens (Security Meme Tokens), they receive a fixed allocation subject to the vesting schedule:

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9.2.3 📅 Vesting Timeline

The 60%team issuerand allocationinvestor followsallocations afollow structured release schedule over 30 months:schedules:

💰

TotalInvestor Vesting Period:(36 30months)

months frommintingtofinalrelease, assuming immediate graduation)

Phase	Timing	Release %	Cumulative
1️⃣	12-month cliff	0%	0%
2️⃣	Month 13	25%	25%
3️⃣	Monthly (time14-36)	~3.3%/month	100%

---

9.2.4 📜 Vesting Smart Contract Implementation

// OTCM Utility Token Vesting Schedule Implementation (TypeScript)
interface VestingSchedule {
    /**beneficiary: *PublicKey;
    IssuertokenMint: token vesting implementation
   * Enforced at protocol level through smart contract
   */PublicKey;          // VestingOTCM configurationUtility config:Token (NOT securities)
    totalAllocation: bigint;
    
    schedule: {
        totalAllocation:cliffDuration: number;      // 60%Seconds ofuntil totalfirst supplyrelease
        vestingPeriods:vestingDuration: 5;number;    // NumberTotal of unlock events
    releasePercentage: 20;          // % pervesting period
        releaseSchedule: 'LINEAR' | 'MILESTONE';
    };
    
    state: {
        startTime: Date;
        totalReleased: bigint;
        lastClaimTime: Date;
    };
    
    // Vesting periodsenforcement
    periods:calculateVested(currentTime: [Date): {bigint;
    id:claim(): 1,
      trigger: 'MINT_COMPLETION',
      percentage: 20,
      unlockCondition: 'IMMEDIATE',
      status: 'UNLOCKED' | 'LOCKED',
    },
    {
      id: 2,
      trigger: 'GRADUATION',
      percentage: 20,
      unlockCondition: 'MARKET_CAP Promise<TransactionSignature>= $250,000',
      status: 'UNLOCKED' | 'LOCKED',
    },
    {
      id: 3,
      trigger: 'TIME_BASED',
      percentage: 20,
      unlockCondition: 'graduation_timestamp + 6_MONTHS',
      status: 'UNLOCKED' | 'LOCKED',
    },
    {
      id: 4,
      trigger: 'TIME_BASED',
      percentage: 20,
      unlockCondition: 'graduation_timestamp + 12_MONTHS',
      status: 'UNLOCKED' | 'LOCKED',
    },
    {
      id: 5,
      trigger: 'TIME_BASED',
      percentage: 20,
      unlockCondition: 'graduation_timestamp + 18_MONTHS',
      status: 'UNLOCKED' | 'LOCKED',
    },
  ];
    
    // VestingAnti-manipulation
    accountdailySellLimit: vestingAccount:'1% {of owner:daily Pubkey;volume';
    //cooldownPeriod: Issuer'24 wallethours escrowAccount:between Pubkey;          // PDA holding locked tokens
    totalLocked: number;
    totalClaimed: number;
    nextUnlockTimestamp: number;
  }claims';
}

---

9.2.5 🛑 Anti-Dump Mechanisms

Beyond vesting, additional anti-dump mechanisms protect token holders:

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9.2.6 📈 Vesting Visualization

┌                OTCM UTILITY TOKEN VESTING SCHEDULE
                (Team & Advisor Allocation)
                
100% ─────────────────────────────────────────────────────────────────────────┐ │████████████
 📅90% VESTING TIMELINE VISUALIZATION                    │
└─────────────────────────────────────────────── ████████████
 80% ──────────────────────────┘

Month 0 (Mint)───────────────────── ████████████
 70% ─────────────────────────────────────────────── ████████░░░░░░░░░░░░░░░░░░░░░░░░░░░░░░████
 20%60% Month─────────────────────────────────────────────── 0+████████████
 (Grad)50% ─────────────────────────────── ████████████████████████████
 40% ─────────────────────────────── ████████████░░░░░░░░░░████████████████
 40%30% Month─────────────────────────────── 6████████████████████████████
 25% ─────────────── ████████████████████████████████████████████████░░
 60%20% Month 12─────────────── ████████████████████████████████████████████████░░
 80%10% Month 18─────────────── ████████████████████████████████████████████
  0% ─── ░░░░░░░░░░░░████████████████████████████████████████████
      100%TGE    12mo    24mo    36mo    48mo
      
