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Whitelist DPI token for Vesper Pools

Title: VIP-XX
Status: Proposed

Summary

Proposal to whitelist Defi Pulse Index (DPI) as deposit assets for the Vesper Pools.

Background

Index Coop is the largest on-chain index provider with just over $400 million in assets under management across four products: DPI, MVI, BED, ETH2xFLI & BTC2xFLI. Our goal is to make crypto investing more accessible by creating index products that showcase the value of Defi.

For more analytics into our products check out our Dune dashboard.

Abstract

In this proposal, we intend to provide information as to why we believe the listing of DPI will be beneficial to the Vesper protocol and the community.

Expectations

Conduct research on whether DPI is suitable for inclusion on Vesper protocol. Research the potential revenue a DPI pool can generate for holders.

The underlying strategy employed will include depositing 90%+ of the DPI held in the vault into lending protocols AAVE, C.R.E.A.M, Alpha Homora V2 or Rari Fuse Pool 19 (With scope to add more platforms as more yield opportunities become available). Strategies will be maintained and upgraded as directed by the Vesper community and Vesper Pool Ops.

Liquidity will be bootstrapped by assigning VSP from community treasury, at a level recommended by OpComm.

Although, the interest rates of the DPI on lending protocols are low now. Index Coop does plan to increase the lending rates of these markets by building leveraged products on them. Similar to ETH2xFLI & BTC2xFLI a DPI2xFLI product would increase the interest rate of the DPI lending markets as the DPI2xFLI product will DPI borrow in order to create the leverage needed to create the DPI2xFLI product.

DPI is also closely correlated to ETH & BTC. Meaning it will experience less volatility relative to other governance tokens. This is due to the fact that the token tracks a basket of tokens and reaps the benefits of diversification.

Listing DPI has additional benefits for the Vesper community as by creating a DPI Vesper pool it will create more extrinsic productivity opportunities for DPI which assists in the adoption of DPI which ultimately results in more adoption of VSP as the token is a component of DPI. This also complements Vesper marketing as well, since this pool can be presented as an easy way for institutions and individuals to gain exposure to the Defi category in general while building a position via accumulated yield over time.

Specifications

DPI Token Address: 0x1494ca1f11d487c2bbe4543e90080aeba4ba3c2b

1. Whitelist DPI token.
2. Create DPI pool
3. Deploy pool to beta, for live mainnet testing.
4. Send to auditors.
5. Deploy to pool production.
6. Assign VSP to the production pool.

Change fee structure, treasury management, and revenue allocation

Summary

Change the withdrawal fee, performance fee, treasury management strategy, and structure for how protocol revenue is allocated. Optimize the fee structure and revenue allocation to improve long term growth in users and TVL. In its current state, the Vesper treasury is just holding VSP, which entails unnecessary risk through lack of diversification.

Abstract

Raising the yield fees and lowering the cost to transfer between pools incentivizes growing the total returns for Vesper pool users, while still staying in line with competitors’ fees. Implementing an algo-trading strategy for the treasury mitigates risk. Diverting protocol revenue from vVSP rewards lowers short-run returns to stakers, but enables long-run growth.

Expectations

Currently, withdrawal fees make up 93% of protocol revenue, but are acting as a disincentive for users to move to higher APY pools. Raising the yield fees and lowering the cost to transfer incentivizes growing the total returns for Vesper pool users.

