VIP-25: Adjustments to VSP Emissions, Revenue Model and vVSP Subsidy
Reduce total VSP emissions from the Vesper DAO Treasury to 20,000 VSP per month (current emissions are 27,500 per month) with a portion of the budget allocated to incentivize VSP participants directly. Initiate a plan to cover ongoing PoolOps and residual “bad debt”.
This proposal encompasses two main components: VSP emissions and Revenue management.
The existing Revenue Model splits net revenue, after PoolOps expenses, between the Pool Developer (5%), vVSP (40%), and Vesper DAO Treasury (55%). Unfortunately, gas costs associated with regular PoolOps activity currently consumes 100% of incoming fees.
Several tactics will be utilized immediately to address PoolOps expenses:
- Protocol Owned Liquidity (~$47k), will be removed from the VUSD product and used to fund PoolOps. At current rates, this translates to at least 6 months of expenses.
- L2 rollouts will be prioritized to generate revenue off of pools with near-zero gas costs.
- Rebalance logic and strategy selection will be improved to reduce costs further without negatively impacting APY or UX.
Revenue stream will temporarily be modified as follows:
- Residual Bad Debt & Pool Ops: 80%
- DAO Treasury: 15%
- Pool Developer: 5%
As Vesper establishes itself as “DeFi Middleware”, the usage of VSP to incentivize end users becomes increasingly inefficient and wasteful. Most integrations with Vesper pool share tokens cannot pass on VSP to depositors - effectively removing that VSP from circulation indefinitely.
Additionally, Vesper’s growing number of integrations offer more capital efficient mechanisms to incentivize users. The Convex integration and Frax gauge are a testament to this: Every $1 of VSP emitted to voters on the gauge translates to $2-4 of rewards for users. This proposal outlines the next steps in that evolution.
Total VSP emissions will be reduced to 20,000 per month from the Vesper DAO Treasury (from 27,500 VSP), with up-to 16,000 going to strategic Vesper Pool incentives, and at least 4,000 going to the vVSP pool. Once Locked VSP launches, rewards will migrate to the new system.
VSP used to incentivize depositors may be used as it had previously, or rewards can be allocated to third-party integrations where it is determined they represent a stronger outcome. Immediately, incentives could be applied to Vesper deposits on Metronome, FXS voters towards the Frax pool, or Alchemix Vesper vaults.
The total VSP emissions will be reduced to 20,000VSP/month. By allocating at-least 4,000 VSP a month as a subsidy to the vVSP pool, Vesper community members will be able to earn yield again on their VSP holdings, in spite of how revenue is allocated. As Vesper revenue increases, and as bad debt is paid down, buybacks can resume for vVSP holders (or locked VSP in the future), and this subsidy can retire.
This is a temporary revenue proposition that must be overridden by another VIP within 6 months of execution. If no new VIP is executed by the cutoff date, the previous revenue model, outlined above, will be reinstated.
PoolOps expenses should be covered for 6+ months, so long as gas rates remain steady.
At current TVL, Vesper bad debt in Rari Fuse should decrease to below $500,000 during this 6 month timeframe. If TVL increases, that debt will be alleviated at a much quicker pace.
Based on the current number of VSP deposited into vVSP, this 4,000/month subsidy should bring the vVSP estimated APY back above 1%.
Vesper DAO Treasury will begin to accumulate non-VSP holdings to be utilized as seen best fit.
The new VSP framework will take effect the next time VSP rewards reset (around April 10th).
The new revenue model and PoolOps strategies will commence immediately at passing of proposal.