# The Quanto Flywheel

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### Trading Activity & Value Flows

Users trade and settle PnL in QTO: All trades, and thus profits and losses across the platform are denominated in QTO.

**Fee structure**:

* All trading fees are paid in $QTO.
* Of these fees:
  * 70% is permanently burned, reducing circulating supply.
  * 30% is distributed to QTO stakers, rewarding long-term holders.
* Read more on Fees [here](https://docs.quanto.trade/about-usdqto/broken-reference).&#x20;

### Liquidation Mechanics & Buybacks

**Non-QTO Collateral Liquidations**:

* When a user is liquidated on collateral not denominated in QTO (e.g., SOL, BTC, meme coins), that collateral is sold on the open market to buy back $QTO.
* This converts all realized losses into buy pressure for QTO, directly benefiting holders.
* Read more on Buybacks [here](https://docs.quanto.trade/about-usdqto/usdqto).&#x20;

**Partial Liquidation & Loss Realization**:

* If a user is not fully liquidated, but realizes losses on their non-QTO collateral (e.g., via devaluation or trade closure), those unrealized losses are converted into QTO-denominated debt.
* Users must repay this debt in $QTO, further reinforcing demand.
* Read more on Liquidations [here](https://docs.quanto.trade/about-usdqto/broken-reference).

### Holder Incentives

**Deflationary Supply**:

* Continuous burn from fees reduces token supply over time, increasing scarcity.

**Buy Pressure from External Assets**:

* Every non-QTO collateral loss event (e.g., liquidations, drawdowns) contributes to QTO buybacks.

**Staking Rewards**:

* 30% of platform fees are distributed to stakers, incentivizing long-term alignment.

### Liquidation Cascade Scenario

In the event of a liquidation cascade, where many users are liquidated simultaneously:

* A large volume of non-QTO collateral is sold on the open market.
* These sales are routed to buy back $QTO in real-time, creating **extreme buy pressure**.
* This mechanism helps:
  * Absorb market volatility.
  * Protect the protocol from systemic risk.
  * Transfer value from overleveraged positions back to $QTO holders.


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