> For the complete documentation index, see [llms.txt](https://wiki.elephant.money/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://wiki.elephant.money/ecosystem-tokens/trunk-token-elephant-money-stable/deflationary-mechanics.md).

# Deflationary Mechanics

TRUNK is a **hyper deflationary** token that rewards its holders with a share of the protocol profits in two ways:

### **Buybacks and burns**: 

3% APR based on the size of the Elephant Treasury is used to buy back TRUNK off the market and burn 50% of it. This reduces the total supply of TRUNK and increases its scarcity and value. By decreasing the circulating supply of TRUNK, the buybacks and burns create a positive feedback loop that drives up the demand and price of TRUNK. The remaining 50% of the bought back TRUNK is used to mint TRUMPET, which is also burned. This leads to the second way of rewarding TRUNK holders.

### **TRUMPET distribution**

50% of the TRUNK from the buybacks are used to mint TRUMPET and burn it (reducing the overall supply ,while increasing the backing value -[ see more on the TRUMPET economics](/services/trumpet/trumpet-how-it-works.md)). The TRUNK that was used to mint TRUMPET is then distributed pro rata to all TRUMPET holders. This way TRUMPET holders receive a direct and non-inflationary yield from the TRUNK buybacks. By minting TRUMPET, TRUMPET holders are also contributing to the liquidity and stability of the TRUNK market.