Yield fee: increase from 15% to 20%
Withdrawal fee:
If transferring directly to another Vesper pool: decrease fee from 0.6% to 0.3%. (Starting with transfers of the same token between conservative and aggressive pools).
If withdrawing without transferring to another pool: keep fee at 0.6%
Proposed changes to how fee revenue is allocated:

Operations and Marketing: 25%
Developer: 5%
Partner Program: 5%
Replenishing VSP Reserves: 10%→25% (gradual transition)
Rewards: 55%→40% (gradual transition)

New Initiatives:
Operations and Marketing: this allocation is set to cover a projected $4 million budget that will allow for expanded operations and marketing initiatives to accelerate Vesper’s growth
Partner Program: these funds will go towards incentives for pools created for partner protocols, which bring in deposits from their treasury and community, driving an increase in fee revenue for Vesper
Replenishing VSP Reserves: these funds will go towards buying VSP to extend the VSP pool incentives past their current expected expiration in August/September 2022. This allocation will be gradually increased over the course of a year in order to make the decrease in vVSP rewards more gradual

Specification

Some fee revenue will be diverted from VSP buybacks and vVSP reward payouts to wallets for each new initiative.
The algo-trading strategy for the treasury will determine if assets should be allocated to stablecoins or a specific allocation of other tokens (ETH, UNI, LINK, and VSP) to minimize the drawdown of treasury funds. This strategy will only impact the allocation of new funds and will not touch existing VSP holdings to avoid excessive sell pressure.

Test Cases

Economics Design examined historical data on Vesper’s fees and devised recommendations for Vesper’s new fee structure, fee revenue allocation, and treasury management. Their team also conducted financial analysis of the projected impact to balance a short-term revenue drop with a goal of improving long-term growth.

Surplus VSP Budget for Avalanche Launch

VIP-21: Surplus VSP Budget for Avalanche Launch

Summary

Approve +50,000 VSP over two months following the Avalanche production launch to attract initial depositors and grow the community on the Avalanche ecosystem.

Abstract

Vesper has maintained a process of incentivizing depositors with VSP tokens since the production launch of the platform. As a result, key unifying lessons were realized and brought to attention by the community. With this in mind, the proposal is to launch a 60 day token addition to the existing framework in order to help secure additional growth, drive protocol metrics, and revenue. This proposal is driven by a commitment to making thoughtful decisions that benefit the community and the platform's longevity.

In order to maximize impact of our Avalanche launch, this proposal outlines an additional 50,000 VSP allocation over two months following the launch:

• 35,000 for the first month

• 15,000 for the second month

The purpose of these rewards are to aid in a strong initial start on Avalanche. There is a flourishing DeFi ecosystem on AVAX without a strong yield aggregator like Vesper. These additional VSP are intended to grow the Vesper community on Avalanche. 

Expectations

In addition to the standard 27,500 monthly framework, there will be a surplus of up-to 35,000 VSP and 15,000 VSP for the first and second months after Avalanche launch, respectively.

Pool Retirement

VIP-24: Pool Retirement

Summary

Sunset several pools with low participation into "retirement", closing new withdrawals and withdrawing funds from protocols.

Abstract

Several Vesper pools have experienced extended periods of low demand. This may be attributed to low yield opportunities and/or a lack of interest surrounding the deposit asset.

Vesper utilizes revenue from yield earned as gas for all pool operations. Pools that do not achieve sufficient deposits cost more in gas to operate than they contribute in revenue. This diminishes the overall revenue model, decreasing the amount of VSP bought back for depositors.

By retiring these pools, the protocol can realize better revenue without detracting from the general user experience.

Expectations

Migrate the following pools into a "retirement" setting. As retired pools, users can still withdraw funds from the app, but they will no longer be earning any yield. Additionally, new deposits will not be permitted.

The following pools are to be retired:

Grow

• Aggressive DPI

• Conservative USDT

• Conservative DAI

Earn

• USDC-LMR

• DAI-DPI

• DAI-PUNK

• DAI-SHIB

• LINK-DAI

Orbit

• FEI

• AlUSD

Even during periods of low gas costs, like recently, our protocol can save $5,000-$10,000 per year in operational expenses.

Specification

Migrate the above pools into a retirement status 10 days after approval, which requires the following changes:

Smart Contract

• Pause deposits

• Stop strategy rebalancing

Front End

• Display "Retired" status

• Remove "Deposit" button

Fee Structure Overhaul

VIP-18: Fee Structure Overhaul

Summary

Replace the existing fee structure with a single, universal fee. This prevents users from ever earning negative returns.

