MUX Community Corner 1: The Next Chapter for veMUX

MUX Protocol

6 min readOct 31, 2023

TL;DR 🌟

Exploring the different pathways to obtaining veMUX.
A deep dive into the MUX Protocol Owned Liquidity (POL) and its broad spectrum of functions.
Most importantly, how and why your beloved veMUX just went through two massive upgrades!

Amendment to Protocol Income (September 12) — veMUX holders experienced a jump in rewards last month from 15% → ~29% by rediverting income from a healthy POL ($6.57M → $10M+ in the past year).
Adjusted Referral Rebates (November 1st onwards) — 100% of all referral rebates previously distributed to LPs and veMUX Holders will be exclusively allocated to veMUX holders starting November 1st.

Rhetorical Question: Who doesn’t enjoy Real Yield in ETH?

This week’s veMUX rate is pretty juice thanks to the returning volatility — but we’re happy to reveal that this isn’t even its final form.

For the uninitiated,veMUX serves as the governance token for MUX, providing holders with voting rights and symbolizing a long-term alignment with MUX.

MCB or MUX tokens can be locked for 2 weeks to 4 years to obtain veMUX. The amount of veMUX received is proportional to the lock duration. The longer you lock, the more veMUX you get!

1 MCB or MUX locked for 2 weeks = 0.009589 veMUX
1 MCB or MUX locked for 1 month = 0.020548 veMUX
1 MCB or MUX locked for 1 year = 0.25 veMUX
1 MCB or MUX locked for 4 years = 1 veMUX

Due to these lock requirements, if you’re holding veMUX, you’re probably already a long-term believer in the MUX ecosystem. You’re in it for the long haul; that commitment shouldn’t go unnoticed. After all, the locking process signifies a commitment to the long-term growth of MUX.

Due to a healthy POL and the incoming ARB Grant Incentives, veMUX holders can now enjoy a larger share of protocol income and reap the rewards from an entirely new income stream.

Let’s get into the why and how below! 👇

Perfectly Balanced, As All Things Should Be ⚖️

MUX requires a balance of incentives for 3 players to run in the most decentralized, effective manner:

veMUX holders, responsible for governance on MUX.
MUXLP Liquidity Providers empower MUX’s unified trading engine, the MUXLP
Protocol Owned Liquidity (POL) serves multiple critical functions for MUX which we will expand on below, the foremost being to guarantee that the MUXLP can adequately meet trading demands.

Typically, protocols adjust their incentives when things aren’t going so well. But MUX is taking a different approach. We’re revisiting our incentive structure precisely because the POL has performed exceptionally well, and

If you’re a veMUX holder, you’ll definitely want to keep reading.

Amendment to Protocol Income📮

MUX Protocol-Owned Liquidity (POL) was designed as a backbone to ensure that the MUXLP could become sufficient without an over-reliance on external liquidity providers by:

For trading protocols, deep liquidity is a fundamental requirement, as it supports increased Open Interest (OI). However, the cost and instability of obtaining and retaining liquidity through liquidity providers (LPs) can be significant. To mitigate this, MUX has thoughtfully designed its POL mechanism to serve several key functions — the most important of which is increased self-reliance, or less dependence on “rented” liquidity.

MUX POL Functions, from most important to least important:

The POL’s primary role is to act as the cornerstone of the MUXLP pool by supporting trading demands.
The POL also binds with the veMUX share of protocol income.
Additionally, the POL is instrumental in financing the annual development and marketing budget.
Lastly, the POL also functions as a safeguard mechanism, protecting all LPs in extreme market conditions. A recent example is the Fantom incident caused by the Multichain hack, where the POL absorbed a financial hit of $120K to secure all LPs.

MUX has undergone impressive growth in the last year, resulting in healthy POL growth over the past 1 year from $6.57M → $10M.

Here’s the kicker: the rewards for veMUX holders haven’t kept pace with that POL growth.

On September 12, MUX proposed an Amendment to Protocol Income to give veMUX holders a bigger (and more deserved) slice of the pie.

Here’s what’s changed in [brackets] :

Income Allocation Before

veMUX Holder Share (in ETH) — Total Protocol Income × [70% × POR]
MUXLP Share (in ETH) — Total Protocol Income × 70% × (1 — POR)
POL Share (in MUXLP) — [Total Protocol Income × 30%]: Bought in MUXLP to add as POL.

Income Allocation Now

veMUX Holder Share (in ETH) — Total Protocol Income × [ (70% × POR + 15%) ]
MUXLP Share (in ETH) — Total Protocol Income × 70% × (1 — POR)
POL Share (in MUXLP) — [Total Protocol Income × 15%]: Again, bought in MUXLP to beef up the POL.

The diverted income now increases $veMUX rewards from 15% — 30%, essentially doubling holder incentives without impairing POL functionality.

Let’s talk numbers. 👇

Right now, the POR is hovering around 20%. Plug that into the new formula, and here’s how the income pie gets sliced:

veMUX Holder Share (in ETH) = (70% × 20% + 15%) = 29%
MUXLP Share (in ETH) = 70% × (1–20%) = 56%
POL Share (in MUXLP) = 15%

Takeaways:

veMUX holder share gets a 15% bump, pushing it up to ~29%.
The MUXLP share holds steady at 56%.
The POL’s share takes a 15% haircut, leaving it with a 15% allocation.

This redistributed protocol income has been live since September, but now, let’s jump into the next piece of the puzzle.

Adjusted Aggregator Referral Rebates 🔄

As an additional income stream, MUX utilizes its own GMX and Gains Network referral codes to earn rebates from trades routed to GMX and Gains Network. The integrated protocols keep 100% of the fees generated from these routed trades.

Previously, LPs and veMUX holders shared 100% of the income derived from Referral Rebates. However, effective November 1, the income from Referral Rebates will be entirely allocated to veMUX holders, following the guidelines outlined in the recent proposal for Adjusted Referral Rebates.

This increase in veMUX share aligns with the probable boost in trading volume from the upcoming ARB Grant distribution, which would benefit traders and LPs the most. As highlighted earlier, ensuring a fair distribution of incentives among diverse entities in the MUX ecosystem is necessary.

For reference, the daily income generated by GMX Referral Rebates alone occasionally exceeds $100K during a busy trading week, so this update should serve to rebalance the benefits between traders, LPs and veMUX holders once the campaign goes live.

Insights 💡

In light of the current market dynamics, the POL is healthy enough to allow for increased diversification of incentives. Redirecting 100% of the income from Referral Rebates to veMUX holders aims to realign the rewards between veMUX holders, traders and LPs, when considering an expected increase in trading activity following the introduction of ARB incentives.

Good governance requires a constant appraisal of incentives. Locking up tokens isn’t just a couple of clicks; it’s a symbolic pledge of allegiance towards a protocol. veMUX holders represent some of the most dedicated members of the MUX community, and they need to be rewarded accordingly, especially when there is an abundance of resources to share.

That means MUX can roll out the red carpet for its most devoted users.

This one’s for you, chads! 🍻