The case for a Turret token

Updated September 6, 2026.

Turret needs people willing to supply USDG so other people can borrow it. A token could help attract that capital by rewarding suppliers and giving eligible holders a share of the revenue the protocol collects.

That is the purpose we are exploring. Borrowing and earning already have an economic relationship: borrowers pay interest, and lenders supply the money those borrowers use. A token would add incentives around that relationship. It would need to bring enough lasting participation to justify its cost and complexity.

This is a design proposal. The token rewards and holder revenue sharing described here are not live. There is no announced launch date, final ticker, distribution schedule or guaranteed return.

Borrow and Earn come first

On Turret, a borrower deposits supported collateral and borrows USDG from that market's funded pool. Debt accrues interest. Lenders supply USDG through Earn and receive pool shares representing their participation, including its interest and loss exposure. The market page shows the applicable terms.

Each market has its own pool. USDG deposited in the Silver pool funds SLV-backed loans; it does not automatically become lending capital for the other markets. Money lent out is not immediately available for withdrawal, and a liquidation that recovers too little can cause losses.

Users do not need a Turret token to borrow, supply USDG, repay or recover their remaining collateral. Optional rewards should preserve that access.

What Liquity used its token for

Liquity's original design provides a useful example. It had two different tokens: LUSD, the stablecoin people borrowed, and LQTY, the incentive token.

Users who deposited LUSD into its Stability Pool earned LQTY rewards alongside liquidation gains. The deposited LUSD paid off liquidated debt, and depositors received collateral. LQTY rewarded people for supplying that liquidation funding. Liquity's Stability Pool explanation

Staking LQTY earned a share of borrowing and redemption fees. In V1, LQTY was not a governance token, and staked LQTY did not itself backstop loans. Liquity's staking design

Liquity also rewarded independent frontend operators for bringing users to the protocol. Frontend incentives

For Turret, the useful idea is to connect rewards to contributions the product needs. Turret lends existing USDG; it does not reproduce Liquity's stablecoin or Stability Pool design.

Reward the people supplying useful capital

Our proposed starting point is a funded token reward program for eligible Earn suppliers. It could encourage people to deposit USDG and keep it available while the lending markets grow. Rewards would have a published budget, eligibility rules and duration.

Those token rewards would be separate from the pool's lending return. Borrower interest is income from loans. A token reward is an incentive whose value can change, including falling to zero. Combining the two into one attractive yield figure would hide that difference.

Reward budgets should reflect where capital is useful. If a market already has more USDG than it can prudently lend, paying for still more deposits does little for borrowers. We would need to review borrowing demand, market limits and how much capital remains after incentives end.

Any future reward for liquidation funding or market-making would need its own rules. An Earn deposit, funds reserved for liquidations and liquidity in a trading pool perform different jobs. The same money cannot be counted in all three places.

Give holders a defined share of collected revenue

The second proposed role is revenue sharing for eligible token stakers or lockers. A share of the protocol's collected revenue could fund distributions, creating a reason to hold the token that depends on people using Turret.

That share must come from revenue available to the protocol after lender entitlements, required reserves and operating costs. Deposited USDG and outstanding loan principal are not distributable revenue. Interest that a borrower owes but has not repaid is not cash available for a payout.

The percentage, eligibility, distribution asset and claim rules still need to be specified and implemented. There would be no fixed APY or promise of regular payments regardless of revenue. Holding the token would not give someone a right to withdraw lenders' USDG or take borrower collateral.

More money helps, within each market's limits

Deposits through Earn and direct pool funding can increase the USDG available for loans. They do not automatically raise the market's borrowing cap or improve the price at which collateral can be sold.

For example, suppose a pool has 100 USDG available and its borrowing cap has 500 USDG of remaining room. An additional 200 USDG deposit could increase the cash available to lend to 300 USDG, provided the other borrowing checks pass. If the cap has only 50 USDG of room, the extra deposit does not remove that limit. These are illustrative figures, not current market balances.

Silver makes the distinction concrete. The lending pool needs USDG to pay borrowers, while a liquidation needs a way to recover enough value from SLV. More lending deposits do not create more buyers for SLV. Better sale routes, deeper trading liquidity and appropriate loan limits still matter.

A token could encourage people to provide the capital each part needs. Issuing it does not create that capital or guarantee that a liquidation will cover the debt.

Where the trading-fee proposal fits

The earlier version of this article proposed a 3% combined fee on Turret token buys and sells through the intended launch venue. That remains a proposal for token trading, not an added 3% charge on Borrow or Earn. The final venue, fee breakdown and enforceable terms would need to be published before launch.

The earlier budget assigned 60% of Turret's collected trading-fee receipts to lending capital, 25% to liquidation and security operations, and 15% to holder benefits. Those were proposed allocations of Turret's receipts, not the full fee traders pay. They are not an implemented allocation or a finalized revenue-sharing entitlement.

Trading fees could provide supplementary funding, but trading activity can decline or stop. Token-holder distributions funded by trading fees would need to be reported separately from distributions funded by lending revenue. Essential operations should not depend on the next token trade.

What needs to be settled before launch

A launch needs a funded rewards budget, a defined source and share of distributable revenue, and reviewed contracts that enforce the rules. We also need to publish the supply, allocation, team holdings and vesting, treasury permissions, trading fees, eligibility and claim terms.

Any governance role would need clear limits. The token's purpose does not require holders to control borrower collateral or bypass market protections.

The test for this proposal is practical: does it bring capital to markets that can use it, retain suppliers beyond a reward campaign, and support a product people return to? Borrow and Earn must remain useful even when token rewards run out.