voSPOOL — A Primer

This article serves as a to-the-point, quick primer on voSPOOL — the governance token for the SpoolDAO.

Staking SPOOL: Staking SPOOL does not require locking tokens for any fixed amount of time. While SPOOL is staked, it generates 1/156 voSPOOL per week for the staker. SPOOL stakers also receive their full share of the Spool Protocol revenue while they are staked, which they can claim at any time. Unstaking any SPOOL will reset voSPOOL to zero. voSPOOL is not transferable or tradeable.

What voSPOOL does: voSPOOL allows holders to apply their voting weight to governance votes regarding the Spool DAO, including matters like treasury management, the curation of risk models, the addition of new strategies or protocols, and general matters of governance.

Additionally, voSPOOL holders direct the SPOOL reward emissions from the treasury that are used to boost the yield of different Spools. By design, the Spool Protocol will spawn many different composite strategies created by end users, DAOs, institutions, and other entities for various purposes.

These Spools earn a base yield from their underlying strategies, but they can receive additional SPOOL from treasury emissions to boost the base yield with additional SPOOL APR.

Because there is a potentially very high number of individual Spools, voSPOOL will be the sole determinant of which Spools actually receive a share of the periodical SPOOL emissions. Any Spool eligible for emissions will need to pass a 1% voSPOOL vote hurdle to actually get assigned emissions for a given epoch.

After passing the hurdle, emissions will then be split between all Spools that passed the hurdle as follows:

• 50% of SPOOL emissions are assigned based on the relative revenue the Spool generated in the past epoch. A good way to approximate the revenue of a Spool would be to multiply the average TVR with the average base yield of the Spool. This ensures that SPOOL emissions go to highly popular and performant Spools.
• 50% of SPOOL emissions are assigned based on the relative voSPOOL votes a Spool garnered in the hurdle vote. This ensures that votes in excess of the ones needed to pass the hurdle are not wasted and continue to be worth striving for.

Implications of voSPOOL: SPOOL circulating supply will inflate by design, but the direction of this inflation will be in the hands of not only SPOOL stakers, but over time be concentrated with senior stakers of SPOOL who are long-term DAO members. These DAO members are also the group that is most aligned with the Spool DAO’s main purpose of growing Spool Protocol and Total Value Routed while also being most affected by dilution. By giving them the power to direct emissions, SPOOL will be directed where it furthers the goals of the DAO as a whole.

Comparing veTokens to voTokens

Comparison is often a great way of explaining new concepts, so let’s briefly shine a light on the key difference between veTokens (CRV being the notable examples) and voTokens as proposed for SPOOL.

The core reason for altering this standard was liquidity for stakers. In the ve model, getting governance power is associated with underwriting illiquidity of up to 4 years, which is a very long time, especially in an industry as fast-paced as crypto. This skews governance heavily towards entities that can afford to actually forego liquidity to such an extent that they have significant voting power.

It stands to reason that many retail and smaller participants would end up staying staked for 4 years and even longer if the protocol is developing as they want to see quarter by quarter, but there is no way for them to know this from the start.

voTokens retain the quality of giving governance power to those that are committed to the DAO and protocol long term, but removes the need to make this decision up front by instead making it accumulate over time. The user can unstake at any time, at the cost of his voToken count resetting to zero.

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Spool is composable and permissionless DeFi middleware that connects Capital Aggregators with DeFi Yield Generators to dynamically, automatically, and efficiently allocate funds and ensure optimized yields, for custom strategies, managed by DAO-curated Risk Models.

Spool was established as a DAO, with a selection of founding contributors that represent a diverse cross section of the blockchain community.

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