> ## Documentation Index
> Fetch the complete documentation index at: https://docs.droplinked.com/llms.txt
> Use this file to discover all available pages before exploring further.

# How Droplinked works

> An overview of how the Droplinked protocol operates as a network — on-chain product registration, authenticated distribution, trustless settlement, and network yield.

Droplinked combines four critical functions into a single protocol to simplify Web3 commerce for
producers and publishers. The protocol streamlines inventory management and sales tracking for
producers, disintermediates legacy affiliate networks and middlemen eating into margins, and
incentivizes contributors through earned ownership of the network.

<CardGroup cols={2}>
  <Card title="On-chain product registration" icon="cube">
    Producers register inventory as NFTs on the chain of their choice. Each listing and sale is
    verifiable on-chain with full context (color, size, description, quantity, price,
    commission, royalty payout).
  </Card>

  <Card title="Authenticated distribution" icon="link">
    Producers identify and authorize publishers to sell their listings, with pre-defined
    contract terms enforced by smart contracts on the Droplinked network.
  </Card>

  <Card title="Trustless settlement" icon="handshake">
    Sales settlements are recorded on-chain with immutable splits to producers, owners,
    distributors, affiliates, and partners — settled via Proof of Conversion.
  </Card>

  <Card title="Network yield" icon="chart-line">
    A 1% protocol fee accrues to the Droplinked treasury. Contributors who hold staked DROPS
    earn yield from the growth of gross network volume.
  </Card>
</CardGroup>

## Decentralized registration of products

Producers register inventory into listings on their blockchain of choice. Each item listed and
sale generated is verifiable on-chain with context as to the variables associated with that
product listing — color, size, description, quantity, price, commission, royalty payout, etc.

Once a product's attributes have been defined, an NFT is minted for each listing and associated
with a SKU. This inventory is then fractionalized using
[Droplinked's NFT Fractionalizer](https://fractionalizer.droplinked.com),
in which each NFT fraction represents one product unit from those that had been registered.

## Authenticated distribution

Producers identify and authorize publishers to sell and distribute their listings while giving
partners the power to select counterparties and outline pre-defined contract terms for
affiliated sales. Because these terms are defined through smart contracts on the Droplinked
network, the distribution process is simplified with maximum transparency and a trustless
settlement guarantee based on Proof of Conversion.

Through authenticated publishers, partners can quickly and strategically deploy inventory
listings across multiple properties while leveraging unique benefits such as token-gating,
loyalty programs, and custom campaigns or offers.

## Trustless settlement

There are numerous participants across the commerce supply chain. Droplinked simplifies payment
to contributors by recording all sales settlements on-chain with immutable splits defined to
producers, owners, distributors, affiliates, and partners.

True contributors benefit from transparent settlement with the assurance that their payouts are
immutably disbursed based on validated contributions. No longer are there inefficient third-party
processes delaying payout settlements. This also resolves fraudulent sales attribution
infamously associated with legacy affiliate infrastructure by leveraging smart product contracts
for every product listing.

With every sale attributed through Proof of Conversion, the Droplinked network takes a **1%
protocol fee** that is automatically deposited into the Droplinked treasury.

## Network yield

1% of the value of every validated sale is automatically deposited as a network fee and
reserved into the Droplinked treasury. Additionally, producers and publishers can choose to
receive a portion of their settlement value in **DROPS tokens** to stake towards future GMV
yield payouts. For whatever portion they choose to receive in DROPS, a proportionate amount of
the fiat value of that settlement is reserved in the Droplinked treasury.

The treasury continues to accumulate the protocol fee through the growth of the network as
gross network volume sales increase. Contributors are entitled to a network yield through staked
DROPS — a mechanism for rewarding early adopters as participants who can generate a yield from
the future growth of the network.

## What's next

<CardGroup cols={2}>
  <Card title="Developer tools" href="/guides/library/droplinked-tools" icon="wrench">
    NFT Fractionalizer, NextJS sample storefront, Product Tiles, DIMST, Tokenpay, OAuth, and
    more.
  </Card>

  <Card title="Droplinked API" href="/guides/library/api-overview" icon="code">
    Headless commerce APIs for stores, products, carts, checkout, and Web3 payments.
  </Card>

  <Card title="API cookbook" href="/guides/library/api-cookbook" icon="book">
    End-to-end recipes — build a custom store with Droplinked's headless APIs.
  </Card>

  <Card title="Use cases" href="/guides/library/use-cases" icon="layer-group">
    Endpoint walkthroughs for user, store, product/collection, and cart/checkout management.
  </Card>
</CardGroup>