      ░░░ Cliff (Locked)    ████ =Vested
Unlocked tokens    ░ = Locked tokens

📍 Key Events:
├─ Day 0: Token minting → 20% immediately available
├─ Graduation: $250K MC reached → Additional 20% unlocked
├─ +6 months: Time-based release → Additional 20% unlocked
├─ +12 months: Time-based release → Additional 20% unlocked
└─ +18 months: Final release → All tokens fully vested

---

9.3 💵 Revenue Model: Perpetual 5% Transaction Fee

9.3.1 📊 Fee Structure Overview

The OTCM Protocol generates sustainable revenue through a 5% transaction fee applied to all trades executed on CEDEX. This fee structureapplies to ST22 Tokenized Securities trading (Category 1 compliant) and provides predictable, volume-based revenue while remaining competitive with traditional securities trading costs.revenue.

Category 1 Revenue Context

💡 Revenue Source: Transaction fees are generated from trading of ST22 Tokenized Securities, which are securities under federal securities laws. This creates a sustainable revenue model where OTCM Protocol earns fees from facilitating Category 1 compliant securities trading.

---

9.3.2 🔄 Fee Distribution Mechanism

// Fee Collection and Distribution Mechanism
interface FeeDistribution {
    /**/ *Fee 5% transaction fee distribution mechanism
   * Executed automaticallycollection on eachevery CEDEXST22 trade
    */tradeExecution: {
        totalFee: '5.00%';
        collection: 'Atomic with trade execution';
        transferHookEnforced: true;  // FeeCannot calculationbe calculation: {
    totalFeeRate: 500;             // 5.00% in basis points
    appliedTo: 'TRADE_VALUE';      // USD equivalent
    collectOn: ['BUY', 'SELL'];    // Both directionsbypassed
    };
    
    // Distribution splitbreakdown
    distribution: {
        otcmProtocol: {
            percentage: 80;'4.00%';
            //destination: 4%'Protocol ofTreasury';
            trade (80% of fee)
      recipient: OTCM_TREASURY_ADDRESS;
      usage:uses: [
                'PROTOCOL_DEVELOPMENT'Category 1 compliance infrastructure',
                'OPERATIONAL_COSTS'Transfer Hook operations',
                'LIQUIDITY_PROVISION'Custody oracle maintenance',
                'TREASURY_GROWTH'Development',
                'Staking rewards',
                'LP growth'
            ];
        };
        smtIssuer:st22Issuer: {
            percentage: 20;'1.00%';
            //destination: 1%'Issuer-designated ofwallet';
            trade (20% of fee)
      recipient: ISSUER_REVENUE_ADDRESS;
      usage:uses: ['Issuer 'ISSUER_REVENUE'revenue', 'STAKING_REWARDS_FUNDING',Shareholder 'OPERATIONAL_SUPPORT',
      value'];
        };
    };
    
    // FeeCategory collection1 collection:compliance
    {
    timing:regulatoryStatus: 'ATOMIC_WITH_TRADE';Fees //from SameCategory transaction1 currency:compliant 'TRADE_CURRENCY';securities // USDC/SOL/etc
    settlement: 'IMMEDIATE'trading';
};
}

---

9.3.3 📈 Revenue Projections by Volume

Revenue scales linearly with trading volume. The following table illustrates revenue at various volume levels:volume:

Formula: Annual Protocol Revenue = Daily Volume × 4% × 365

---

9.3.4 📜 Fee Collection Implementation

// Fee Collection Smartvia ContractTransfer Hook (Rust/Anchor)Category //1 Fee collection executed atomically with each tradeCompliant)
pub fn collect_transaction_fee(collect_trading_fee(
    ctx: Context<CollectFee>,
    trade_amount: u64,
) -> Result<()> {
    // Calculate 5% total fee (5%)
    let total_fee = trade_amount
        .checked_mul(FEE_RATE_BPS as u64)500)  // 5.00% = 500 bpsbasis points
        .ok_or(ErrorCode::Overflow)MathOverflow)?
        .checked_div(10_000)
        .ok_or(ErrorCode::Overflow)MathOverflow)?;
    
    // CalculateSplit: splits4% to protocol, 1% to issuer
    let protocol_shareprotocol_fee = total_fee
        .total_fee.checked_mul(80)  // 80% of fee = 4% of trade
        .ok_or(ErrorCode::Overflow)?
        unwrap().checked_div(100)
        .ok_or(ErrorCode::Overflow)?unwrap();
    let issuer_shareissuer_fee = total_fee
        total_fee.checked_sub(protocol_fee).checked_sub(protocol_share)
        .ok_or(ErrorCode::Overflow)?;  // 20% of fee = 1% of trade
    
