# Community contribution / How it works?

<figure><img src="/files/0Zic4aIJenjRhAL86f3Y" alt=""><figcaption></figcaption></figure>

**Community Contribution** is the core mechanism behind Community Coins. It’s a customizable fee taken from each transaction of the token when traded on CoolDEX and is automatically distributed across three directions:

* [*Real-time*](/community-coins/community-contribution-how-it-works/holders.md) [*Holders*](/community-coins/community-contribution-how-it-works/holders.md)
* [*Liquidity Providers*](/community-coins/community-contribution-how-it-works/liquidity-providers.md)
* [*Burning*](/community-coins/community-contribution-how-it-works/burning.md)

All generated Community Contribution is split **50/50 in $SOL and $TOKEN.**

Developers set the contribution between **0.25% and 5%** and must allocate **100%** of it. They can split it **across all three categories** (e.g., 50% to holders, 10% to LPs, 40% to burning) **or go all-in on one** (100% to holders, for example).

{% hint style="success" %}
Once liquidity is added to **CoolDEX**, this mechanism activates, and Community Contribution is automatically generated and distributed based on the setup.
{% endhint %}

### **Two Key Rules for Distribution**

1. All Community Contribution must be allocated.
2. If any part of the Community Contribution is allocated to Liquidity Providers (LP), the rewards earned by the initial migrated liquidity (from Something.cool to CoolDEX) will be redistributed among all active holders\*.

> We believe that even the liquidity of Community Coins should belong to the community. If the initial liquidity migrated from Something.cool earns rewards — we ensure those rewards will be redistributed back to token holders.

### **Example**

Let's illustrate how **Community Contribution** works in a real scenario:

Coin **"$AAA"** has a **2% Community Contribution**, distributed as:

* **50% to holders**
* **20% to liquidity providers**
* **30% to burning**

And then some user swaps **10 $SOL** for **1,000,000 $AAA**. He receives tokens worth **9.8 $SOL**, while **0.2 $SOL** goes into Community Contribution.

**Then simple Math:**

After this swap, the user receives **980,000 $AAA**, and a **Community Contribution fee** of **0.2 $SOL** is deducted and distributed as follows:

1. **10% (0.02 $SOL) goes to CoolDEX** for processing the reward distribution.
2. **90% (0.18 $SOL) is allocated across the 3 categories** based on the set percentages:
   * **50% of 0.18 SOL goes to holders**, meaning they receive **0.045 $SOL + 45,000 $AAA** (equivalent to **0.09 $SOL**).
   * **20% of 0.18 SOL goes to liquidity providers**, meaning they receive **0.018 $SOL + 18,000 $AAA** (equivalent to **0.036 $SOL**).
     * If the **initial liquidity** is the only liquidity source, these rewards go to it and are then redistributed among **all current holders** at the time of the swap.
   * **30% of 0.18 SOL is allocated to burning**, meaning **54,000 $AAA** is burned (equivalent to **0.054 $SOL**).

### **Final Impact**

* **Holders receive a total reward of 0.063 $SOL + 63,000 $AAA**, equivalent to **0.126 $SOL**.
* **A total of 54,000 $AAA is permanently burned**, equivalent to **0.054 $SOL**.

Now, imagine the rewards holders could earn when a coin reaches **20M–50M–100M–500M+ in trading volume**. This mechanism creates **massive long-term opportunities** and enables you to build **a real cult following around your coin.**


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