Abstract

The Vesper revenue framework was built using market data from competitors at the time and analyzing the user psychology of different fee models. As the market has changed substantially since inception, our fee model is now outdated, and seen as inferior to others.

This proposal sunsets the existing model (0.6% withdrawal fee, 20% performance fee) and introduces a universal fee.

The universal fee is straightforward: Vesper will charge a 2% fee on principal, collected from realized earnings on the pool at each rebalance. If that 2% reflects more than 50% of yield earned, Vesper will only take 50% of yield.

In other words, we charge 50% under 4% APY, and 2% of principal at-or-above 4%.

This model was determined by analyzing competitors and modeling APY and revenue to both protocol and end user. 

Expectations

This fee model is also unique from other options in its ease of implementation. The universal fee, while assigned based on principle, does not touch the deposits of user funds, only the yield earned.

The management fee is added to the rebalance logic module, and looks like an additive, dynamic fee on yield earned versus deposits. It works as follows:

Yield Earned is assigned at rebalance. Then...\

Fee = 2% * ( blocks since last rebalance / blocks per year ) * TVL

If (fee > Yield Earned * 50%)

• Fee = Yield Earned * 50%

User APY = Yield Earned - Fee

Protocol Revenue = Fee

Examples:

Base APY	End User APY (Vesper)	End User APY (Yearn)
1%	0.5%	0%
2%	1%	0%
3%	1.5%	0.4%
5%	3%	2%
8%	6%	4.4%
13%	11%	8.4%
21%	19%	14.8%

Specification

All pools' withdrawal/deposit fees are set to 0%. Rebalance logic modified to account for a universal fee. This fee is set at 2% of management or 50% of performance, whichever is lower.

Adjustments to VSP Emissions, Revenue Model and vVSP Subsidy

VIP-25: Adjustments to VSP Emissions, Revenue Model and vVSP Subsidy

Abstract

Reduce total VSP emissions from the Vesper DAO Treasury to 20,000 VSP per month (current emissions are 27,500 per month) with a portion of the budget allocated to incentivize VSP participants directly. Initiate a plan to cover ongoing PoolOps and residual "bad debt".

Summary

This proposal encompasses two main components: VSP emissions and Revenue management.

Revenue Management

The existing Revenue Model splits net revenue, after PoolOps expenses, between the Pool Developer (5%), vVSP (40%), and Vesper DAO Treasury (55%). Unfortunately, gas costs associated with regular PoolOps activity currently consumes 100% of incoming fees.

Several tactics will be utilized immediately to address PoolOps expenses:

• Protocol Owned Liquidity (~$47k), will be removed from the VUSD product and used to fund PoolOps. At current rates, this translates to at least 6 months of expenses.

• L2 rollouts will be prioritized to generate revenue off of pools with near-zero gas costs.

• Rebalance logic and strategy selection will be improved to reduce costs further without negatively impacting APY or UX.

Revenue stream will temporarily be modified as follows:

• Residual Bad Debt & Pool Ops: 80%

• DAO Treasury: 15%

• Pool Developer: 5%

Emissions

As Vesper establishes itself as "DeFi Middleware", the usage of VSP to incentivize end users becomes increasingly inefficient and wasteful. Most integrations with Vesper pool share tokens cannot pass on VSP to depositors - effectively removing that VSP from circulation indefinitely.

Additionally, Vesper's growing number of integrations offer more capital efficient mechanisms to incentivize users. The Convex integration and Frax gauge are a testament to this: Every $1 of VSP emitted to voters on the gauge translates to $2-4 of rewards for users. This proposal outlines the next steps in that evolution.

Total VSP emissions will be reduced to 20,000 per month from the Vesper DAO Treasury (from 27,500 VSP), with up-to 16,000 going to strategic Vesper Pool incentives, and at least 4,000 going to the vVSP pool. Once Locked VSP launches, rewards will migrate to the new system.

