In traditional (Web2) prop firms, the firm's interests often conflict with those of the traders. Many firms profit mainly from challenge fees, rather than genuinely hoping traders succeed. They might:

• Design challenges that are overly difficult.

• Delay payouts or enforce harsh rules.

• Lack transparency in profit distribution.

The result? Traders are "buying the dream", while the firm collects steady income.

🛠 A Transparent Mechanism with Smart Contracts & Tokenomics

With Web3, everything changes. A Web3-based prop firm running on smart contracts enables:

1. User funds are held in escrow contracts→ No one can touch the funds except via onchain logic.

2. Funds are distributed transparently at fixed ratios:
   – 20% of the challenge fee is allocated to operational costs and staking rewards.– 80% goes to the reward pool for winners.• Out of this, 40% is paid in tokens (vested gradually).• The remaining 40% can be in stablecoins, ETH, or other assets.

3. Fully onchain and auditable logic– Win rates, challenge results, and payouts are all transparent on-chain.– Traders know exactly what they’re competing for and against.

🧩 Resolving Conflicts of Interest

✅ Web3 Prop Firm❌ Web2 Prop FirmTrader wins → reward pool shrinksTrader wins → firm pays out directlyFirm earns fixed 20% feeFirm profits more when traders failTransparent rewardsPayouts are arbitrary and opaqueFunds held by smart contractsFirm has full custody of funds

→ No one can "game the system" to avoid paying out rewards.

🔁 Value Loop – Both Firm and Traders Win

• Traders win → receive payouts from the reward pool.

• Token rewards may appreciate → holding them becomes more valuable.

• Firm earns a fixed fee → incentivized to help more traders pass.

• Community can use tokens to vote on new pools or challenges → toward full DAO governance.

🌱 Conclusion

**A Web3 prop firm is more than just "backing good traders" — it’s a transparent, win-win ecosystem with no hidden agendas.**With escrow smart contracts and clear tokenomics, users know where they stand, what they’re competing for – and the firm is aligned with their success.

Let smart contracts reshape how funded trading firms operate – no more ambiguity, no more manipulation.