Merchant Entry Reward Mechanism

This section defines how merchants participate in FunPay’s incentive system, how rewards are calculated, and how participation levels are structured.

Merchant rewards are performance-based, collateral-backed, and time-bound, ensuring alignment between commercial activity and ecosystem stability.

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Merchant Level Structure

Merchants are classified into five levels (M1–M5) based on daily activity capacity and collateral commitment.

Merchant Level	Daily Activity Cap (USD)	FUN Collateral Required (USD)	Merchant Reward Ratio	Special Privileges
M1	500	100	20%	–
M2	2,500	500	25%	–
M3	10,000	2,000	30%	–
M4	30,000	5,000	35%	–
M5	100,000	10,000	40%	Exclusive rights (M5 only)

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Activity Cap Definition

• The daily activity cap defines the maximum transaction volume a merchant can process under the reward system.

• Rewards are generated only within the approved activity cap.

• Activity beyond the cap does not generate additional incentives.

This prevents reward inflation and enforces proportional participation.

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FUN Collateral Mechanism

• Merchants lock FUN as collateral to activate and maintain their level.

• Collateral serves three purposes:

  • Qualification enforcement

  • Risk containment

  • Commitment signaling

Collateral value is referenced in USD terms but locked in FUN.

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Reward Ratio Logic

• The reward ratio represents the merchant’s share of incentive value generated from eligible transactions.

• Higher levels unlock higher reward efficiency.

• Reward ratios increase only through level progression, not manual adjustment.

This ensures predictable incentive behavior.

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Collateral Lock Period

• FUN collateral is locked for 60 days, counted from the date the merchant reaches their latest activity peak.

• Lock duration resets if the merchant upgrades or increases activity capacity.

This prevents short-term exploitation and stabilizes merchant participation.

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Merchant Rights and Participation Conditions

This section defines the rights, eligibility conditions, and participation safeguards for merchants operating within FunPay.

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Merchant Rights Overview

Once activated, merchants gain the following rights:

1. Incentive Participation Right Merchants are eligible to receive rewards generated from real transaction activity.

2. Collateral Protection Right Locked FUN collateral is protected under protocol rules and cannot be arbitrarily reduced.

3. Transparent Accounting Right All reward calculations, activity records, and eligibility status are system-recorded and auditable.

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Merchant Activation Conditions

To activate merchant participation:

• The merchant address must be activated by qualified active users

• Minimum activation requirements include:

  • Activity contribution greater than $50

  • At least 3 valid direct referrals

These conditions ensure merchants enter the system through real community engagement.

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Level Upgrade Conditions

Merchants may upgrade levels by:

• Increasing FUN collateral

• Expanding daily activity capacity

• Maintaining compliance with lock and reinjection rules

Upgrades take effect after system validation.

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Risk and Compliance Rules

• Merchants violating transaction integrity or incentive rules may lose eligibility for rewards.

• Collateral remains locked during investigation periods.

• No retroactive reward removal occurs without protocol-defined triggers.

This preserves fairness and operational clarity.

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Summary

The Merchant Entry Reward Mechanism ensures that:

• Rewards are tied to real commerce

• Risk is shared through collateral commitment

• Growth is earned through participation, not speculation

Merchants are not external fee payers but structured participants in the FunPay economic system.