# How it works

At the heart of the protocol is the **Auto-Ascending Liquidity Mechanism (ALM™)** — a unique system where every buy and sell transaction increases the price of the token.

**The UP token is not tied to the market. Its price doesn’t depend on supply and demand — it’s controlled by code.**

Thanks to a unique formula and protocol design, the UP token price can **only go up** — regardless of external conditions.

***

## 🔢 The Price Formula

At the core of the system is a simple yet powerful equation:

The price of UP is defined as:

{% hint style="info" %}
UP Price = USDC in liquidity treasury / UP in circulation
{% endhint %}

This means:

* **More USDC** in the pool = higher price
* **Less UP** in circulation = higher price

Because of how the minting and burning works, **both buying and selling UP increase the price**.

***

## 🟢 Buying UP

When a user buys UP tokens:

1. **USDC is sent** to the Uponly Liquidity Pool.
2. The **1.25% Platform fee,** **1.25%** **Referral fee** and **0.25%** **Founder Pool fee** are deducted.
3. The remaining **97.25% USDC stay in the pool**.
4. The UP Minter Contract uses **90% of the original USDC** to mint new UP tokens. This creates a **10% buy fee**.
5. The user has a new position with UP tokens inside the Uponly platform.\
   \
   \&#xNAN;*\*the tokens can't be transferred and can only be traded inside the Uponly platform.*

#### 🔼 Why Price Goes Up:

* The USDC in the pool increases **faster** than the number of UP tokens in circulation.
* Result: **UP price increases** after every buy.

<figure><img src="/files/TvblokytBiQACNhdXw9m" alt=""><figcaption><p>Flowchart Diagram showcasing the flow of funds when users purchase UP tokens</p></figcaption></figure>

***

## 🔴 Selling UP

When a user sells UP tokens:

1. The tokens are sent to the **UP Burner Contract**.
2. The **1.25% Platform fee,** **1.25%** **Referral fee** and **0.25%** **Founder Pool fee** are deducted.
3. The contract removes **7.25% of the USDC value** from the user’s proceeds and leaves it in the pool.
4. The user receives **90% of their token’s value** in USDC.
5. The burned UP tokens are permanently removed from circulation.

#### 🔼 Why Price Goes Up:

* More UP tokens are burned than the USDC taken out.
* Less circulating supply + relatively more backing = **UP price increases** after every sell.

<figure><img src="/files/mRlDPGELJD694FiKxmmN" alt=""><figcaption><p>Flowchart Diagram showcasing the flow of funds when users sell UP tokens</p></figcaption></figure>

***

## 🧠 What Makes It Work

* **Smart Contracts Only**: The entire system is automated and trustless. There are no admins, owners, or centralized control.
* **Protocol Fees Power the System**: The small buy/sell fees ensure the liquidity pool always grows faster than token issuance or redemptions.
* **Mathematically Impossible to Go Down**: The ALM™ design ensures the price can’t drop — every action strengthens the system.

***

UPONLY flips traditional crypto economics on its head — instead of relying on hype or speculation, it uses **mathematics and code** to guarantee upward price motion.


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