Coin Rewards

Introduction

At Zora, we are passionate about providing the best experience to create and earn onchain. Coin Rewards is a split of the Zora fee allowing:

• Creators to monetize their work
• Developers to earn from facilitating coin creation and trading

Coin Trading Rewards (V4)

Coin trading rewards are distributed to the creator, create referral, trade referral, protocol, and doppler.

The latest V4 coins use a UniswapV4 hook to collect fees, swap to a backing currency, and distribute rewards to recipients on every swap.

How V4 Rewards Work

V4 coins generate rewards through a sophisticated automated system that operates on every swap:

Fee Collection and Distribution

When users trade coins, the Uniswap V4 hook automatically:

1. Collects LP fees (3% standard Uniswap V4 fees) from all liquidity positions
2. Splits fees into two parts:
   • 33.33% for LP Rewards - Used to create new liquidity positions
   • 66.67% for Market Rewards - Distributed to stakeholders

LP Reward Mechanism: Liquidity Preservation

The 33.33% allocated to LP rewards doesn't go to liquidity providers directly. Instead, it's used to mint new single-sided liquidity positions that are strategically placed outside the current trading range:

• Token0 fees → New position created above current price (inactive until price moves up)
• Token1 fees → New position created below current price (inactive until price moves down)

These positions are essentially locked and burned - they don't earn future fees but serve a crucial purpose: maintaining pool liquidity. Instead of extracting 33.33% of fees from the pool, this mechanism keeps them as permanent liquidity, ensuring the pool becomes deeper and more liquid over time.

Market Reward Distribution

The remaining 66.67% of collected fees becomes "market rewards" and is distributed differently based on coin type.

V4 Market Reward Distribution

The market rewards (66.67% of total fees) are distributed differently based on coin type:

Content Coins

Creator Coins

Multi-Hop Currency Conversion

All market rewards are automatically converted to the final backing currency before distribution:

Currency Hierarchy

• Content Coins are paired with Creator Coins (configured during deployment)
• Creator Coins are paired with ZORA (configured during deployment)

Conversion Process

When fees are collected, the hook automatically performs multi-hop swaps to reach the final payout currency:

1. Content Coin fees → Creator Coin (first hop)
2. Creator Coin → ZORA (second hop)

This ensures that all stakeholders receive rewards in ZORA, regardless of which coin type generated the fees.

Example Flow

Content Coin Trading → Fees Collected → Multi-hop Swap → All Recipients Receive ZORA
                   ↓
            Content Coin → Creator Coin → ZORA

Key V4 Features

• Automated Distribution: Rewards are distributed on every single swap, no manual claiming required
• Multi-Hop Conversion: Automatically converts rewards through intermediate tokens to reach ZORA
• Unified Currency: All recipients receive rewards in the same target currency (ZORA)
• Liquidity Preservation: 33.33% of fees remain in pools as permanent liquidity

Coin Rewards Terminology

Trade Referral: The platform or address that referred a specific trade/swap of a coin. In V4, this is passed through hook data and can trigger referral rewards.

Create Referral: The platform that referred the creator to deploy the coin. This is set at coin creation time and earns a percentage of all trading fees.

Creator/Payout Recipient: The address designated to receive creator rewards from trading activity. This can be updated by coin owners.

Protocol: The Zora protocol treasury that receives a portion of trading fees.

Doppler: The Doppler protocol treasury that receives a portion of trading fees.

How It Works: Creator

1. Creator selects coin creation parameters including payout recipient
2. Creator specifies a wallet address eligible to claim their rewards
3. Creator launches their coin -- that's it!

The creator's total rewards are automatically distributed with each trade:

• V4: Converted to target currency and sent directly to payout recipient
• V3: Accumulated in escrow and can be withdrawn at any time

How It Works: Developer

Create Referral Reward

The Create Referral Reward is paid out to the developer or platform that referred the creator to deploy their coin using Zora's contracts.

Creating a Coin with Rewards

The createReferral address is specified upon coin creation through the factory's deploy function.

function deploy(
    address payoutRecipient,
    address[] memory owners,
    string memory uri,
    string memory name,
    string memory symbol,
    bytes memory poolConfig,
    address platformReferrer, // This is the create referral
    address postDeployHook,
    bytes calldata postDeployHookData,
    bytes32 coinSalt
) external payable returns (address coin, bytes memory postDeployHookDataOut);

Trade Referral Reward

The Trade Referral Reward is paid out to the platform that referred a specific trade.

Trading with Referrals

Trade referrals are passed through the hook data when executing swaps via the Universal Router or other compatible interfaces.