    // Transfer to protocol treasury
    transfer_to_treasury(
        &ctx.accounts.trade_account,
        &ctx.accounts.protocol_treasury,
        protocol_share,
    unwrap()?;
    
    // Transfer tofees issueratomically
    transfer_to_issuer(transfer_to_protocol_treasury(protocol_fee)?;
    &transfer_to_issuer_wallet(ctx.accounts.trade_account,issuer_wallet, &ctx.accounts.issuer_revenue,
        issuer_share,
    )issuer_fee)?;
    
    // Emit compliance event for tracking
    emit!(FeeCollected {
        trade_amount,
        total_fee,
        protocol_share,protocol_fee,
        issuer_share,issuer_fee,
        timestamp:category1_compliant: Clock::get()?.unix_timestamp,true,  // Fees from securities trading
    });
    
    Ok(())
}

---

9.3.5 📊 Comparative Fee Analysis

OTCM's 5% transaction fee compares favorably with traditional securities trading costs when considering the full Category 1 compliant service bundle:bundle:

💡 Value Proposition: OTCM's 5% fee includes comprehensive Category 1 compliance infrastructure: (KYC/AML,AML/accreditation accreditation),verification, SEC-registered transfer agent custody, official shareholder registry, 42 Transfer Hook security controls, immutable audit trail, and 24/7 trading. Traditional alternatives require separate fees for each service.

---

9.3.6 📈 Five-Year Revenue Projections

---

9.4 🏦 Staking Rewards Architecture

9.4.1 📋 Staking Model Overview

OTCM Protocol implements a staking mechanism thatenabling enablesOTCM tokenUtility Token holders to earn passive incomerewards through participation in the protocol's securityoperations. andStaking governance.rewards Individualare funded by transaction fees from ST22 stakingTokenized nodesSecurities provide continuous rewards with industry-leading compounding frequency.trading.

💡 "Staking transforms passive token holding into active protocol participation, aligning holder incentives with long-term network success while providing sustainable passiverewards income.funded by Category 1 compliant securities trading."

Revenue Flow to Stakers

┌─────────────────────────────────────────────────────────────────┐
│           ST22 TOKENIZED SECURITIES TRADING                     │
│              (Category 1 Compliant)                             │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│              5% TRANSACTION FEE COLLECTED                       │
└─────────────────────────────────────────────────────────────────┘
                              ↓
              ┌───────────────┴───────────────┐
              ↓                               ↓
┌─────────────────────┐         ┌─────────────────────┐
│  4% → OTCM Protocol │         │  1% → ST22 Issuer   │
└─────────────────────┘         └─────────────────────┘
              ↓
┌─────────────────────────────────────────────────────────────────┐
│              PROTOCOL TREASURY ALLOCATION                       │
│  ┌────────────┐ ┌────────────┐ ┌────────────┐ ┌────────────┐   │
│  │ Operations │ │Development │ │  STAKING   │ │  LP Growth │   │
│  │    30%     │ │    25%     │ │  REWARDS   │ │    15%     │   │
│  │            │ │            │ │    30%     │ │            │   │
│  └────────────┘ └────────────┘ └────────────┘ └────────────┘   │
└─────────────────────────────────────────────────────────────────┘
                              ↓
┌─────────────────────────────────────────────────────────────────┐
│              OTCM UTILITY TOKEN STAKERS                         │
│              (Rewards distributed every 2.6 days)               │
└─────────────────────────────────────────────────────────────────┘

---

9.4.2 📊 APY Configuration & Ranges

---

9.4.3 🔄 Epoch Duration & Compounding

OTCM staking utilizes short epochs for maximized compounding benefit:

---

9.4.4 🧮 Compounding Mathematics

The effective APY differs from nominal APY due to compounding frequency:

APY_effective = (1 + APY_nominal / n)^n - 1

Where n = number of compounding periods per year (~140 for OTCM staking)

---

9.4.5 🏗️ Staking Pool Implementation

// OTCM Utility Token Staking Pool Configuration
interface StakingPool {
    /**/ *Pool ST22Configuration
    stakingpoolId: poolPublicKey;
    configurationstakingToken: * Each SMT issuer maintains separate staking pool
   */PublicKey;     // PoolOTCM identificationUtility poolId:Token Pubkey;(NOT issuerId:securities)
    string;rewardToken: tokenMint:PublicKey;      Pubkey;// OTCM Utility Token
    
