Understanding Revenue Sharing on Lonch

Revenue sharing is a collaborative business model where individuals contribute to a project or venture and receive a portion of the revenue generated by that project in return. This approach enables participants to share in the success of the endeavor, aligning their interests with the overall goals of the project.

At Lonch, revenue sharing takes on a dynamic form, facilitated by blockchain technology and smart contracts. Crowdfounders contribute to a product on the Lonch platform and receive tokens representing their share of the project's revenue. These tokens are recorded on the blockchain, providing transparency and security, and ensuring that contributors are fairly compensated for their efforts.

Whether it's developing a new product, providing valuable insights, or contributing essential skills, individuals on Lonch have the opportunity to participate in revenue sharing arrangements that reward their contributions to the success of a project. This model fosters collaboration, incentivizes participation, and empowers individuals to play a direct role in shaping the outcomes of the projects they support.

The different Pools of Revenue Share

When creating a product there are 3 different pools for revenue sharing.

The Visionary’s Cut: The guaranteed profitshare for the visionary. This is taken out before royalties for royalty tokens. It is also based on the profit generated by the product.

The Contributor (Crowdfounder)’s Cut: The proftishare to be split among all contributors on the project. This pool size is fixed, but the value of the royalty tokens in the pool can be diluted if additional tokens are minted.

Lonch’s Cut: 10% of the gross revenue (pre-expense). This is how lonch operates and is able to provide a low cost platform for all involved and provide access to the “free” services on the platform.

An Example

Round 1

Visionary: 50%
Contributors: 50%
Lonch: 10%ContributorA has 10 tokens (1/3 of all tokens)
ContributorB has 10 tokens (1/3 of all tokens)
ContributorC has 10 tokens (1/3 of all tokens)Product Generates: $1000 in gross revenue (before expenses)
Lonch gets: $100Product has $400 in expenses, remaining amount (profit) is $500
Visionary receives: $250
ContributorA receives: $83.33
ContributorB receives: $83.33
ContributorC receives: $83.33

Visionary also happens to be ContributorA in this case. As such they received $250+83.33 => $333.33

Round 2

If in the second pay period, things have shifted to:
ContributorA has 10 tokens (~4.76% of all tokens)
ContributorB has 100 tokens (~47.6% of all tokens)
ContributorC has 100 tokens (~47.6% of all tokens)Then it would be as such:
Product Generates: $1000 in gross revenue (before expenses)
Lonch gets: $100Product has $400 in expenses, remaining amount (profit) is $500
Visionary receives: $250
ContributorA receives: $11.90
ContributorB receives: $119.04
ContributorC receives: $119.04

Visionary also happens to be ContributorA in this case. As such they received $250+11.90 => $261.90

Note: Visionaries generally won't have that high of a %, but we used 50% for the sake of demonstration. See our guide on how to allocate on the Create a Product article.