VSP used to incentivize depositors may be used as it had previously, or rewards can be allocated to third-party integrations where it is determined they represent a stronger outcome. Immediately, incentives could be applied to Vesper deposits on Metronome, FXS voters towards the Frax pool, or Alchemix Vesper vaults.

The total VSP emissions will be reduced to 20,000VSP/month. By allocating at-least 4,000 VSP a month as a subsidy to the vVSP pool, Vesper community members will be able to earn yield again on their VSP holdings, in spite of how revenue is allocated.  As Vesper revenue increases, and as bad debt is paid down, buybacks can resume for vVSP holders (or locked VSP in the future), and this subsidy can retire.

This is a temporary revenue proposition that must be overridden by another VIP within 6 months of execution. If no new VIP is executed by the cutoff date, the previous revenue model, outlined above, will be reinstated.

Expectations

PoolOps expenses should be covered for 6+ months, so long as gas rates remain steady.

At current TVL, Vesper bad debt in Rari Fuse should decrease to below $500,000 during this 6 month timeframe. If TVL increases, that debt will be alleviated at a much quicker pace.

Based on the current number of VSP deposited into vVSP, this 4,000/month subsidy should bring the vVSP estimated APY back above 1%.

Vesper DAO Treasury will begin to accumulate non-VSP holdings to be utilized as seen best fit.

Specification

The new VSP framework will take effect the next time VSP rewards reset (around April 10th).

The new revenue model and PoolOps strategies will commence immediately at passing of proposal.

USDC Deposit

Hi,
I deposited 1691 USDC to Vesper app today. The money was not credited to my account.
Thank you for solving the problem.

https://etherscan.io/tx/0xa15e439f165184143fc3333f77cbf428baee0143b8886aebc720965eb5011a3f

Best Regards,
Jozef Kardos

Zero fee like-token intra-Vesper transfers

Summary

Zero withdrawal fee, for pool-to-pool transfers within Vesper.

This proposal rests on top of , and depends on, proposal #32.

Specification

Do not charge a fee when moving tokens from one Vesper pool into another Vesper pool. e.g. Moving ETH from a conservative Grow pool to an ETH-DAI Earn pool. This may only be applied

• In cases where the withdraw token from the old pool (e.g. ETH) and the deposit token into the new pool (e.g. ETH, again) are the same.
• In cases where the withdraw pool and the deposit pool are both Vesper Grow or Earn pools. This does not apply to lending or other products.

Vesper Multi-Chain Whitelist

Whitelist Polygon, Fantom, Avalanche, Arbitrum chains and MATIC, FTM, AVAX

VIP-xx
Status: Pending

Summary

Whitelist Polygon, Fantom, Arbitrum, Avalanche chains for pools in the Vesper ecosystem and MATIC, FTM and AVAX as new deposit assets.

Abstract

Vesper seeks to expand its ecosystem by launching its pools on popular EVM chains to offer more choices and benefits for the Vesper user, principally the reduction of transaction costs. Polygon, Fantom, Avalanche, Avalanche have established DeFi ecosystems that enable Vesper to integrate easily.

In addition, Polygon, Fantom and Avalanche have native tokens that are candidates for Vesper pools.
Expectations

This proposal greenlights the creation of Polygon, Fantom, Avalanche and Arbitrum Vesper satellites. In addition, this will approve MATIC, FTM and AVAX to be used as deposit assets. As an initial step, Vesper pools are already undergoing beta testing on Polygon as of Oct. 12, 2021.

Specification

Whitelist Polygon, Fantom, Avalanche and Arbitrum satellites for production.
Whitelist MATIC, FTM and AVAX tokens.

VSP Bonding

VIP-20: VSP Bonding

Summary

This proposal creates a conditions based framework to authorize VSP bonding.

