5. Financial Engineering Design

PADO’s financial engineering model is designed to mitigate price volatility risks from the moment of transaction approval until the conversion into its internal settlement token, THBP (Thai Baht PADO). Additionally, it enhances long-term token scarcity to drive value appreciation. The system ensures overall stability through a tier-based credit limit system and a PSP expansion mechanism, both of which regulate transaction approvals and risk management.

5.1 Three-Tier Stabilization Framework

Phase 1: Fundamental Stability

Asset Deposits & Staking

• Bitcoin (BTC) and Ethereum (ETH) staking

• PADO altcoin swap pools

• PADO token staking through membership fees

The contribution of staked assets to the system's stability is mathematically represented as follows:

$$L(t)=\alpha \cdot L_{BTC}(t)+L_{others}(t)$$

where:

• $L_{BTC}(t)$: BTC staked volume

• $L_{others}(t)$: Other staked assets

• $\alpha$ : Stability coefficient of Bitcoin ($\alpha > 1$)

Phase 2: Short-Term Risk Hedging (PSP)

Role of the Payment Stabilization Pool (PSP)

The PSP mechanism hedges against short-term price fluctuations between the moment of payment approval and THBP conversion, adjusting for any discrepancies between the real-time PADO token price $P(t)$ and the reference price $P^*(t)$

$$\Delta P(t)=P(t)- P^*(t)$$

$\Delta P(t)=P(t)- P^*(t)$where:

• $P(t)$: Real-time PADO token price

• $P^*(t)$: Reference price at the time of transaction

The required PSP stabilization fund is calculated as:

$$PSP_{Req}(t)= \frac{|\Delta P(t)|}{P^*(t)} \times V_{THBP}(t)$$

• where $V_{THBP}(t)$ represents the total THBP generated for transactions.

Emergency Approval Suspension & PSP Expansion:

If the PSP’s available fund $PSP_{total}(t)$ is insufficient to meet transaction demand:

$$PSP_{Req}(t) > PSP_{total}(t)$$

then new transaction approvals are temporarily suspended to prevent PSP depletion.

Simultaneously, additional PSP liquidity is sourced through swap pools and BTC/ETH staking ($\Delta_{swap}(t) > \Delta_{stake}(t)$), increasing the PSP threshold:

$$PSP_{available}(t)=PSP_{total}(t)+\Delta_{swap}(t)+\Delta_{stake}(t)$$

Phase 3: Long-Term Value Appreciation (PADO Token Burning)

PADO Burn Mechanism

PADO employs a gradual token-burning process to reduce total supply over time, increasing token scarcity and long-term value.

Transaction Fee Burning:

A portion of transaction fees collected from PADO’s payment network is burned. Example: If 30% of transaction fee is burned, the formula is: $\alpha = 0.3$

$$Burn\ fee(t)=\alpha \times Fee(t)$$

where:

$$Fee(t)=FeeRate \times TransactionVolume(t)$$

• $FeeRate$ : Applied transaction fee percentage

• $TransactionVolume(t)$: Total transaction volume at time t

VIP Membership Fee Burning:

10% of membership renewal fees are burned:

$$Burn\ membership(t) = 0.1 \times \sum_{i \in (S,G,P,Black)}(M_i \times N_i(t))$$

where:

• $M_i$: Membership fee per tier (Silver, Gold, Platinum, Black)

• $N_i(t)$: Number of active members per tier at time t

Total Token Burning Calculation:

$$Burn_{total}(t) = \lambda_1 \cdot B_{fee}(t) + \lambda_2 \cdot B_{membership}(t) + \lambda_3 \cdot L_{stake}(t)$$

where:

• $\lambda_1, \lambda_2, \lambda_3$: Weighted coefficients for each burning factor

5.2 Credit Limit Management System

To ensure the stable conversion of PADO tokens into THBP (Thai Baht PADO) during payment processing, PADO employs a credit limit management system based on PSP stabilization funds, membership tiers, and credit scores. This system is structured as follows:

Role of PSP Liquidity

Function:

The PSP stabilization fund serves as a liquidity buffer that absorbs price volatility risks until PADO tokens are converted into THBP.

• Daily Peak Coverage: PSP funds are allocated to cover the maximum expected daily transaction approvals, represented as:

$$P = V_{day}$$

where $V_{day}$ represents expected peak transaction volume per day.

