PAPER RESERVE — FUNDING AND HOLDER REWARD SCENARIOS Research draft | October 6, 2026 PURPOSE Compare hypothetical USDC payouts at different treasury funding amounts and PSRV holdings. These are sensitivity scenarios, not expected returns, probability estimates, confidence intervals, APYs, or results from the user's agent. The base case is a middle illustration, not the most likely outcome. The bear case is not a minimum; zero payouts and substantial capital loss remain possible. WHAT WAS RESEARCHED The public PaperTrade-Simulations repository by HakaiRhinohl, pinned to commit a23afa7f6c403346c7127c962cf03e1fad6b4da1 (August 3, 2026). Repository: https://github.com/HakaiRhinohl/PaperTrade-Simulations Results: https://github.com/HakaiRhinohl/PaperTrade-Simulations/blob/a23afa7f6c403346c7127c962cf03e1fad6b4da1/batch_results_official.csv Methodology and published summaries: https://github.com/HakaiRhinohl/PaperTrade-Simulations/blob/a23afa7f6c403346c7127c962cf03e1fad6b4da1/results/chapter1_numbers.md Engine: https://github.com/HakaiRhinohl/PaperTrade-Simulations/blob/a23afa7f6c403346c7127c962cf03e1fad6b4da1/pipeline/local_server.py The repository replays 3.6 million selected historical BTC/ETH trades at 1,000x modeled leverage across 608 parameter combinations. The engine sets SIM_DAYS=290. The 25/50/100% flow settings sample this selected dataset; they are not measured shares of all current Hyperliquid activity and are not forecasts of Papertrade adoption. We analyzed the published result CSV and inspected the source. We did not rerun the underlying 325 MB trade dataset or independently verify its historical reconstruction. The source CSV filename includes 'official'; that name does not establish that Papertrade endorsed the simulation. SELECTED PUBLISHED ROWS — ALL LAUNCH AT DAY 0, ADL-WORST-CASE OFF Bear anchor: 25% sampling, emission-responsive volume ON; 41,265,260.53 cumulative staker USDC and 3,721,735,052.49 final PAPER. Base anchor: 50% sampling, emission-responsive volume ON; 70,298,718.11 cumulative staker USDC and 5,084,594,705.08 final PAPER. Bull anchor: 100% sampling, emission-responsive volume OFF; 248,107,424.50 cumulative staker USDC and 8,625,944,157.57 final PAPER. Emission-responsive volume means the simulation reduces trade notional as its mint incentive declines. It is a behavioral assumption, not observed Papertrade behavior. MODEL INPUTS ADDED FOR PSRV — ILLUSTRATIVE, NOT ESTABLISHED BY THE SIMULATION Bear Base Bull Net cash acquisition cost/PAPER $0.050 $0.025 $0.012 Other PAPER assumed staked 100% 75% 50% Revenue retained vs replay 25% 50% 100% Common defaults: - Net treasury funding: 100,000 USDC equivalent. - Cash acquisition-spend budget: 100% of funding, as specified by the project owner. All treasury funding is allocated to acquiring PAPER, including the net trading, hedging and execution costs required to acquire it. This is the total acquisition budget across the accumulation process. Gross collateral requirements and the timing of capital reuse are NOT simulated. - Net acquisition cost includes combined trading losses less hedge gains, trading fees, funding, execution and acquisition-related transfer costs. No verified PSRV trading logs establish the default costs. - Eligible PSRV: 1,000,000,000, matching proposed total supply before any exclusions. This is not a verified eligible or circulating supply. - Example holder: 10,000,000 PSRV, or 1% of the assumed eligible balances throughout the period. - Recurring settlement/distribution cost: 25 USDC per 30 days (illustrative treasury cost). Individual claim transaction costs are excluded. - 100% of the remaining distributable reward pool assigned to eligible holders; no operations percentage or reinvestment assumed. - Revenue-retention factors are arbitrary stress assumptions for lower realized/available revenue. They are not empirically calibrated probabilities or a rerun at lower trade volume. Changing them while keeping supply fixed is a sensitivity calculation. CALCULATION F = net funded treasury; a = acquisition budget fraction, fixed at 1 (100%); c = all-in net cost per PAPER. P = F * a / c, the treasury's assumed PAPER balance. S = final PAPER supply from the selected published simulation. s = fraction of PAPER outside the treasury assumed staked. Effective staked supply = P + (S - P) * s. Treasury's PAPER staking share = P / effective staked supply. R = published cumulative staker USDC over the 290-day replay. h = revenue-retention assumption. 