Reserve Income Management and Sustainability

To preserve the long-term viability of the ecosystem, the Suno Protocol defines clear rules for how income generated by the Reserve—that is, from operational projects held by the Protocol—is managed and allocated. This includes mechanisms to continuously compensate for asset depreciation, support liquidity, and deliver predictable returns to uWatt holders.

All of these functions are governed by smart contracts, ensuring transparency, consistency, and automation.

Revenue Allocation

The income generated by the Reserve is allocated across three primary functions:

1. Depreciation Reserve

   A portion of the income is allocated to a Depreciation Reserve, which exists to continuously offset the natural decline in asset value as projects age. Rather than waiting until an asset reaches the end of its useful life, the Protocol reinvests this portion of income into purchasing new pWatts from other existing projects. This ensures that the Reserve is replenished over time, maintaining or even increasing the total value backing the uWatt.

2. Liquidity Provisioning

   Another portion of the income may be allocated to liquidity pools on decentralized or centralized exchanges. This enhances the tradability of uWatts and helps align their market price with their intrinsic reference value. By improving liquidity, the Protocol makes it easier for participants to enter and exit positions with minimal slippage.

3. Rewards to uWatt Holders

   The remainder of the income is distributed as rewards to uWatt holders, in proportion to their share of the total uWatt supply. This creates a clear and direct incentive for participants to hold uWatts and benefit from the long-term performance of the Reserve.

Automated and Transparent

All income flows and allocations are managed by smart contracts. This ensures that distributions happen in a consistent and auditable way, without requiring centralized oversight or manual intervention. Token holders can verify income flows and Reserve health at any time through on-chain data.

A Sustainable Economic Loop

This model creates a self-sustaining feedback loop: operational assets generate income → income funds depreciation compensation, liquidity, and rewards → the Reserve remains healthy → uWatts stay backed by productive assets → more participants join → new projects are funded.

By reinvesting continuously and allocating income transparently, the Protocol ensures that uWatts remain backed by real-world infrastructure—and that the system grows sustainably over time.