• Conversion Delay Protection: If THBP conversion requires 20 minutes, PSP reserves must accommodate pending transactions to ensure seamless processing throughout the delay period.Handling PSP Overloads

Handling PSP Over-Approval Scenarios

Emergency Approval Suspension:

If the sum of approved transactions (U) and newly requested transactions (x) exceeds the PSP stabilization fund limit (P):

$$U + x > P$$

then the system temporarily suspends new transaction approvals to prevent PSP depletion.

Temporary PSP Limit Expansion

To mitigate liquidity shortages, additional PSP funds ( $\Delta P$) can be sourced from:

1.Swap pools

2.Additional BTC/ETH staking

The updated PSP limit is expressed as:

$$P' = P + \Delta P$$

This dynamically adjusted PSP limit enables the system to process previously suspended transaction requests efficiently.

PSP Limit Replenishment Mechanism

Once PADO tokens are converted into THBP, the allocated PSP funds are automatically restored, ensuring continuous liquidity:

PSP Decrease Upon Approval

When an approval for transaction amount x occurs:

$$PSP_{avail(new)} = PSP_{avail(old)} - x$$

PSP Restoration Upon Conversion

Once THBP conversion is completed, the same transaction amount (x) is restored:

$$PSP_{avail(new)} = PSP_{avail(old)} + x$$

Dynamic Adjustment Model

The rate of PSP availability is dynamically adjusted based on:

$$\frac{d (PSP_{avail})} {dt} = R_{conv}(t) - R_{req}(t)$$

where:

• $R_{req}(t)$ : Rate of transaction approval requests

• $R_{conv}(t)$: Rate of completed THBP conversions

Credit Limit Management and Priority Allocation

Each user’s transaction approval limit is determined by membership tier, credit score, and total PSP stabilization funds.

Individual Credit Limit Calculation

Each user’s credit limit is determined by:

$$L_{approval}(t) = \mu(m,c) \times PSP_{total}(t) \\ \mu(m,c) = m \times c$$

where:

• m: Membership tier coefficient (e.g., Silver = 1.0, Gold = 1.2, Platinum = 1.5, Black = 2.0)

• c : Normalized credit score (range 0 to 1)

• $PSP_{total}(t)$: Total available PSP stabilization funds at time t

Real-Time Credit Limit Adjustments

As users transact, THBP usage ($V_{used}(t)$) is subtracted from their available limit:

$$L_{avail}(t) = L_{approval}(t) - V_{used}(t)$$

Upon settlement and PSP replenishment, the limit is automatically restored.

Transaction Approval Priority System

If multiple transaction requests exceed available PSP reserves, approvals are prioritized based on:

1. Membership Tier: Higher-tier members (Black > Platinum > Gold > Silver) receive priority.

2. Credit Score: Within the same tier, users with higher credit scores are prioritized.

3. Remaining Credit Limit: Users with higher available credit limits receive preference.

This priority allocation is expressed as:

$$P_i = \alpha \cdot T_i + \beta \cdot C_i + \gamma \cdot L_i$$

where:

• $T_i$: Membership tier weight (e.g., Black = 4, Platinum = 3, Gold = 2, Silver = 1)

• $C_i$: User's credit score

• $L_i$: User’s remaining transaction approval limit

• $\alpha, \gamma, \beta$: Weight coefficients for each factor

Thus, the PADO credit limit management system integrates PSP stabilization funds to dynamically adjust transaction approval limits. In the event of excess transaction requests exceeding PSP reserves, the system implements emergency measures to prevent liquidity depletion. Furthermore, it optimizes the allocation of limited financial resources by prioritizing approvals based on membership tiers and credit scores, ensuring an efficient and risk-mitigated transaction environment.

5.3 Black-Tier Capital and Altcoin Swap Pool

Within the PADO ecosystem, Black-tier VIP members play a crucial role in stabilizing the price of PADO tokens through large-scale deposits of BTC, ETH, and PADO tokens. This, in turn, enhances overall system stability. Simultaneously, the PADO-Altcoin Swap Pool functions as an additional liquidity provisioning mechanism to support the ecosystem’s liquidity requirements.