30-day protocol revenue equivalent = R * 30 / 290 * h. Treasury gross USDC = protocol revenue equivalent * treasury staking share. Funded holder pool = max(0, treasury gross USDC - recurring settlement cost). Holder payout = funded holder pool * time-weighted eligible PSRV holdings / total time-weighted eligible PSRV balances. The treasury's PAPER is modeled as a subset of S, replacing a portion of the simulated holdings; it is not added as a second copy of supply. Its contribution to trading flow, mint-curve progression and fees is not rerun. The calculation is appropriate only as a small-participant sensitivity. It rejects acquiring more than the modeled supply and warns if treasury PAPER exceeds 1% of supply. TIME AND RETURN LIMITS '30-day equivalent' divides replay-wide revenue by 290 and multiplies by 30 while using final diluted supply. It is NOT an actual first-month simulation, a daily cashflow reconstruction, or a prediction for any calendar month. Funding and PAPER acquisition are assumed complete before the modeled comparison period. The model omits day-zero early-staker advantages and does not assume PSRV captures them. There is no reinvestment, new future treasury funding, token-price appreciation, or capital repayment in these outputs. USDC distributions are gross holder income before individual claim costs. They are not portfolio profit: acquiring PAPER spends capital, token prices can fall, and trading collateral can lose value during accumulation. No break-even or return on investment can be calculated without the holder's PSRV purchase cost and the treasury's remaining asset value. IMPORTANT SOURCE LIMITATIONS FOUND 1. The engine replays historical behavior at 1,000x leverage, which does not establish future user behavior or the economics of our lower-leverage hedge strategy. 2. The selected trade rows are processed in daily buckets; the simulation's reported zero-day queue wait does not establish instant settlement. 3. The inspected engine gates voluntary-loss minting on queue_was_empty and takes loss-side fee cuts before queue repayment. Current Papertrade docs describe eligible loss minting while insolvent and waived loss fees while the queue is non-empty. This is a material model/contract mismatch to resolve before relying on absolute output values. 4. The model tracks open interest but does not enforce the live per-side OI admission controls described in current protocol docs. The full-flow published row has peak modeled OI around 6.43 billion USD. 5. Daily fee and supply series referenced by the charting code are not present in the repository tree. We therefore do not manufacture detailed monthly or day-zero payout paths from summary rows. 6. Replay results cannot establish PSRV's acquisition efficiency, agent performance, Phase 2 access timing, bridge reliability, revenue realization, future stake fraction, or holder eligibility. Official docs for comparison: https://docs.papertrade.xyz/#/how/mint-curve https://docs.papertrade.xyz/#/how/solvency-queue https://docs.papertrade.xyz/#/how/risk https://docs.papertrade.xyz/#/paper/staking PUBLIC PRESENTATION Use a title such as 'Explore funding scenarios' with visible 'Illustration, not a forecast' labeling. Keep the assumptions accessible. Do not headline these values as what holders should expect or describe the base case as validated. Replace the acquisition assumptions with observed pilot results and reconcile the source model with deployed contracts before promoting return estimates. FILES scenario-inputs.json: exact source anchors and default assumptions. scenario-results.csv: 60 combinations of treasury funding, holder balances and scenario inputs. funding-scenarios.png: labeled static comparison for a 1% eligible holder.