    // APY configurationParameters
    apyConfig: {
    currentApy:baseApy: number;           // Basis points (1500 = 15%)
    minApy: 800;             // 8% minimum
    maxApy: 6000;number;              // 60%40% maximum
    adjustmentFrequency:currentApy: 'EPOCH';number;          // Can adjust each epoch
  };Volume-dependent
    
    // Epoch configurationConfiguration
    epochConfig:epochDuration: {
    durationSlots: 5616;224640;       // ~2.6 days atin 400ms/slotseconds
    currentEpoch: number;
    epochStartSlot: number;
    nextDistribution:lastRewardDistribution: Date;
  };
    
    // Pool state
  poolState: {State
    totalStaked: number;bigint;
    totalStakers:rewardPool: number;bigint;
    rewardsAvailable:stakers: number;Map<PublicKey, rewardsDistributed: number;
    lastDistributionEpoch: number;
  }StakerPosition>;
    
    // RewardsRevenue fundingSource rewardsFunding:(Category {1 source:Alignment)
    rewardFunding: 'ISSUER_REVENUE'ST22 trading fees (Category 1 compliant securities)';
    
    // 1%Operations
    transactionstake(amount: feebigint): sharePromise<void>;
    autoReplenish:unstake(amount: true;bigint): reserveTarget:Promise<void>;
    number;claimRewards(): Promise<bigint>;
    
    // 3Auto-compound epochsoption
    worthautoCompound: of rewardsboolean;
};
}

---

9.4.6 💧 LP Reinvestment Mechanism

A portion of staking rewards automatically flows back to theliquidity OTCM Liquidity Pool, strengthening protocol reserves:pools:

---

9.4.7 📜 Staking Rewards Distribution

// Staking Rewards Distribution (Rust/Anchor)funded //by StakingST22 rewardstrading distribution per epochfees)
pub fn distribute_staking_rewards(
    ctx: Context<DistributeRewards>,
    epoch: u64,
) -> Result<()> {
    let pool = &mut ctx.accounts.staking_pool;
    let current_time = Clock::get()?.unix_timestamp;
    
    // Verify epoch has endedcomplete
    require!(
        Clock::get()?.slotcurrent_time >= pool.epoch_config.epoch_start_slotlast_distribution + pool.epoch_config.duration_slots,epoch_duration,
        ErrorCode:StakingError::EpochNotComplete
    );
    
    // Calculate rewards forfrom thistreasury epoch(funded by Category 1 trading fees)
    let epoch_rateepoch_rewards = pool.apy_config.current_apy
        .checked_div(140)  // ~140 epochs per year
        .ok_or(ErrorCode::Overflow)?;
    
    let total_rewards = pool.pool_state.total_staked
        .checked_mul(epoch_rate as u64)
        .ok_or(ErrorCode::Overflow)?
        .checked_div(10_000)  // Convert from basis points
        .ok_or(ErrorCode::Overflow)calculate_epoch_rewards(pool)?;
    
    // CalculateDistribute proportionally to all stakers
    for (staker, position) in pool.stakers.iter_mut() {
        let staker_share = position.staked_amount
            .checked_mul(epoch_rewards)?
            .checked_div(pool.total_staked)?;
        
        if position.auto_compound {
            position.staked_amount = position.staked_amount.checked_add(staker_share)?;
        } else {
            position.pending_rewards = position.pending_rewards.checked_add(staker_share)?;
        }
    }
    
    // LP reinvestmentReinvestment (2%)
    let lp_reinvestment = total_rewards
        .epoch_rewards.checked_mul(2)
        .ok_or(ErrorCode::Overflow)?
        .checked_div(100)
        .ok_or(ErrorCode::Overflow)?;
    let staker_rewards = total_rewards
        .checked_sub(transfer_to_liquidity_pool(lp_reinvestment)
        .ok_or(ErrorCode::Overflow)?;
    
    // Transfer LP reinvestment
    transfer_to_master_lp(
        &ctx.accounts.rewards_vault,
        &ctx.accounts.master_lp,
        lp_reinvestment,
    )?;
    
    // Distribute to stakers (proportional to stake)
    distribute_to_stakers(&ctx, staker_rewards)?;
    
    // Update pool state
    pool.pool_state.rewards_distributed += total_rewards;
    pool.pool_state.last_distribution_epochlast_distribution = epoch;
    