Contribution of Swap Pool to PADO Token Stability

The issuance limit of Black-tier NFTs is determined based on the Total Value Locked (TVL) within the swap pool. The calculation formula is as follows:

$$Max\ NFT_{Black} = \frac{TVL_{Pool}}{TVL_{Global}} \times Global\ Max\ NFT_{Black}$$

where:

• $TVL_{Pool}$​: Total assets locked in a specific PADO swap pool

• $TVL_{Global}$​: Total assets locked across the entire PADO ecosystem

• $Global\ Max\ NFT_{Black}$: Maximum allowable Black-tier NFTs issued globally

This formula ensures that as more liquidity is injected into the swap pool, more users qualify for Black-tier NFTs. Consequently, high-value depositors contribute directly to ecosystem stability, reinforcing long-term token appreciation and security.

Swap Pool Lock-Up Effect

PADO tokens deposited into the PADO-Altcoin Swap Pool are temporarily removed from circulation, effectively reducing transaction velocity and increasing scarcity. Additionally, multiple swap pools diversify liquidity, mitigating extreme price fluctuations caused by sudden buy/sell pressure.

Additional Staking Requirement (Black-Tier NFT Eligibility)

To qualify for a Black-tier NFT, users must not only deposit PADO tokens into the swap pool but also fulfill an additional staking requirement. The formula for this requirement is:

$$PADO\ Staking\ Requirement =\left( \frac{1}{TVL_{Pool}} \times C_{Base}\right) + PADO_{MinStake​}$$

where:

• $TVL_{Pool}$: Liquidity within the respective swap pool

• $C_{Base}$: Coefficient determining the minimum staking requirement

• $PADO_{MinStake}$: Minimum staking threshold (e.g., 10,000 PADO tokens)

This lock-up mechanism ensures that a substantial portion of PADO tokens remains unavailable for immediate trading, reinforcing deflationary effects and driving long-term price appreciation.

5.4 Expected Impact of Financial Engineering Design

PADO’s financial engineering model enhances system stability and token value appreciation in both the short and long term. The anticipated effects include:

1) Short-Term Stability Reinforcement

Mitigating Payment Volatility Risks:

• The PSP (Payment Stabilization Pool) effectively hedges against PADO price fluctuations occurring between payment approval and THBP conversion.

• This ensures that transactions remain stable despite sudden market movements.

Emergency Approval Suspension & PSP Expansion Mechanism:

• If transaction volume exceeds PSP capacity, automated emergency protocols temporarily halt new approvals to prevent liquidity depletion.

• Additional liquidity can be dynamically sourced via swap pools and BTC/ETH staking, thereby scaling the PSP fund as needed.

2) Long-Term Value Appreciation

Token Burn Mechanism:

• Transaction Fee Burning: A percentage of fees collected within the PADO payment network is permanently burned to reduce circulating supply.

• VIP Membership Fee Burning: 10% of NFT-based VIP membership renewal fees is also burned to further diminish token availability.

Staking Lock-Up Mechanism: Locked-up assets remove tokens from circulation, reinforcing scarcity-based value appreciation.

• Strengthening Economic Sustainability:

• Progressive reduction in PADO’s total circulating supply leads to a controlled deflationary economic model.

• This mechanism supports long-term token price appreciation, ensuring sustained demand and economic stability.

3) NFT-Based Ecosystem Expansion & User Engagement

Black-Tier Deposits & Additional Staking Requirements:

• Large-scale deposits and additional staking contribute to NFT tier determination.

• Black-tier NFT holders receive exclusive benefits and premium privileges within the PADO ecosystem.

Boosting User Retention & Loyalty:

• The tier-based benefits structure incentivizes long-term participation.

• Higher-tier members gain priority transaction approvals and exclusive financial rewards.

4) Liquidity Expansion & Global Market Penetration

Enhanced Liquidity through Swap Pools & Payment Network Expansion:

• The introduction of altcoin swap pools increases liquidity depth within the PADO ecosystem.

• Payment network integrations broaden market accessibility, positioning PADO as a global digital financial infrastructure.

5) Optimized Credit Limit Management

Risk Mitigation via PSP & Credit-Based Approval System:

• The PSP reserves and tier-based credit system dynamically regulate transaction approvals, mitigating financial risks.

• Users with higher membership tiers and credit scores receive priority approval and increased transaction limits.

PADO’s hybrid financial engineering model seamlessly integrates short-term price stability mechanisms with long-term deflationary economics. By leveraging PSP stabilization, token burning strategies, and NFT-based incentives, PADO establishes a secure, scalable, and self-sustaining digital economy.Furthermore, the incorporation of liquidity pools, automated staking requirements, and swap-based market mechanisms positions PADO as a leading financial ecosystem within the global digital asset industry.