Abstract 

Bonding is a mechanism made popular by Olympus that enables protocols to own their own liquidity. Bonding has proven successful in building treasuries and ensuring healthy liquidity across dexes, but suffers challenges when not properly bounded. This proposal introduces a framework for when rules and conditions for when bonding can occur. These conditions will be closely tied to the amount of liquidity supplied on DEX pairs and the health of the treasury to continue to fund further development of the Vesper platform and ecosystem. 

Expectations

Bonding - A mechanism enabling users to sell assets to the Vesper DAO in exchange for newly minted VSP that will be locked in a Time Capsule. Vesper DAO will maintain functionality to sell new bonds under the following specifications:

Specification

• A user-iterable Goal List or mapping of (ERC20 token, target_budget, price_multiplier) which are wanted to be received into the Treasury.

• mintFrom(erc20 address, amount) will mint an amount of VSP, the lesser of (target_budget, amount) * VSP_price.

• User provides any amount of a user-specified ERC20 token.  Token must be in the goal list.

• N = tokens * token_price * price_multiplier

• User receives N newly minted-and-locked VSP (up to mint window budget)

• DAO treasury 0x9520... receives N newly minted VSP

• DAO treasury 0x9520... receives collateral tokens from user

• target_budget starts at maximum amount, and subtracted against the amount received from user

• price_multiplier is used to add a bonus or subtract a fee

Token Whitelisting Frenzy

Token Whitelisting Frenzy

VIP-xx
Status: Pending

Summary

Vesper is uniquely positioned to service a huge and growing demand for risk-on DeFi degens to maximize the efficiency of their capital. Market participants have shown a willingness to pay huge premiums for the privilege of collateralizing aggressive assets to take out loans as well as deploying those assets to generate additional yield beyond whatever metrics the underlying token possesses.

With a more proactive approach to supporting new and high revenue tokens, Vesper can benefit from higher TVL, stronger revenue, and better exposure to the DeFi communities who need products like Vesper.

Background Research

Rari Fuse’s rapid rise to over $1 billion TVL, seemingly overnight, sans incentives, can be linked to the engagement of the Olympus DAO community, who benefit from a product that enables them to take out loans for additional leverage on their staked OHM tokens (which generate 8,000% APY already). Over Rari’s $1.3 billion TVL, over half of that is attributed to sOHM deposits in Pool #6 and Pool #18.

These assets are used primarily as collateral to take out stablecoin loans. For sOHM holders taking out these loans, this gives them the opportunity to generate more profit beyond their existing 8,000% APY:

• They can use stablecoins to buy more sOHM and redeposit for a leveraged position (at a somewhat-conservative 40% loan-to-value, they can boost their APY well over 10,000%)
• They can use those stablecoins to farm at other aggressive destinations, taking advantage of yield arbitrage between borrow interest and deposit rates.
• They can ape into projects incubated in the OHM ecosystem via Olympus Pro, further invigorating the Olympus protocol and with a strong conviction of significant ROI.

This risk-on nature translates to huge premiums on loans. Borrowers using sOHM in these pools routinely borrow at rates of 20-100% APR. (Our aggressive DAI pool is a major supplier on these loans, and benefits from the premium rates).

The Rari community and RGT, as the sole providers of “do more” for the Olympus community, have benefited immensely from their endorsement of OHM, as each community has heavily tapped into one another and been able to multiply their growth through the comradery.

Centralized platforms are taking advantage of this market dynamic as well. SHIB shorters recently were paying 400% APR on FTX for the privilege of selling dog token at market price.

Abstract

I see three distinct opportunities, substantiated by market trends, that Vesper is wholly prepared to take advantage of:

• Support risk-on assets to create exciting products that generate premium yield (and premium revenue for VSP holders).
• Tap-in to “buzzing” DeFi 2.0 tokens/communities as a means to grow TVL and market Vesper to new groups
• “Incubate” upcoming, aggressive, or controversial tokens (similarly to what Rari has done for OHM) by creating yield sources and hooking those tokens up to them via our Vesper pools.

However, this needs to be done in such a way that does not compromise the overall security of Vesper or diminish our carefully crafted reputation as the responsible, secure yield source.

