Everything You Need to Know About VMX

4 min readNov 20, 2023

The tokenomic incentive structure behind VMX is carefully designed with value accrual and sustainability in mind. Despite Perp DEXs being one of the few DeFi primitives that offer a pathway to revenue from the get-go, in practice few have come up with the right set of incentives to keep all ecosystem participants holding their tokens long-term and earning while they do so. With Voodoo, we set out to change this precedent and take full advantage of our real yield, leveraging it in ways that keep all types of holders benefitting over the long run.

We started off by taking the “standard” real yield Perp DEX rewards structure as a base level template and thinking outside the box when it comes to connecting each facet of the proverbial fly wheel. Let’s take a look at the elements we’ve incorporated to translate Voodoo’s growth directly into token value accrual.

The underlying dynamics that make VMX unique?

Buy Pressure

Leveraging buy pressure is an underutilised mechanism for driving value directly to tokens in general. With Voodoo generating real yield through platform fees, we have the opportunity to use platform revenue to deepen market liquidity, which in turn helps stabilise the price in times of greater market volatility. To do this, 5% of platform revenue on Voodoo goes directly to purchasing VMX from the open market, which is in turn used as liquidity provision for the VMX-ETH trading pair. This kills two birds with one stone, by removing supply from the market while simultaneously creating more trading liquidity for larger orders. Diverting 5% of revenue to purchasing VMX also serves to maintain a baseline of liquidity that scales with protocol growth.

Deflation

Another important method for driving value accrual to VMX is through buyback and burning. Buying and burning creates a constant deflationary mechanism that acts on the token to reduce circulating supply, as well as provides a signalling mechanism to the wider DeFi audience that reflects the growth in usage of Voodoo through the token itself. Voodoo reserves 5% of platform revenue for a buy and burn mechanism, thereby decreasing the amount of VMX tokens in circulation. These burns will mitigate inflationary pressure on the circulating supply of the token driven by other emissions sources.

Dynamic Emissions

Degens want the highest APY, but they also want the price to go up. This comes at an inevitable cost. With dynamic emissions, we periodically adjust VMX rewards to maintain an APY based on a target range. Market conditions in crypto fluctuate rapidly; dynamic emissions allow Voodoo to adjust the contribution of rewards to token inflation to protect token value and the platform. Our emission schedule includes an upper guardrail limit so that users always know the maximum amount of VMX tokens that can ever be emitted per month as rewards.

VMX — ETH LP Staking

Now that you understand the underlying dynamics that connect Voodoo to VMX token, let’s dig into the practical benefits and explore exactly how getting a hold of VMX lets you harness the true power of Voodoo rewards.

VMX holders unlock a whole set of benefits when they provide liquidity on the VMX-ETH LP pool. Deep liquidity is extremely important for price stability of an asset. Because price underlies the entire Voodoo token ecosystem, Voodoo rewards LP providers for contributing value in the liquidity pool. VMX LP stakers unlock a generous share of the platform revenue, additional VMX (which can be staked to compound your rewards), AND a share of the pool’s trading fees.

VMX holders stake their tokens in the VMX-ETH pool and receive VMX-ETH LP tokens in return. Staking these LP tokens allows them to receive four different types of rewards:

Multiplier Points (MP): An additional boost ETH earnings
esVMX: Holder receives additional VMX when staked
30% share of the platform fees paid in ETH
Trading fees on VMX-ETH LP pool

VXM Tokenomics and Eigenlayer

Our integration of Eigenlayer has implications for VMX tokenomics. Hybrid Intent & Vault Engine utilizes Multi-Party Computatikn (MPC), secured by Eigenlayer, for our intent propagation infrastructure. The MPC runs as an Actively Validated Service (AVS) on Eigenlayer, benefiting from the security of restaked ETH and LSDs.

Voodoo will utilize its own Liquid Restaking Derivative Token (LRD), called Voodoo Restaked ETH (vrETH).

vrETH is incentivized by escrowed tokenomics. Users can Stake ETH or LSDs on Ethereum to obtain a liquid derivative token vrETH. vrETH token stakers earn esVMX emissions, ETH real yield, and Eigenlayer points. This token is fully liquid and tradable.

Conclusion

VMX is your vehicle for gaining exposure to the success of Voodoo. While the details are many, the thesis is really simple. The more volume that passes through Voodoo, the more revenue is diverted to VMX stakers 1. as ETH through real yield 2. Via token buy and burns to encourage price appreciation.

As of right now, Voodoo is already on Guarded Mainnet, and generating profit from swap fees. We did this because it is important to us to prove the value proposition of VMX to the wider market before going live with the token.