Introducing esVSP
A closer look at how the new esVSP model works for Vesper
Introduction
A few months back, the Vesper DAO came together and voted to switch from vVSP to a Locked VSP (esVSP) model. This move aims to not only benefit our long-term users with a share in the revenue, but also ramp up token utility and ensure the liquidity of locked VSP. This way, users can trade their locked VSP positions in the open market as an ERC-721 token.
Let’s explore the finer details surrounding the implementation of esVSP, such as time lock details and the fees associated with an early unlock.
Note: The transition from vVSP to esVSP will take place over 9 weeks, with revenue share migrating from vVSP to esVSP during that time. More details can be found in VIP-26.
Revenue Share
As stated before, there will be a gradual shift of the revenue share from vVSP to esVSP over the first 9 weeks. After these 9 weeks, all revenue share will be directed towards esVSP holders. The revenue each esVSP holder earns will be influenced by their respective weights. These weights are dependent on the amount of VSP they’ve locked and the duration of the lock, which can be between 1 week to 2 years, with a maximum multiplier of 4x. Voting power is based on the boosted amount.
How does it work?
To calculate your esVSP, you can use the following formula:
Boost: MaxBoost * Lockup Duration / Max Lockup
Boosted Balance: Balance * Boost
Total esVSP Balance: VSP Balance + Boost Balance
Example:
Suppose a user decides to lock their 1000 VSP tokens for a period of 2 years (730 days). Using the formulas above:
Boost: 4 * 730 / 730 = 4
Boosted Balance: 1000 * 4 = 4000
Total esVSP Balance: 1000 + 4000 = 5000 esVSP
It is anticipated that users who participate in esVSP will receive a greater amount of revenue share than they currently do in the vVSP pool.
Unlocking Your Position
The concept of an early unlock fee is not new within DeFi, acting as a safety net to encourage users to stay in the ecosystem. With Vesper, this early unlock fee is the penalty you would pay if you decide to unlock your VSP before the end of your chosen lock-up period. The initial penalty starts at 50%, and it decreases linearly over time until the lock expires when it becomes 0%. Any penalty fees collected in this way go back to the Vesper DAO Treasury.
How does it work?
To determine the penalty involved in an early unlock, you can use the following formula:
Penalty = User’s Locked Balance * Remaining Time * Maximum Penalty / Total Lock Duration
Example:
Let’s say you locked your VSP for 1 year, but after 6 months, you decide to withdraw them early.
Given the penalty decreases linearly from 50% to 0% over the course of the lock duration (1 year in this case), at the halfway point (6 months), your penalty would be 25%.
If you had locked 100 VSP, you’d pay 25 VSP as a penalty for unlocking them early.
Now, suppose instead you decided to unlock your VSP one month before the end of your 1-year lock period.
The penalty would be much smaller as there’s only one month left in your lock duration, you would be 11/12ths of the way through, and the penalty would be just above 4% (1/12 * 50%).
If you had locked 100 VSP, you’d pay around 4 VSP as a penalty for unlocking them early.
On-chain Governance
This move also means the Vesper DAO will be transitioning to an on-chain governance model using a modified version of Compound Governance’s code, with Tally.xyz as the user interface.
esVSP will serve as the governance token for this new model. In order to participate, you will need to lock VSP for esVSP, with voting power determined by the number of VSP tokens a user locks in and the duration of that lock. The maximum boost to voting weight is 4x, based on this locked amount.
Note that initial functionality will be limited and expanded over time.
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