# How does $PEPAY Work? ## $PEPAY uses $PEPE to secure its value Think of $PEPAY as an OHM token that is redeemable by the user FOR $PEPE and net deflationary IN $PEPE. The key difference? Unlike OHM, you can directly redeem your $PEPAY for it's backing via smart contract at any time. When we say $PEPAY is backed, we mean actually backed - not "treasury-backed" like OHM. ## Who Should Hold $PEPAY? $PEPAY is a perfect fit for believers in the power and potential of $PEPE. Put simply, if you hold $PEPE in your wallet for anything but short-term day-trading, you would be much better off holding $PEPAY because over time, you would find yourself with much more $PEPE when you cash out, than if you simply held $PEPE. Essentially, $PEPAY is a leveraged long position on $PEPE with no additional downside - not dissimilar from a $PEPE bond. $PEPAY is designed to be the bank of $PEPE - $PEPAY's primary function is to help medium and long-term hodlers of $PEPE, make more $PEPE, without assuming any additional risk. $PEPAY is also an ideal choice for those seeking to benefit from arbitrage opportunities arising from $PEPE volatility, which is best taken advantage of by attentive short-term traders. These traders can realize substantial profit from arbitraging between the $PEPAY contract and the $PEPAY LP price, while simultaneously creating additional backing value for long-term $PEPAY hodlers, in a virtuous cycle with no losers rarely seen in any assets. ## $PEPAY tokenomics create a reverse-bank-run One of the most fascinating aspects of the $PEPAY tokenomics inherited from $JAY, is that even in a worst-case scenario, $PEPAY creates a reverse-bank-run, where the person who sells last, makes the most $PEPE. Each contract burn to realize profits pays a 6% fee into the treasury, therefore s/he who sells last will make the largest profits, because they will have profited from each seller before them having increased the backing ratio by paying the 10% fee. There are no losers with $PEPAY. ## How can there be no losers? $PEPAY creates a situation where trading is no longer strictly a PVP engagement. $PEPAY doesn't need losers to pay winners. The game is not zero-sum. All players can theoretically leave with a profit, measured in $PEPE, without requiring additional capital to continually flow-in (the tell-tale sign of a ponzi scheme.) Consider the following sequence as an example, with an initial price of 1 $PEPAY=1 $PEPE: 1. User 1 purchases 10 in $PEPAY. He pays 10 in $PEPE and an additional 1 in $PEPE in fees, 0.6 of which goes to the contract treasury. 1. Treasury = 10.6 $PEPE. 2. $PEPAY circulating = 10 3. $PEPAY price now = 1.06 $PEPE. 2. User 2 purchases 20 $PEPAY, totaling 21.2 $PEPE at the updated contract price + 2.12 $PEPE in fees, of which 1.27 goes into the treasury. 1. Treasury = 33.07 $PEPE (21.2 + 1.27 + 10.6) 2. $PEPAY circulating = 30 3. $PEPAY price now = 1.10 $PEPE. 3. User 3 purchases 15 $PEPAY via a Uniswap LP to perform arbitrage. He burns the 15 $PEPAY to the contract, which is half the current circulation, to redeem half the backing, and he receives half the treasury, equaling 16.535 $PEPE. He pays a 10% tax of 1.65 $PEPE, 1 $PEPE of which goes into the treasury. 1. Treasury = 19.36 $PEPE (33.07 - 16.535 + 1) 2. $PEPAY circulating = 15 3. $PEPAY price now = 1.29 $PEPE. Whether users are buying, selling, burning, or minting, $PEPAY's redeemable amount of $PEPE will ALWAYS AND ONLY GO UP. --- # 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://pepay.gitbook.io/whitepaper/overview/how-does-usdpepay-work.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. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.