Understanding vVSP — The VSP Pool
There are several nuances to the vVSP pool that enable token holders to deposit their VSP and share in the performance and growth of Vesper as a whole. Below is a general overview of the vVSP pool, its role in Vesper, and answers to some frequently asked questions.
Overview of vVSP
In essence, users deposit VSP and earn VSP yield that compounds automatically. 100% of this VSP yield comes from open-market buybacks. Funds for these assets are accumulated from 95% of the platform revenue. (The remaining 5% goes to reward the developer who created the pool.)
Currently, revenue comes from the 0.6% withdrawal fee (applied to the total amount withdrawn) and the 15% platform fee on yield (applied whenever the pool is rebalanced). These fees are applied to each of the three holding pools (and is not applicable to liquidity providers or vVSP depositors). These buybacks are frequent and reflect that rate of revenue, which you can estimate by factoring in the current yield and TVL.
As of this writing, the most recent daily buyback was $25,000, which vVSP depositors share. This number may increase or decrease over time to reflect a steady rate, so that the daily inflow of revenue approximates the daily buyback.
Note that the vVSP pool is not “boosted” with extra VSP tokens (like the holding pools are). 100% of the VSP yield for depositors is reflective of open-market buybacks. You can read more about that here.
VSP deposits have a 24 hour timelock. This is to prevent individuals from “frontrunning” buybacks by purchasing and depositing VSP right before the buyback and withdrawing and selling right after.
Additionally, vVSP, the tokenized pool share, acts as the governance token for Vesper. vVSP holders (who are also VSP depositors) will soon be able to participate in governance voting and proposals. This may span decisions like changing the fee structure, boosting other pools with VSP, promoting community developed strategies, and more.
vVSP FAQ
How is the earning rate calculated?
The earning rate is calculated by averaging the volume of buybacks over the last 24 hours and then annualizing that rate (so “daily yield percentage times 365”). It also factors in the compounding nature of the pool.
How does the earning rate change over time?
When users deposit VSP, the earning rate goes down (as everyone in the pool shares the VSP yield). Inversely, earning rate increases when users withdraw VSP. The earning rate similarly increases with more frequent and larger buybacks, and decreases with less frequent and smaller buybacks.
Does the price of VSP affect the earning rate?
Yes and no. The calculation for earning rates doesn’t change, since it’s calculated in VSP earnings on VSP deposits. Deposits and buybacks at $5 VSP produces the same outcome as $500 VSP.
However, the future earning rate can change if the price of VSP outpaces growth of TVL. As VSP increases, the dollar value of buybacks needs to increase as well, or depositors will see less and less VSP earnings on each buyback.
Am I staking VSP?
This is a common misunderstanding. It’s inaccurate to say that you are “staking” VSP in the vVSP pool, since that would imply that newly minted VSP emerges from these pools. Rather, the fees are converted to VSP by open-market buybacks.
Why is there a timelock?
If there were no timelock, users could set up a bot that frontruns the buyback to acquire cheaper VSP, deposit the VSP to get yield, withdraw the VSP and yield, and sell more VSP at a higher price. This would siphon value away from the long-term supporters we seek to incentivize with the vVSP pool.
Why is the vVSP earning rate sometimes lower than the Vesper Grow pools?
Vesper grow pools are boosted with VSP drip. A significant portion of the VSP supply is reserved for pool depositors. The vVSP pool is not boosted. In other words, we don’t drip extra VSP to vVSP like we do for holding pools — 100% of VSP awarded to vVSP pool participants is taken from already circulating VSP via open market buybacks.
Are there any fees for using vVSP?
No fees!
When will I be able to vote with my vVSP?
We’ll be delivering updates on this over time. For now, review the relevant section in our documentation.
Does the vVSP pool provide rewards for depositors?
No. There is no “VSP boost” that the pool pays out like the Vesper Grow pools. All VSP delivered to pool depositors comes from the contracts that receive revenue and swap it for VSP.
How long does the vVSP pool last for?
There is no expiration date. You can deposit VSP to the pool indefinitely.
Zane Huffman is a member of the Vesper strategy team.