Some tokens exist on my radar that hit the checkboxes of:

• capable of good, sustainable yield at high TVL
• ready-for-integration in our bluechip strategies
• more-or-less responsible tokenomics regarding an interesting product that reasonably exists well into the future

This proposal outlines tokens that meet these criteria. Those who do not will be handled separately in the "Vesper Orbit" VIP.

Whitelisted tokens are greenlit for Vesper Lend, Vesperdev app, [Orbit, and Orbit Lend (pending VIP)]. All tokens must graduate from Vesperdev before hitting the main app.

Whitelist:

Abracadabra

• MIM
• SPELL
• sSPELL

SushiSwap

• SUSHI
• xSUSHI

Olympus

• OHM
• sOHM
• wsOHM

Frax Finance

• FRAX
• FXS

Gelato Network

• G-UNI(DAI-USDC)

Unit Protocol

• USDP

Aave

• AAVE
• stkAAVE

Compound

• COMP

Yearn

• YFI
• yvUSDC
• yvUSDT
• yvETH
• yvWBTC

Fei Protocol

• FEI
• TRIBE

Alchemix

• ALCX
• alUSD
• alETH

Curve & Convex

• CRV
• CVX
• crvCVX

Metronome

• MET

Terra

• LUNA
• UST

Brave

• BAT

Synthetix

• sUSD
• SNX

Binance

• BNB
• BUSD

Index Coop

• MVI

NOTE that whitelisting does not require that a product is built out on top of the whitelisted asset. Many of these integrations are low burden (forking frontend, strategies, pools). Some however require extra care, and those with “elevated” engineering burdens will be scheduled against other Vesper engineering needs.

Elevation from whitelist to integration (particularly on lending markets) also requires safety assessment on vulnerability of token to be leveraged for exploits.

Specification

• Whitelist the following tokens Vesper-wide: MIM, SPELL, sSPELL, SUSHI, xSUSHI, OHM, sOHM, wsOHM, FRAX, FXS, G-UNI(DAI-USDC), USDP, AAVE, stkAAVE, COMP, YFI, yvUSDC, yvUSDT, yvDAI, yvETH, yvWBTC, FEI, TRIBE, ALCX, alUSD, alETH, CRV, CVX, crvCVX, MET, LUNA, UST, BNB, BUSD, MVI, SNX, SUSD
• Vesper to build products and integrate tokens following whitelisting as seen most apt.

Vesper Orbit

Vesper Orbit

VIP-xx
Status: Pending

Summary

Many tokens seen as exciting, controversial, or possessing high potential are barred integration from Vesper because they lack integration on other DeFi protocols. This VIP proposes "Vesper Orbit", an off-shoot Vesper application and associated Rari Fuse pool that can incubate these tokens and create the yield sources needed for integration into the Vesper ecosystem.

Background Research

See #34

Abstract

Vesper Orbit is a “degen friendly” offshoot of the Vesper application that does not adhere to the same requirements for auditing and safety as the flagship products. Vesper Orbit would play a similar role to Yearn’s Ape.tax platform. Vesper Orbit is a concept that has been proposed by Jeff Garzik and discussed several times in Discord over the past several months.

Vesper Orbit exists as a standalone Rari Fuse lending market (Fuse#11) and a set of pools found at a special orbit domain (ie orbit.vesper.finance). Vesper Orbit will not surface on either the main marketing or application websites, and will only be accessible to users “in the know”.

Vesper Orbit will carry fees similarly to the main set of products (at a performance and withdrawal fee to be determined later) and follow the same revenue split model as other products under the Vesper Umbrella. Tokens and strategies can graduate from Vesper Orbit to the beta or main app if they qualify under the same standards as other pools and tokens.

