> For the complete documentation index, see [llms.txt](https://docs.amara.exchange/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.amara.exchange/tokenomics/burn-mechanism.md).

# Burn Mechanism

$AMARA is designed to be deflationary over time through a structured buyback-and-burn program. Instead of relying on arbitrary burns, supply reduction is tied directly to actual protocol usage, making every burn meaningful and transparent.

**How It Works**

* A portion of protocol revenue is allocated specifically for buybacks.
* These funds are used to purchase $AMARA from the open market.
* All tokens acquired through this program are permanently sent to a burn address, removing them from circulation.

**Funding Sources for Buybacks**

* **Trading Fees**: Revenue from perpetual and spot markets.
* **Liquidation Fees**: Collected when undercollateralized positions are liquidated.
* **Funding Rate Spreads**: Surplus generated when long and short positions are imbalanced.
* **Treasury Surplus**: Excess reserves directed by governance once active.

**Execution**\
Buybacks are carried out transparently, with transactions visible on-chain. They may occur on a recurring schedule or be triggered by revenue milestones, such as hitting a certain fee threshold. This ensures flexibility while maintaining accountability.

**Impact on Supply**

* Every buyback reduces circulating supply, directly linking token scarcity to Amara’s adoption.
* Burns compound over time. As usage grows, more revenue is directed to buybacks, accelerating deflationary pressure.
* The effect is twofold: supporting token value while rewarding long-term holders through scarcity.

**Long-Term Alignment**\
By tying burns to platform revenue, Amara ensures that deflation is not arbitrary but earned. The more successful the protocol becomes, the more aggressive the burn schedule grows. This design reinforces $AMARA’s role as both a utility token and a store of value tied to the health of the ecosystem.


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