Sunset vVSP, Introduce Locked VSP

[green-jeff]

VIP 19: Sunset vVSP, Introduce Locked VSP

Summary

Wind down revenue flow to vVSP to 0%, replaced by a VSP lockup mechanism, Time Capsule.

Abstract

The advent of "veNomics" has been a hot topic across the crypto space. Curve has shown that locking tokens for revenue share and privileges within the ecosystem is a phenomenal way to drive a healthy, sustainable token ecosystem.

However, this model has serious shortcomings, and while additive buildouts like Convex help to mitigate some of those shortcomings, this model is inherently inferior to alternatives that can address those concerns within the model itself. Most prominently, the Illiquidity of votelocked position (no opportunity for OTC trading or early exit).

This document outlines the framework for Vesper's take on veNomics: Time Capsule. This model will:

1. Reward long-term users with revenue share

2. Ensure a liquid position: users can trade their locked VSP position predictably on the open market

3. Create a hard exit floor that provides an alternative exit, benefiting the treasury

Expectations

• Users will choose a scaling lockup and number of VSP and receive a bond that matures over the duration of that lockup.

• Each lockup is represented as an NFT backed by the total amount of VSP locked up.

• Revenue share is delivered as VSP, streams to the user, and can be claimed at any time.

• Users can exit the lockup early for a decaying fee, fee is paid from underlying VSP and attributed to the treasury.

• As NFTs, the lockups are liquid and transferable. Users can leverage them in trade or as collateral. Each NFT has a minimum and maximum price (VSP value - current fee to withdraw, VSP value) that behaves predictably.

Users can always lockup VSP to receive a locked VSP position. Locked VSP is backed 1:1 with the amount of VSP locked at position creation..

Users can trade positions freely or, if tools exist, leverage them as collateral or otherwise. These lockups have a real market price somewhere between the value of the VSP each lockup is worth at maturation and the VSP received if withdrawn at that snapshot in time. For example: if a position holds 2 VSP, and can be exited with 25% fee, the true value of the position is somewhere between 2 VSP and 1.5 VSP (2 - 2* 25%)

Because APY is reflected as a floating rate between protocol revenue, VSP lockup participation, and price of VSP, we should see the following behavior:

1. Since participation starts at 0, APY is initially infinite, some non-zero lockups are guaranteed.

2. If subscription is low, users will buy-and-lock VSP, driving price + protocol revenue up 

3. Larger VSP boost ⇒ higher TVL ⇒ more revenue

4. If subscription is high, users can exit at a premium, with fees going to treasury to reduce VSP circulation

This mechanic should help to sustain a more predictable VSP price with the market determining optimal terms according to revenue, TVL, and price of VSP.

Locked VSP earns revenue share as a basis, as well as additional utility in the Vesper ecosystem. Governance rights across the entire Vesper ecosystem as well as the ability to direct VSP emissions by voting weight.

Specifications

Creation of a new smart contract that enables users to lock up a chosen amount of VSP to create an NFT position. Each position to hold weight in revenue share depending on size of deposit and length of lockup.

User can select lockups at different benchmarks between one week and three years. Weight is determined as multiplication of position size and lockup duration. Position size is valued linearly and lockup length valued logarithmically. Decaying early withdraw fee is linear.