> For the complete documentation index, see [llms.txt](https://depunks.gitbook.io/a-route-to-the-future/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://depunks.gitbook.io/a-route-to-the-future/the-breakdown/royalty-distribution-system.md).

# Royalty Distribution System

<figure><img src="https://738266355-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2Fnz7a0MWc5FG6Wv65tepm%2Fuploads%2FcDIazgTetnAIVsd3v86l%2Fsuo_cyberpunk_builders_on_a_construction_site_c1889437-c8b8-42de-a9f7-20157f.png?alt=media&amp;token=bf8da606-dd38-4136-bfe5-74f306fb1c96" alt=""><figcaption></figcaption></figure>

### Automation and Timing

The royalty distribution system within the DePunks ecosystem operates as a pivotal mechanism to reward holders, incentivize ongoing participation, and fuel the growth of the project. Here's how it works:

1. **Royalty Collection**: Whenever a DePunks NFT is sold or transferred to a new owner on marketplaces, a royalty fee is automatically triggered. This fee is set at 20%.
2. **Royalty Distribution**: The collected royalty fees are then distributed as follows:
   * **Royalty Allocation**: The majority portion of the royalty fee is allocated to the owners of the DePunks NFT.&#x20;
   * **$PUNK Token Conversion**: The royalty fees collected is converted into $PUNK tokens at the prevailing market rate. This conversion process is executed automatically and transparently within the ecosystem.
3. **Token Burn and Airdrop**: Once the $PUNK tokens are acquired through royalty fees, 5% of them are permanently removed from circulation through a token burn mechanism. The remaining 95% of $PUNK tokens are redistributed to DePunks holders through a carefully crafted airdrop mechanism. The amount of $PUNK received in the airdrop is proportional to the number of DePunks held by each participant, incentivizing ownership and long-term engagement with the project.

Overall, the royalty distribution system serves as a fundamental component of the DePunks platform, ensuring fair compensation for creators, stimulating ecosystem growth through $PUNK token distribution, and fostering a vibrant and sustainable marketplace for digital art and creativity.