The SperaxUSD decentralized stablecoin ecosystem is about to see major tokenomics upgrades.
What Does this Mean for $SPA Holders?
veSPA, or vote-escrowed $SPA, is simply locked $SPA. Depositing $SPA into a vault will lock $SPA to provide far more rewards compared to those who don’t stake. veSPA is the perfect product for the long term holder.
veSPA aligns community incentives, helping $USDs and $SPA holders benefit from each other’s success. To do this, veSPA focuses on long term incentive alignment between $USDs holders and $SPA stakers. veSPA holders become active participants in SperaxDAO governance to continue building out $USDs, while greater $USDs adoption guarantees continued staking incentives for veSPA participants.
The veSPA upgrade adds additional utility and value accrual mechanisms to $SPA, complementary to the existing mechanism that burns $SPA as $USDs grows in circulation. These upgrades prove incentive alignment for holders of veSPA and $USDs.
Staking Reward Breakdown
By staking, stakers will receive three kinds of rewards. All three kinds of rewards are distributed with the same weekly distribution mechanism. The rewards are generated by different sources, but all rewards are distributed in proportion to the staker’s veSPA balance relative to the veSPA pool.
- Staking incentive -> More $SPA
- $USDs Protocol Fees (100%) -> More $SPA
- $USDs auto-yield share -> More $SPA
Stakers can view rewards details from all three kinds of rewards on the dapp. Stakers would be able to view their share of the total rewards and the next reward distribution date.
Staking Incentive Rewards
This reward is the most straight forward, but will only be available during the launch of the protocol. During the token generation event, 10% of circulating $SPA supply was reserved for staking incentives. We reserved these rewards to:
- Reward stakers without inflating total $SPA supply
- Bootstrap the $SPA rewards as the protocol isn’t yet collecting massive usage fees
- Decentralize $SPA holdings
This budget is finite. Once this budget is exhausted, the DAO will have to vote to allocate $SPA from the treasury to refill this $SPA stream.
Protocol Fee Rewards
$USDs charges a fee to users minting or redeeming $USDs. These protocol fees benefit SPA stakers (i.e. users holding veSPA). With fees collected from the $USDs protocol, the staking protocol purchases $SPA on the open market. This purchased $SPA is distributed amongst all veSPA holders.
Therefore, increased $USDs utilization and arbitrage strategies result in more fees collected, which benefit veSPA holders with higher rewards. This buyback function links $USDs growth with buy pressure for $SPA while distributing more rewards to veSPA stakers.
USDs Yield Share Rewards
A fraction of the automated yield generated by $USDs will be swapped for $SPA tokens in the open market and distributed to veSPA holders.
This buyback function links $USDs TVL with constant buy pressure for $SPA while distributing more rewards to veSPA stakers.
Rather than rebasing and burning all the yield, Sperax will only rebase and burn (1- profit sharing parameter) * total yield in $USDs. The rest of the yield (i.e profit sharing parameter * total yield in $USDs) will be combined with the protocol fees and incentive rewards to be swapped for $SPA using the Uniswap v3 $SPA / $USD pool at regular intervals.
When $USDs is minted, up to 1.5 cents (usually less) will be used to buy back $SPA. With yield share rewards, there may be an additional 3.5 cents of $SPA buybacks every year for every $USDs minted. Assuming consistent TVL, this yield share translates to more than 20x more $SPA being bought over 10 years. This directly links levels of $USDs TVL to value accrual for $SPA.
The profit sharing parameter could be subject to change via governance on the first iterations. Future versions could incorporate a dynamic on chain profit sharing algorithm that will further stabilize staking returns.
$SPA tokens are distributed directly to stakers in proportion to their veSPA balance. Users have an option to re-stake their $SPA rewards manually instead of claiming. Re-staking $SPA rewards would be a one click process, saving gas well in a hassle free process for users who wish to automatically compound their $SPA rewards.
Distribution of $SPA rewards are based on the user’s veSPA balance at the beginning of each week. The proportional amount of $SPA rewards that each user receives will be calculated based on the user’s veSPA balance relative to the total veSPA supply at the beginning of the week.
The actual distribution occurs at the end of the week based on collected fees, generated rewards, and the daily distribution rate of $SPA staking incentives.
At the time of staking, users can choose if they wish to go through a cooldown period or keep their veSPA balances staked at a residual balance. If users choose to remain staked, before withdrawing their $SPA, users must initiate a cooldown period for withdrawing SPA.
If users choose the no cooldown option, veSPA decays to 0 and stakers are able to withdraw their deposited SPA balance at the end of the lockup period.
Users can initiate a cooldown period when Minimum Lock period (7 days) is left in their lockup period. Staker’s veSPA balance decays to 0 from the residual veSPA balance during the cooldown period. At the end of the cooldown period stakers can withdraw deposited $SPA. Stakers will receive rewards during the cooldown period in proportion to their veSPA balance.
At the end of the cooldown period the veSPA balance remains 0 and the staker doesn’t get any rewards. Users can then unstake at any point after the cooldown period has ended.
Instead of distributing all $USDs fees and $USDs yield share in the form of $SPA tokens, the protocol may also burn a certain percentage (burnFactor) of the $SPA tokens. The parameter burnFactor will be set to 0 initially since we want all of the $SPA token rewards to be distributed to veSPA holders.
For future utility, stay tuned for the full DAO overview!
- Vote in the Governance protocol
- Collateral type, collateral deployment strategy, burn lever settings, protocol fees
- Vote to determine the weights of different liquidity mining campaigns (similar to the curve gauge)
- Earn higher/different yield on $USDs holdings in your wallet!
The veSPA tokenomics upgrade is an anticipated and extremely exciting development for the community. Thank you for participating in Liquidity Provision, and we look forward to veSPA governance in the coming upgrade.
Sperax is dedicated to benefiting all financial lives with blockchain technology.
Sperax is the open-source development team focused on building software products on the Sperax protocol. With the Sperax token ($SPA) at its core, Sperax has built the first auto-yield stablecoin, $USDs, and a suite of DeFi apps.
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