Abstract
CoinFunded introduces a hybrid proprietary trading model powered by liquidity provision (LP) in digital asset markets. Traditional prop firms depend almost entirely on evaluation sales, creating a fragile revenue structure vulnerable to sales volatility and payout clustering. CoinFunded solves this structural imbalance by allocating a predictable portion of operational surplus into automated, delta-neutral liquidity-provision strategies across reputable exchanges.
This LP layer generates persistent, volume-linked, market-neutral yield (4.5-10.5% pm) that reinforces payout reserves, stabilizes treasury operations, and provides long-term solvency. By combining scalable prop trading demand with compounding market-making economics, CoinFunded offers a sustainable and transparent evolution of the modern prop trading business model.
1. Introduction
The proprietary trading (prop) industry has grown rapidly due to retail traders' demand for access to funded accounts. However, most prop firms rely on a fragile single-revenue model: evaluation fees. While revenue is cyclical and sentiment-driven, payout demands remain constant and can cluster unpredictably.
CoinFunded introduces a financial architecture where operational surplus is systematically redeployed into an automated liquidity-provision (LP) system. This creates a non-speculative, yield-generating financial base that mitigates payout liability and reduces reliance on evaluation cycles.
This whitepaper covers:
- • Industry structural problems
- • LP-backed stabilization model
- • System architecture
- • Capital-flow mechanics
- • Risk and transparency framework
- • Roadmap for global scaling
2. Problem Statement
2.1 Volatile Revenue vs. Fixed Payout Expectations
Traditional prop firms rely on:
- • Evaluation fees
- • Subscriptions
- • Reset fees
Revenue fluctuates with marketing cycles and trader sentiment. Meanwhile, payouts tend to spike during:
- • Low-volatility months (easier rule compliance)
- • Prolonged trends (higher trader profitability)
- • Cyclical payout dates
This imbalance often leads to delayed payouts, treasury deficits, or firm collapse.
2.2 Unproductive Capital Structure
Most prop firms hold operational capital in cash, earning little to no yield. This unproductive structure cannot absorb payout surges or sales downturns.
2.3 Fragile Trust Environment
Negative payout reports on social media can collapse trust rapidly. Failures in the industry are rarely due to trading losses—rather, they stem from liquidity mismanagement.
CoinFunded's LP-backed architecture directly addresses these structural weaknesses.
3. The CoinFunded Solution
CoinFunded introduces Liquidity-Backed Prop Operations (LBPO)—a hybrid model where operational surplus is deployed into automated, delta-neutral market-making strategies.
The LP system:
- • Generates stable monthly yield
- • Scales with capital deployed
- • Is non-directional and resilient to market conditions
- • Reinforces payout reserves
This creates a multi-revenue ecosystem instead of dependency on evaluation sales.
4. System Architecture
4.1 Revenue Layers
CoinFunded derives revenue from four independent layers:
- 1. Evaluation Fees — primary revenue driver during growth.
- 2. LP Yield Layer — market-neutral spread capture, maker rebates, and liquidity incentives.
- 3. Broker / Exchange Partnerships — fee-share and rebate programs.
- 4. Internal Performance Desk (optional) — selective replication of top trader strategies.
This diversified model significantly reduces reliance on any single revenue stream.
4.2 Capital Allocation Model
CoinFunded uses a structured three-tier treasury:
Tier 1 — Operating Capital
Funds infrastructure, compliance, staff, marketing, and technology.
Tier 2 — Payout Reserve Pool (PRP)
A dedicated reserve equal to 2–3× the projected monthly payout obligation. Reinforced by LP yield.
Tier 3 — Liquidity-Provision Fund (LPF)
A portion of monthly surplus (20–40%) is allocated to the LPF.
LPF yield flows into the Payout Reserve Pool, providing compounding reinforcement.
