> For the complete documentation index, see [llms.txt](https://hoodstrategy.gitbook.io/hoodstrategy/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://hoodstrategy.gitbook.io/hoodstrategy/how-it-works.md).

# How It Works (The Flywheel)

At the heart of HoodStrategy is a **flywheel** — once it's spinning, it keeps itself going: more volume means more Robinhood stock bought, which means more paid out to holders.

## The cycle

```
   1. A user BUYS or SELLS $HOODSTR (via Uniswap)
                          │
                          ▼
   2. The v4 HOOK collects a 5% tax (in ETH)
                          │
                          ▼
   3. The tax accumulates until the THRESHOLD
      (minimum amount + cooldown = "every X minutes")
                          │
                          ▼
   4. In the SAME transaction: swap ETH → HOODX
      (against the HOODX/ETH pool, Uniswap v4)
                          │
                          ▼
   5. The purchased HOODX is credited to HOLDERS
      (per-token reward accumulator)
                          │
                          ▼
   6. Holders claim their HOODX whenever they want
```

## Step by step

### 1. The trade

A user buys or sells $HOODSTR on Uniswap. The relevant pool is **$HOODSTR / ETH**, with the HoodStrategy hook attached.

### 2. The tax

The hook intercepts the swap and collects a **5% tax**, kept in ETH inside the contract. **Wallet-to-wallet transfers are not taxed** — only buys and sells through a pool are.

### 3. Accumulation and threshold

Taxes accumulate. The purchase cycle doesn't fire on every micro-trade (too costly, too exposed to slippage). It fires when **two conditions** are met:

* the accumulated ETH exceeds a **minimum threshold** (`harvestThreshold`);
* the **cooldown** since the last purchase has elapsed (`harvestCooldown`, default 5 min).

This threshold + cooldown combination is what implements "every X minutes." A pure clock isn't used, because a smart contract can't trigger itself on time — it must be pushed by a transaction. Here, trades do the pushing.

### 4. The atomic HOOD purchase

When the conditions are met, **in the same transaction as the trade**, the hook:

1. converts the accumulated ETH into **HOODX** via the HOODX/ETH pool;
2. checks the price stays within a **slippage bound** set by the Chainlink oracle;
3. receives the HOODX into the contract.

### 5. Distribution

The purchased HOODX is added to a **global per-token reward accumulator**. Each holder's claimable share grows pro rata to their holdings. Distribution is **accounting, not physical**: the protocol doesn't transfer HOODX to thousands of wallets (prohibitive gas) — it updates a counter. See [Reward Mechanism](/hoodstrategy/reward-mechanism.md).

### 6. Claiming

Each holder calls **`claim()`** whenever they want to withdraw their HOODX to their wallet. This is the **pull** model: the protocol never force-sends anything; each holder pulls their share. It works because HOODX is a freely transferable ERC-20.

{% hint style="success" %}
**A holder's life in one line:** you hold $HOODSTR → your HOODX share grows on its own → you click `claim` to pull it → you keep the HOODX (HOOD exposure) or swap it for whatever you want.
{% endhint %}


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