> For the complete documentation index, see [llms.txt](https://fomopad.gitbook.io/fomopad/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://fomopad.gitbook.io/fomopad/3.-functioning-mechanism.md).

# 3. Functioning Mechanism

When a Meme project launches on FomoPad, it undergoes a fundraising phase. The raised funds are split into two parts: one for providing initial liquidity by injecting both tokens and funds into the liquidity pool, rewarding investors with LP tokens proportionate to their contribution; the other is reserved in the contract to repurchase project tokens over 30 days to maintain stable price growth. 

After the initial liquidity fundraising concludes, 30% of the total tokens will be circulating in the market, primarily held by the investors who participated in the initial liquidity provision. LP holders then have multiple operational choices:

* **Hold & Mine**: Continue holding LP tokens to participate in mining and earn rewards from the remaining 70% of tokens. 75% of mining rewards are distributed to LP holders.
* **Referral Rewards**: Earn 30% of the mining rewards from referred users, with 25% of the rewards allocated to referrers.
* **Exit Liquidity**: Investors can choose to exit LP, but a decreasing tax applies (20% on day 1, decreasing to 5% after 15 days). A 5% sell tax is applied to token sales.
* **Add Liquidity**: Investors can increase their mining rewards by purchasing more tokens and adding them to the liquidity pool.

**Token Production Mechanism**:The daily token output depends on the funds in the liquidity pool and market performance. Production is calculated as the pool’s base currency multiplied by a coefficient derived from price gains (price increase/10, capped at 10). If prices decline, the coefficient is zero.

**Rebase Mechanism**: The Rebase mechanism's base is determined by the amount of the pool’s base currency (BNB). According to the AMM model x\*y=K, as token prices increase, the base currency decreases while the token supply increases, adjusting the Rebase base. 

In addition, when tokens are sold into the SWAP base pool, the pool will burn a certain amount of the base currency based on a specific coefficient.

This system maintains a balanced supply and market conditions, preventing excessive inflation even when prices rise.

<figure><img src="https://1139937237-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FmrqXyVQNM7jCeENCg3Br%2Fuploads%2FzfCTonpy9D7SOG8MtU1A%2Fmechanism.png?alt=media&amp;token=8b64fc32-bd23-4b73-970d-80e7e11f09e1" alt=""><figcaption></figcaption></figure>