Whitelisting is not required for Vesper Orbit. However, we've pinpointed a number of tokens that look interesting for Vesper Orbit and not quite ready for Whitelisting to the main Vesper app. Those tokens include, but are not limited to:

• HEX
• PUNK-BASIC
• SHIB
• ALGD
• AXS
• DOLA
• INV
• AMPL
• renDOGE
• TOKE
• KLIMA
• MIST
• TRU

Specification

• Create Vesper Orbit pools application at orbit.vesper.finance (or similar domain)
• Vesper to support tokens under Vesper Orbit as deemed apt.

Sunset vVSP, Introduce Locked VSP

VIP 19: Sunset vVSP, Introduce Locked VSP

Summary

Wind down revenue flow to vVSP to 0%, replaced by a VSP lockup mechanism, Time Capsule.

Abstract

The advent of "veNomics" has been a hot topic across the crypto space. Curve has shown that locking tokens for revenue share and privileges within the ecosystem is a phenomenal way to drive a healthy, sustainable token ecosystem.

However, this model has serious shortcomings, and while additive buildouts like Convex help to mitigate some of those shortcomings, this model is inherently inferior to alternatives that can address those concerns within the model itself. Most prominently, the Illiquidity of votelocked position (no opportunity for OTC trading or early exit).

This document outlines the framework for Vesper's take on veNomics: Time Capsule. This model will:

1. Reward long-term users with revenue share

2. Ensure a liquid position: users can trade their locked VSP position predictably on the open market

3. Create a hard exit floor that provides an alternative exit, benefiting the treasury

Expectations

• Users will choose a scaling lockup and number of VSP and receive a bond that matures over the duration of that lockup.

• Each lockup is represented as an NFT backed by the total amount of VSP locked up.

• Revenue share is delivered as VSP, streams to the user, and can be claimed at any time.

• Users can exit the lockup early for a decaying fee, fee is paid from underlying VSP and attributed to the treasury.

• As NFTs, the lockups are liquid and transferable. Users can leverage them in trade or as collateral. Each NFT has a minimum and maximum price (VSP value - current fee to withdraw, VSP value) that behaves predictably.

Users can always lockup VSP to receive a locked VSP position. Locked VSP is backed 1:1 with the amount of VSP locked at position creation..

Users can trade positions freely or, if tools exist, leverage them as collateral or otherwise. These lockups have a real market price somewhere between the value of the VSP each lockup is worth at maturation and the VSP received if withdrawn at that snapshot in time. For example: if a position holds 2 VSP, and can be exited with 25% fee, the true value of the position is somewhere between 2 VSP and 1.5 VSP (2 - 2* 25%)

Because APY is reflected as a floating rate between protocol revenue, VSP lockup participation, and price of VSP, we should see the following behavior:

1. Since participation starts at 0, APY is initially infinite, some non-zero lockups are guaranteed.

2. If subscription is low, users will buy-and-lock VSP, driving price + protocol revenue up 

3. Larger VSP boost ⇒ higher TVL ⇒ more revenue

4. If subscription is high, users can exit at a premium, with fees going to treasury to reduce VSP circulation

This mechanic should help to sustain a more predictable VSP price with the market determining optimal terms according to revenue, TVL, and price of VSP.

Locked VSP earns revenue share as a basis, as well as additional utility in the Vesper ecosystem. Governance rights across the entire Vesper ecosystem as well as the ability to direct VSP emissions by voting weight.

Specifications

Creation of a new smart contract that enables users to lock up a chosen amount of VSP to create an NFT position. Each position to hold weight in revenue share depending on size of deposit and length of lockup.

User can select lockups at different benchmarks between one week and three years. Weight is determined as multiplication of position size and lockup duration. Position size is valued linearly and lockup length valued logarithmically. Decaying early withdraw fee is linear.

Implementation of Locked VSP, On-Chain Governance, and Increased VSP Utility

VIP-26: Implementation of Locked VSP, On-Chain Governance, and Increased VSP Utility

Summary

Implementation of Locked VSP (esVSP). Increase utility for the VSP token within the Vesper ecosystem. Implementation of on-chain DAO governance.