    // Advance to next epochcurrent_time;
    pool.epoch_config.current_epoch += 1;
    
    pool.epoch_config.epoch_start_slot = Clock::get()?.slot;
    
    emit!(RewardsDistributed {
        epoch,epoch: total_rewards,pool.current_epoch,
        total_rewards: epoch_rewards,
        lp_reinvestment,
        staker_rewards,funding_source: stakers_count:"ST22_TRADING_FEES",  pool.pool_state.total_stakers,// Category 1 compliant
    });
    
    Ok(())
}

---

9.5 ☀️ SOL Treasury Strategy

9.5.1 🎯 Strategic Rationale

OTCM Protocol allocates a significant portion of offering proceeds to building a SOL treasury,treasury, positioning the company among the first publiclyCategory traded1 entitiescompliant tokenized securities platforms to maintain significant blockchain asset reserves. This strategy provides multiple strategic benefits:reserves:

---

9.5.2 📊 Treasury Allocation

---

9.5.3 📈 Staking Yield Projections

The SOL treasury generates passiveoperational incomefunding through native Solana staking:

Treasury Target: 6-8% annual staking yields, generating $480,000-$640,000 in operational funding annually.annually to support Category 1 compliance infrastructure.

---

9.5.4 📜 Treasury Management Policy

// SOL Treasury Management
Policy
interface TreasuryManagementPolicyTreasuryPolicy {
  /**
   * SOL Treasury management framework
   */
    // Allocation
    strategytotalAllocation: allocation:'$8,000,000 {in stakingAllocation: 90;         // 90% actively staked
    liquidReserve: 10;             // 10% liquid for operations
  }SOL';
    
    // Staking configurationStrategy
    staking: {
        validatorSelection:targetYield: 'DIVERSIFIED'6-8% APY';
        //validatorDiversification: Multiple'Maximum 25% with any single validator';
        slashingProtection: 'Only stake with validators minimumValidators:having 5;no maxPerValidator:slashing 25;           // 25% max per validator
    validatorCriteria: [
      'TOP_100_BY_STAKE',
      'COMMISSION_UNDER_10_PERCENT',
      'UPTIME_ABOVE_99_PERCENT',
      'NO_SLASHING_HISTORY',
    ]history';
    };
    
    // YieldLiquidity managementManagement
    yieldManagement:liquidity: {
        compoundingFrequency:liquidReserve: 'EPOCH'10% maintained for operational needs';
        //rebalancingThreshold: Each'5% Solanadrift epochtriggers yieldDistribution: {
      operations: 60;              // 60% to operations
      treasuryGrowth: 30;          // 30% compounded to treasury
      stakingReserve: 10;          // 10% to staking rewards reserve
    }rebalancing';
    };
    
    // Risk managementManagement
    riskManagement:riskControls: {
        maxDrawdown:priceVolatility: 20;'Accepted as strategic Solana ecosystem exposure';
        validatorRisk: 'Diversified across 10+ validators';
        regulatoryCompliance: 'Treasury supports Category 1 infrastructure';
    };
    
    // 20%Governance
    maxgovernance: allowed{
        drawdownoversightBody: rebalanceThreshold:'Board 30;of //Directors';
        RebalancereportingFrequency: if'Quarterly allocationtreasury driftsreports';
        30%auditRequirement: liquidityMinimum:'Annual 500_000;third-party // $500K minimum liquidaudit';
    };
}

---

9.5.5 🛡️ Risk Management Framework

The SOL treasury incorporates comprehensive risk management:

⚠️ Price Volatility Risk: SOL treasury value will fluctuate with SOL market price. While this creates potential upside from price appreciation, it also exposes the treasury to downside risk. This volatility is accepted as strategic exposure to the Solana ecosystem.ecosystem that powers OTCM's Category 1 infrastructure.

---

9.6 📊 Economic Sustainability Analysis

9.6.1 🔄 Value Flow Architecture

The OTCM Protocol creates a self-sustaining economic ecosystemecosystem—all powered by Category 1 compliant securities trading where value flows continuously between participants::

┌─────────────────────────────────────────────────────────────────────────────┐
│                     💰                    OTCM PROTOCOL VALUE FLOW                                 │
│                    (Category 1 Compliant Foundation)                        │
└─────────────────────────────────────────────────────────────────────────────┘

