Inside the Vesper Revenue Model
In order to coordinate activities within the Vesper ecosystem, a governance token (VSP) will be distributed to early adopters during the initial stages of the project as an incentive to use the protocol, and earn-able thereafter through participation in Vesper products.
The VSP token forms the basis of Vesper’s revenue model. It uniquely allows holders to capture the lion’s share of the value generated by Vesper products. Not only will the token give holders authority to vote on Vesper governance proposals, it can also be deposited in the vVSP pool to generate vVSP, a pool token that denotes a share of the Vault’s holdings.
Let’s go further under the hood…
How It Works
Vesper generates revenue in a fairly straightforward way. Participants in Vesper Pools pay two different fees on the interest that is generated from a pool’s strategy:
- Any time the pool is rebalanced (the process of swapping stablecoin interest earned into the underlying pool asset), 15% of the yield generated is collected as a platform fee and sent (as pool shares) to the Treasury Box.
- When a user withdraws from a Vesper pool, 0.6% of the total withdrawal is collected as a fee and sent (as pool shares) to the Treasury Box.
The fees will be split, with 5% going to the strategy developer and the remaining 95% is deployed back into the pool strategy to the benefit of all pool participants.
As a hypothetical example:
- A Vesper pool with $50 million in total withdrawals and $5 million in accumulated yield translates to $1.05 million in fees ($300k from 0.6% withdrawal fee and $750k from 15% platform fee).
- That $1.05 million is sent to the treasury and subsequently swapped for VSP on the open market.
- Of the $1.05M that is converted to VSP, 95% goes to vVSP pool participants ($997,500).
- The other 5% is sent to the strategy developer who engineered the pool ($52,500).
The Vesper team is the developer of the initial Grow pools, but it is worth noting that Vesper will soon enable developer-submitted, community-approved pools where the Community Developer will receive this 5% fee.
This revenue model connects the value of VSP to all Vesper activities and products in a way that is sustainable over a long period of time. All of the fees generated by Vesper products are sent to the Treasury Box and swapped, on the open market, for VSP. This applies constant buying pressure for VSP tokens, via the Treasury Box, for as long as Vesper products are generating fees. It also means that VSP will continue recycling back into the community ecosystem, allowing it to be re-allocated and incentivize future bootstrapping efforts.
Vesper’s revenue model binds together the two key participants in the community:
- Pool Users — By using Vesper products and paying fees to the Vesper Treasury (which are converted to VSP, providing upwards price pressure), users are incentivizing holders and builders to continue working for and holding an asset that is tied to the product’s growth.
- VSP Holders — This group purchases (or earns) VSP out of a belief in the project’s long-term success, a desire to receive a share of Vesper product revenues and an inclination to participate in community governance.
The unique alignment of incentives enabled by this revenue model supports Vesper’s core principles of longevity and community.
[Ed. note — 2021–02–15: The revenue model changed since this was originally published. This post has been revised accordingly to reflect the lower fees and how strategy developer revenue is treated.]
[Ed. note — 2021–02–18: Lightly edited to address confusion in terminology and nomenclature.]