Abstract

This proposal outlines the specific details for the implementation of esVSP as previously approved 1 by Vesper DAO Voters, such as duration of time lock, early unlock fees, and the winding down of the vVSP pool. It also proposes increased utility for the VSP token within the Vesper ecosystem by making boosted VSP incentives on Vesper products only available to esVSP holders. Lastly, this proposes moving future Vesper DAO governance to an on-chain model.

vVSP to esVSP Transition:

The transition from vVSP to esVSP will take place over a 9 week period, with revenue share migrating from vVSP to esVSP during that time. This will allow users to move from vVSP to esVSP during lower gas periods, and also offers a small gamification component (being an early esVSP holder, or late to leave vVSP).

Week 1 to 3: 25% revenue to esVSP, 75% revenue to vVSP

Week 4 to 6: 50% revenue to esVSP, 50% revenue to vVSP

Week 7 to 9: 75% revenue to esVSP, 25% revenue to vVSP

Week 10+: 100% revenue to esVSP

vVSP holders aren't forced to withdraw/migrate, and will be able to withdraw their VSP tokens from the vVSP pool indefinitely. After the 9 week transition period completes, the vVSP pool APY will be 0%

Duration of Time Lock:

VSP holders will be able to lock their VSP for a minimum of 1 week, to a maximum of 3 years. Users will be able to select any amount of time between these minimum/maximum limits using a sliding bar inside the Vesper app.

Early Unlock Fee:

esVSP holders will be able to unlock their VSP prior to completion of their lock period for a penalty paid in VSP. The size of the penalty decays linearly from the lock time to the expiration time, with the initial penalty starting at 50%. All penalty fees are returned to the Vesper DAO Treasury.

On-chain Governance:

Vesper DAO governance will move to an on-chain model, utilizing a forked version of the Compound Governance code with Tally.xyz as the user interface.

esVSP will act as the governance token, and holders on a weighted basis will be able to propose and vote upon changes to the Vesper protocol.

esVSP weighting will be based on the number of VSP tokens a user has locked, and the duration of the locking.

When a user locks VSP, their 'boosted' amount is calculated. The maximum boost is 4x, and represents voting weight. Voting power is based on the 'boosted' amount.

Calculate the boosted amount using locked amount, lock period, MAXIMUM_BOOST, and MAXIMUM_LOCK_PERIOD
set boostedAmount to (_lockedAmount * lockPeriod * MAXIMUM_BOOST) / MAXIMUM_LOCK_PERIOD
Add the calculated boosted amount to the total boosted amount
increment totalBoosted by boostedAmount

On-chain governance will initially be beta tested upon a single Vesper Grow Pool, dependent on TVL. Initial functionality will be limited in beta, and expanded over time.

Expectations

Using the transition to this methodology it is expected that the VSP token and market will be more predictable.

It is anticipated that users who participate in esVSP will receive a greater amount of revenue share than they currently do in the vVSP pool.

The early unlock will help support the Vesper DAO treasury over time.

Increasing Utility of the VSP token will strengthen the Vesper ecosystem.

On-chain governance will increase Vesper's decentralization and increase community participation in governance.

Specifications

Initiate esVSP contract with following parameters:

• 50% Early unlock fee, decays linearly
• Time locking available for 1 week to 3 years
• esVSP holders able to participate in on chain DAO governance
• esVSP holders to receive revenue share based on their esVSP weight

Migrate vVSP to esVSP as follows:

• Week 1 to 3: 25% revenue to esVSP, 75% revenue to vVSP
• Week 4 to 6: 50% revenue to esVSP, 50% revenue to vVSP
• Week 7 to 9: 75% revenue to esVSP, 25% revenue to vVSP
• Week 10+: 100% revenue to esVSP

Implement on-chain governance:

• Launched forked version of Compound Governance Model
• Launch Tally.xyz as user interface for governance
• Select a single Vesper pool for beta testing with limited on-chain controls to be expanded over time as testing is deemed successful.