     ┌─────────────────────┐              │   🏢 SMT ISSUERS    │
                  │ (Issue ST22 Tokens) │
                  └──────────┬──────────┘
                             │
                             │ 💵 Minting Fee ($1K-$25K)
                             │ + 40% tokens to LP
                             ▼
                  ┌─────────────────────┐
     │   🏦ST22 CEDEX TRADING  │◄──── 👥 Investors Buy/Sell
                  │  (5% Transaction)   │
                  └──────────┬──────────┘
                             │
          ┌──────────────────┼──────────────────┐ISSUERS   │              │    │
          │ 4%               │ 1%               │
          ▼                  ▼                  │
┌─────────────────┐  ┌─────────────────┐INVESTORS     │
     │ 🏛️ OTCM PROTOCOL│  │ 🏢 SMT ISSUER   (Board-Authorized)│              │   │    TREASURY     │  │    REVENUE      │(Verified)     │
     └────────┬─────────┘              └────────┬─────────┘
              │                                  │
              │ │Create Category 1                │ │Trade Funds StakingST22
              │ │tokenized ▼securities             │ │           ┌─────────────────┐        │
         │           │ 🏦 STAKING      │◄───────┘
         │           │   REWARDS       │    2% LP Reinvestment
         │           │  (8-60% APY)    │
         │           └────────┬────────┘securities
              │                                  │
              ▼                                  ▼
     ┌─────────────────────────────────────────────────────┐
     │                    💧CEDEX LIQUIDITY POOL GROWTHTRADING                    │
     │           (Permanent,Full Non-Withdrawable)Transfer Hook Compliance)           │
     │              5% Transaction Fee                     │
     └────────────────────────┬────────────────────────────┘
                              │
              ┌───────────────┴───────────────┐
              │                               │
              ▼                               ▼
     ┌──────────────────┐          ┌──────────────────┐
     │ 4% → OTCM PROTOCOL│          │ 1% → ST22 ISSUER │
     │    TREASURY       │          │    REVENUE       │
     └────────┬─────────┘          └──────────────────┘
              │
     ┌────────┴────────┬────────────┬────────────┐
     │                 │            │            │
     ▼                 ▼            ▼            ▼
┌─────────┐      ┌─────────┐  ┌─────────┐  ┌─────────┐
│Operations│      │  Dev    │  │ STAKING │  │   LP    │
│   30%   │      │  25%    │  │ REWARDS │  │ GROWTH  │
│         │      │         │  │   30%   │  │   15%   │
└─────────┘      └─────────┘  └────┬────┘  └─────────┘
                                   │
                                   ▼
                         ┌──────────────────┐
                         │  OTCM UTILITY    │
                         │  TOKEN STAKERS   │
                         │ (8-40% APY)      │
                         └──────────────────┘

---

9.6.2 🔄 Token Velocity Management

Excessive token velocity can undermine value. OTCM manages velocity through multiple mechanisms:

---

9.6.3 📉 DeflationarySupply Mechanisms

Dynamics

While OTCM maintains fixed supply, effective circulating supply decreasesis over timemanaged through:

---

9.6.4 📈 Long-Term Projections

---

9.6.5 ✅ Economic Sustainability Summary

✅ Economic Sustainability: The OTCM Protocol creates a self-sustaining economic loop:loop powered by Category 1 compliant securities trading:

TradingST22 trading generates fees → Fees fund operations and staking rewards → Staking rewards attract more OTCM stakers → Stakers reduce sell pressure → Reduced sell pressure supports OTCM price → Higher priceOTCM value attracts more issuers and→ tradersMore issuers create more ST22 trading → More trading generates more fees

The foundation of this economic model is Category 1 compliant tokenized securities trading—sustainable revenue from legitimate securities market infrastructure.

━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━

---

📋 Section 9 Summary

Topic	Key Point
🎫 OTCM Utility Token	Utility token for governance, fees, staking — NOT backed by securities
📜 ST22 Distinction	ST22 Tokenized Securities are securities (Category 1) — completely separate
💵 Revenue Source	5% fee on Category 1 compliant ST22 trading
🥩 Staking Rewards	8-40% APY funded by ST22 trading fees
🔒 Token Protection	Vesting, anti-dump mechanisms, permanent LP locks
☀️ SOL Treasury	$8M treasury supporting Solana infrastructure

---

© 20252026 OTCM Protocol, Inc. | All Rights Reserved

Aligned with SEC Division of Corporation Finance, Division of Investment Management, and Division of Trading and Markets Joint Statement dated January 28, 2026

ST22 Tokenized Securities are securities under federal securities laws. The OTCM Utility Token is a utility token that is NOT backed by securities and serves platform utility and governance functions. This document is for informational purposes only and does not constitute an offer to sell or solicitation of an offer to buy any securities.