How It Works#

SLOHM is a reserve protocol, a system designed to accumulate and grow a treasury of productive assets, where every token in circulation is backed by real value held on-chain. This page explains the fundamental mechanics that make this work.

Reserve Protocol Fundamentals#

At its core, SLOHM operates a transparent, on-chain treasury backed by real, productive assets. Every SLOHM token in circulation corresponds to real value held in the reserve. As the treasury grows through bonding, yield, and protocol activity, so does the value underpinning each token.

This is not an algorithmic model. There is no peg to defend, no collateral ratio to chase. The reserve grows when value enters the system. The supply expands only when the treasury earns it.

How the Treasury Works#

The treasury is the foundation of the protocol. It holds all bonded assets, all yield generated from deployed capital, and all protocol revenue. The treasury's total value divided by the total token supply establishes the reserve floor, the minimum backing per SLOHM token.

Key properties of the treasury:

Fully on-chain. All holdings are verifiable on Bitcoin L1 at any time.
Productive. Treasury assets are deployed across yield-generating strategies, not held idle.
Growing. Every bond, every yield distribution, and every protocol interaction adds value to the reserve.
Transparent. Treasury operations are governed by smart contract logic, not discretionary decisions.

Three Core Mechanisms#

The protocol operates through three interconnected mechanisms that work together to build, sustain, and grow the treasury.

Bonding#

Users deposit BTC, Moto, or Pill tokens into the protocol and receive SLOHM at a premium above the current market rate. This mechanism directs productive assets into the treasury while rewarding participants. Every bond makes the reserve stronger. All bonded assets enter the treasury immediately.

Bonds vest over a defined period (720 blocks, approximately 5 days on mainnet) before the full payout is claimable. This vesting mechanism prevents immediate sell pressure and aligns participant incentives with long-term protocol health.

Read the full Bonding documentation →

Staking#

Staked SLOHM earns additional SLOHM over time. Staking rewards are funded by treasury yield, real returns generated from deployed assets, rather than arbitrary inflation schedules. Supply grows in proportion to reserve growth.

The protocol distributes rewards to stakers every epoch (48 blocks, approximately 8 hours). This creates a compounding effect where staked positions grow automatically with each rebase.

Read the full Staking documentation →

Reserve Yield#

Treasury assets are not idle. The protocol deploys capital across a diversified set of strategies including liquidity provision, asset staking, and lending, with additional strategies to be introduced over time. Yield compounds back into the reserve, improving backing per token.

Read the full Reserve Strategies documentation →

Supply Model#

SLOHM has no fixed supply cap. However, new tokens are minted exclusively when liquid assets are deposited into the treasury or as staking rewards tied to reserve performance. This structural design prevents hyperinflation while enabling organic, value-backed growth.

There are only two ways new SLOHM enters circulation:

Bond payouts. When a user bonds assets to the treasury, new SLOHM is minted proportional to the value deposited plus the agreed premium. The treasury receives 100% of the bonded assets, ensuring every new token has backing.
Staking rebases. The protocol mints SLOHM to distribute as staking rewards. These rewards are funded by real yield generated from treasury-deployed capital, not arbitrary emission schedules.

This model ensures that the total value in the treasury always grows at least as fast as the token supply, maintaining and increasing the reserve floor over time.

Self-Correcting Price Dynamics#

The protocol's bonding and staking mechanics create natural arbitrage conditions that contribute to price stability. When SLOHM trades below reserve backing, bond premiums compress and buying pressure increases. When it trades above, bonding becomes more attractive. These self-correcting dynamics operate without requiring external intervention.