What is veNEUR?
veNEUR is Neuron’s governance and revenue sharing token. Users may time-lock their NEURs for up to 4 years for the same amount of veNEUR (e.g., 100 NEUR locked for 4 years returns 100 veNEURs), or anything in between. Depending on the locking duration, user gets different weights linearly: 4 years = 100%, 1 year = 25% weight. The longer the lock, the more voting power rewards can be earned.
What is vote-locking (time-staking)?
Vote-locking is a modified form of governance staking. Governance voters lock their governance tokens to participate in voting. This prevents governance attacks and aligns incentives between voters and long-term holders.
Although this may seem similar to the time-locking mechanism, where users can’t withdraw their staked tokens before the lock expires, several assumptions make this a pragmatic and profitable way to propel Neuron:
- As stated below, the user’s veNEUR stake is decreasing linearly — so is NEUR, linearly unlocking and allowing to increase yields further;
- Vote-locking opens the way to receiving a share of protocol’s fees and directly increasing the yields — by applying a multiplier to users’ NEUR gains!
- The protocol’s tokenomics heavily encourages early adopters, think buying Apple just as they launch iPod (with an example below);
A user can vote-lock NEURs for veNEUR to:
- Participate in voting (1 veNEUR = 1 vote)
- Receive a share of protocol fees, distributed in NEUR weekly.
veNEUR is a non-transferable balance, nor does it trade on liquid markets, so it is not token or share in common sense.
veNEUR balance and voting power
veNEURs represent one’s balance of NEURs that have been vote-locked, weighted for the time remaining in the lock. The longer the time remaining in the lock, the more veNEUR a user will have for the same amount of locked NEURs:
The number of veNEURs and, subsequently, voting power decrease linearly over time. In the meantime, the user can also increase their veNEUR balance by locking up more NEUR, extending the lock end date, or both.
veNEUR is non-transferable, and each account can only have a single lock duration meaning that a single address cannot lock certain NEUR tokens for 2 years, then another set of NEUR tokens for 3 years, etc. All NEUR per account must have a uniform lock time: an account can increase time of lock from 2 years beyond or add new NEUR tokens to the current lock.
Basically, if a user locked 4000 NEURs for a year, their voting power over time will look like that, slowly declining:
One important veNEUR use-case is voting: first, Neuron Improvement Proposals (NIPs) are created on the project’s forum; then, those passing the first voting barrier are transported to our Snapshot gasless voting space (to be opened at launch).
Neuron has user incentives for deposits in Option Pools. After deposit in Option Pool, user gets that pool share as a ERC-20 token. That token can be staked to get additional (to liquidity and option strategy return) rewards. Holding veNEUR will give the user more weight when collecting that rewards.
Rewards for staking Pool tokens consist of:
- Neuron native rewards, dominated in NEUR. These are the rewards eligible for veNEUR boosting.
- Rewards in other tokens. For example, Uniswap DAO can decide to add UNI rewards for deposits in UNI Covered Call or UNI Put Selling Option Pools. In exchange for the bulk of UNI tokens, Uniswap will get liquidity for calls and puts on its governance token.
Boost calculation is a function with several parameters: user deposit in Option Pool, total deposits in that particular Option Pool, veNEUR balance of user, total amount of veNEUR. For an interested and tech-inclined reader:
In summary, veNEUR balance produces boosts but may produce different boosts of up to 2.5x based on the share of user’s deposits in each Pool. Informally, user should have more share in veNEUR (to total veNEUR) than in Option Pool of interest.
A user’s veNEUR boost does not increase the overall vesting of rewards. The boost is an additive boost added to each user’s yield proportional to their veNEUR balance.
TL:DR: protocol fees are distributed to both Neuron DAO treasury and users having veNEUR balance in the ratio DAO will decide, so all revenue is going to the Neuron community.
Protocol’s fees are used to buy back NEUR tokens on the open market. After that, the treasury donates part of its NEUR to NEUR stakers. That is the revenue that goes with NEUR time-locking.
So total share of revenue distributed to the user with non-zero veNEUR balance (see neuronfund.io/veneur/) will be equal to:
Let’s consider a simple example:
- John is an early adopter at Neuron Fund and had invested $10,000 (he’s not a whale yet) into Neuron’s ETH Put selling Pool with a projected APY of 25%, along with buying $1,000 worth of $NEUR — say, at $5 per token, so he’s sitting at 200 tokens.
- He also time-locked his NEURs for 4 years because while anything can happen in 4 years (hats off to Mr. Taleb), he’s quite certain and bullish on the project’s future (plus his funds are unlocked each week linearly — easy to withdraw and sell if such need comes), getting 200 veNEURs in return.
- After that, John staked his share of ETH Put Selling Pool in neuronfund.io/rewards/.
Now watch me:
By DAO decisions on weights, ETH Put Selling Pool has 12.5% APR projected yearly in NEUR tokens — that is $1,250 or 250 NEURs.
John’s boost factor, considering that total ETH Put Selling Pool deposits are $1,000,000, and Neuron users had locked 7,500 NEURs in total, would be:
That alone boosts John’s additional NEUR APR to 25%: 12.5*2. If we count compounding in, John’d be sitting on a combined APY of:
In addition to that, John’s now entitled to a weekly share of the project’s revenue. Let’s say the distributed project’s distributed revenue for the last week was equal to $70,000.
Then, John’s additional yield for that week would equal:
A nice addition to his compounding yields (we’re kidding, this will exceed his APY yields of $2,832 by approximately 2470%). Nice to be an early bird!
TL:DR. If one enters Neuron’s governance club, the balance will grow exponentially and potentially set one up for a long time (or the whole life)
We’ve prepared a simple chart depicting John’s boost factor depending on his veNEUR balance.
Interested in NEUR, veNEUR, and provably safe yields on your crypto assets?
Join us at Neuron Fund, option protocol with focus on capital efficiency of option trading.
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