Capital Allocation Distribution
- Operating Capital 20%
- Payout Reserve Pool 50%
- LP Fund 30%
Based on operational surplus allocation model
5. Liquidity-Provision Framework
5.1 Strategy Overview
CoinFunded employs delta-neutral, volume-correlated strategies, including:
- • CLOB-based market making
- • Spot grid/liquidity band strategies
- • AMM LP with impermanent-loss hedging
- • Perpetual funding-neutral LP
All strategies are:
- • Market-neutral
- • Low-drawdown
- • Volume-dependent
- • Systematically balanced through automation
5.2 Operational Mechanics
- • Automated delta balancing via real-time hedging
- • Inventory risk controls with predefined thresholds
- • Multi-exchange capital fragmentation
- • Daily liquidity and solvency stress tests
- • Priority withdrawal protocols across exchanges
Important: LP capital is exclusively sourced from operational surplus, never from trader funds.
6. Trader Funding Model
6.1 Evaluation Structure
Sustainable challenges with:
- • Realistic profit targets
- • Daily and maximum drawdown rules
- • Clear, trader-friendly parameters
6.2 Virtualized Trading Accounts
Trader accounts execute on internal risk simulation software. This ensures:
- • Zero conflict with LP capital
- • No trader funds in live markets
- • Controlled replication and risk oversight
6.3 Multi-Layer Payout Mechanism
Payouts originate from:
- 1. (Optional) Internal replication desk
- 2. Payout Reserve Pool
- 3. LPF yield
This redundancy ensures stability even during low sales cycles.
7. Revenue Model
7.1 Core Revenue Streams
Revenue Stream Distribution
Estimated revenue contribution percentages
| Source | Description |
|---|---|
| Evaluations | Main revenue during growth cycles |
| LP Yield | Monthly recurring yield correlated with market volume |
| Exchange Rebates | Passive income from maker fees / incentives |
| Partnerships | Fee-sharing and referral structures |
| Tech & Data (future) | White-label analytics and risk tools |
7.2 LP Yield Projection
Example (conservative):
- • $5m LPF
- • 0.15–0.35% expected daily range (market-dependent)
Monthly LP yield: $225,000–$525,000
Monthly LP Yield Projection ($5M LPF)
This yield supports:
- • Payout stability
- • Operating cost reduction
- • Liquidity reinforcement during weak sales periods
8. Governance & Transparency
8.1 Transparency Framework
CoinFunded provides:
- • Monthly treasury summaries
- • LPF performance metrics
- • Payout ratios
- • Operational surplus allocation reports
Future versions include:
- • 48h-delayed real-time dashboards
- • On-chain verifiable liquidity proofs
8.2 Regulatory Alignment
CoinFunded:
- • Does not pool or invest customer funds
- • Operates fully simulated trading environments
- • Maintains compliance for prop trading frameworks
- • Upholds AML/KYC standards for payouts
9. Competitive Landscape
Traditional Prop Firms
- • Single revenue source
- • No hedged treasury
- • Vulnerable to payout surges
Crypto LP Firms
- • Strong yield but no retail-facing scalability
CoinFunded's Hybrid Advantage
- • Combines scalable evaluation demand with sustainable LP yield
- • Reinforced payout system
- • Objective risk-based treasury management
10. Resilience Model — Why This Will Not Break
CoinFunded is engineered to withstand:
- • Sales downturns: LP yield provides baseline recurring income.
- • Payout spikes: PRP holds 2–3× coverage.
- • Market volatility: Delta-neutral strategies minimize drawdown.
- • Exchange-level issues: Multi-exchange fragmentation reduces exposure.
Redundant payout sources and predictable yield make the model structurally more resilient than traditional prop firms.
11. Roadmap
Phase 1 — Launch Q4 2025
- • LP engine deployment
- • Platform release
- • Initial treasury allocation
Phase 2 — Stabilization Q1 2026
- • Achieve 1–2× payout buffer
- • Expand exchange partnerships
- • Publish transparency reports
Phase 3 — Scaling Q3 2026
- • Launch replication desk
- • Institutional challenges
- • Broaden LP strategy universe
Phase 4 — Maturity Q4 2026
- • AI-driven risk automation
- • On-chain transparency layer
- • Global multi-asset LP infrastructure
12. Conclusion
CoinFunded introduces a next-generation proprietary trading model anchored by automated liquidity-provision yield. By integrating evaluation revenue with a compounding LP treasury, it resolves the industry's greatest weakness—cyclical income versus fixed payout liabilities.
This hybrid structure makes CoinFunded financially resilient, scalable, and transparent, establishing a sustainable evolution of the global prop trading ecosystem.