This proposal seeks to create a new token, VCX, to be used in the POP 2.0 token economy as outlined PIP-28, and propose a conversion from POP to VCX.
VCX aligns incentives across all Popcorn stakeholders and is designed to optimize the following further:
- Protocol revenue
- Smart Vault yield
- VaultCraft utilization
- VCX liquidity
- VCX velocity
- Vote-escrowed VCX is now a Balancer LP token - Popcorn uses the Balancer 80VCX-20WETH LP token as the lock token for obtaining veVCX.
- Gauges - Staking contract where users stake assets and are rewarded pro-rata depending on veVCX distribution.
- Reward token is a call-option for VCX - Reward tokens are now call options on VCX, enabling the protocol to accumulate much more in cash reserves regardless of market conditions, as well as letting loyal VCX holders buy VCX at a discounted price.
- Max boost enabled for Smart Vaults - Popcorn gives a 1X max boost to LPs who have veVCX, increasing the advantage of holding veVCX.
3 VCX Tokens
- A native token for incentivizing liquidity
- veVCX (vote-escrowed VCX)
- Used for voting for governance proposals
- Used for voting on gauge weights
- veVCX is based on Curve’s veCRV 3
- oVCX is a call option token for VCX that lets its holder purchase VCX at a discount to the market price. oVCX does not expire.
POP to VCX Conversion
POP stakeholders are able to convert 1 POP for 10 VCX. Users who lock their stake for 1 year in the 20WETH/80VCX Balancer pool will receive a 50% boost in VCX.
- 1 POP : 10 VCX
- VCX max supply is 1,499,995,500
- 50% boost in VCX if VCX LP locked for 1 year — lock up must be done no more than 1 month after launch.
- The remaining 46,246,739 *(46.2%) POP of the Popcorn Treasury will be converted to VCX
- See POP Tokenomics for initial distribution
Participating in PopcornDAO governance requires that an account have a balance of vote-escrowed VCX (veVCX). veVCX is a non-standard ERC20 implementation each account’s voting power.
- Governance voting: Vote on governance proposals such as listing new gauges, changing protocol parameters, and approving budgets.
- Gauge weights voting: Vote on how gauge rewards are distributed across different gauges.
- Boost gauge rewards: Hold veVCX to boost your Smart Vault yield earned from gauges.
- Receive bribes for voting: Get rewarded for voting on certain gauges.
- Receive protocol revenue: Earn a share of the protocol’s revenue.
Provide Liquidity for veVCX
Users must provide liquidity in the Balancer 80VCX-20WETH pool for veVCX. One 80VCX-20WETH LP locked for 4 years provides an initial balance of one veVCX.
- 1 LP with 1-year lock = 0.25 veVCX
- 1 LP with 2-year lock = 0.5 veVCX
- 1 LP with 4 year lock = 1.0 veVCX
Lock duration veVCX exchange value is subject to change.
veVCX New Staking Pool Formula:
- b* is the weight,
- b is the liquidity provided by the farmer,
- B is the total liquidity of the pool,
- w is the amount of vetokens the farmer has,
- W is the total vetoken supply.
This means if a farmer holds no vetokens then their weight in the staking pool is zero, forcing farmers to also be token holders and LPs for the token, which further disincentivizes farming-and-dumping.
Since all farmers are LPs and all LPs are probably farmers, the incentives going towards the farmers also incentivizes LPing, so the staking reward serves two purposes simultaneously: incentivize protocol usage and incentivize LPing.
There are two options for unlocking locked veVCX:
- waiting until your vote lock expires and unlocking penalty-free
- unlock VCX at a cost:
The penalty = min(0.75, (time left until unlock/2). Penalties are redistributed back to the remaining veVCX holders pro-rata.
oVCX is a call option token for VCX that lets its holder purchase VCX at a discount to the market price. Unlike regular options, oVCX does not expire. The discount price is set by PopcornDAO governance.
oVCX is given to Popcorn liquidity providers as an incentive. You will need to provide liquidity on Popcorn and stake in gauges to receive oVCX incentives.
Replace POP (VCX) rewards with oVCX rewards is a strategic move to accumulate more in protocol revenue that can be used for buyback and hiring additional resources, for example, and lets loyal VCX holders buy VCX at a discounted price.
Let’s say VCX is $100 and a call option gives user oVCX the perpetual right to buy VCX at 50% of market price. Popcorn issues 1 oVCX to farmer Bob who immediately exercises the option to buy 1 VCX for $50 and sell it on a DEX for $100.
Total gains & losses:
- Popcorn protocol: -1 VCX, +$50
- farmer Bob: +$50
- DEX LPs: +1 VCX, -$100
VS. total gains/losses for straight VCX farming:
- Popcorn Protocol: -1 VCX
- Farmer BoB: +$100
- The DEX LPs: +1 VCX, -$100
We have the following observations, where oVCX achieves:
- Incentivization efficiency for protocol cashflow: The higher the discount, the more efficient incentivization, at the expense of protocol revenue.
- Revenue reallocation: Revenue generated by farmers is not transferred to the Popcorn protocol, without effecting the LP.
- Continuous token sale: Users are incentivized to LP the Balancer 20WETH-80VCX pools to acquire VCX at a discounted price and then sell on the market.
- Much higher protocol revenue: Users are incentivized are incentivized to LP the Balancer pool to acquire VCX at a discounted price and then sell on the market.
Overtime, protocol ownership will be transferred to LP’s and the to the farmers who are providing liquidity. Given VCX can now be acquired at a discount only if a user provides liquidity, we can assume there to be less sell pressure as users would want to increase their veVCX to improve their yield on Smart Vaults via gauge as well as earn protocol revenue.
oVCX incentives are distributed among different gauges based on how veVCX gauge distribution. VCX LPs stake their LP tokens in gauges to receive oVCX incentives that are distributed to the Smart Vault gauges.
Smart Vault gauges are based on Curve gauges. Read the Curve docs 1 to learn more.
- Provide liquidity in a Smart Vault that has a gauge
- Your vault shares are automaticall staked in the gauges
- You lock stake your VCX LP token
- oVCX rewards are distributed over time, which need to be claim from the gauge contract
veVCX holders can boost the amount of oVCX rewards in gauges by increasing the size of their LP positions. Meaning liquidity providers would need to increase the size of their position in the Balancer pool. The weight of a liquidity a provider is determined using the following formula:
Max boost is 5X with this formula, which makes holding veVCX much more attractive and should theoretically increase the LP holder rate.
w is the weight,
l is the liquidity provided by LP
L is the total liquidity of the pool,
v is the amount of vetokens the LP has,
V is the total vetoken supply.
Staking weight is relative as other stakers can also stake in the same gauge, meaning the amount of boost you receive dependends not only your veVCX balance, but the balance of others as well.
0 oVCX rewards are distributed to Smart Vault LP’s if users don’t have hold veVCX - they will only recieve the base yield from the underlying vault.
Currently, Popcorn charges the following fees on Smart Vaults:
- Deposit Fee: 0%
- Withdrawal Fee: 0%
- Performance Fee: 10%
- Management Fee: 0%
This is subject to change depending on governance.
Revenue to Treasury
The Popcorn treasury collects protocol revenue. Governance can pass proposals on how to distribute the revenue.
To be eligible for oVCX rewards, users are required to provide and lock liquidity in the 80/20 pool for veVCX, which allows them earn oVCX rewards via gauges. To boost rewards on Smart Vaults, users will need to stake their Smart Vault shares in the Smart Vault gauges for oVCX rewards. Gauges can also be used for staked assets in the future.