# How does coe work?

The COE structure is built on the precise engineering of value flow. Merging traditional businesses with a decentralized token structure is made possible not through financial promises, but by creating a sustainable loyalty flow.

The mechanism works as follows: Businesses allocate a portion of their generated value towards community rewards. This value is converted into Loyalty Tokens via COE's mechanisms and distributed instantly to community members. This cycle ensures long-term loyalty while coinciding with the business's operational growth.

This model is the result of three years of research and prototype execution in real-world markets. To learn more about the operational performance, you can review the following report:

Operational Prototype Phase I Results Report ([**Food COE**](https://forum.dfinity.org/t/beyond-the-numbers-a-data-driven-analysis-of-the-food-coe-project-in-the-icp-ecosystem/55768?u=coe))

### Benefits of COE's Operational Structure

The COE operational model provides benefits to its core stakeholders that are not possible in centralized loyalty systems:

1\. Complete Transaction Transparency: All reward allocation and distribution processes are recorded on the blockchain, becoming immutable and traceable, eliminating any doubt.

2\. Efficiency and Instant Accessibility: The removal of traditional intermediaries allows for the transfer of rewards and the utilization of loyalty rights to occur instantly and without geographical boundaries.

3\. Real Reward Ownership: Unlike centralized points, COE Reward Tokens belong to the user and are not controlled by any central entity; this genuine ownership preserves the utility value of the reward.

4\. Sustainable Business Growth: By guaranteeing long-term community loyalty and intelligent allocation of generated value, COE provides a reliable and sustainable growth engine for connected businesses.

{% content-ref url="../initial-contribution-structure" %}
[initial-contribution-structure](https://coe-co.gitbook.io/coe-project-white-paper/initial-contribution-structure)
{% endcontent-ref %}