[PIP 29] Create new token, VCX, for POP 2.0 and convert POP to VCX

VaultCraft Improvement Proposals VaultCraft Improvement Proposals [VIP]
1
Create new token, VCX, for POP 2.0 and convert POP to VCX
  • Yes
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0 voters

Summary

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 Token (working title)

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

New features

  • 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

  1. VCX
  • A native token for incentivizing liquidity
  1. veVCX (vote-escrowed VCX)
  • Used for voting for governance proposals
  • Used for voting on gauge weights
  • veVCX is based on Curve’s veCRV 3
  1. oVCX
  • 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.

Conversion Criteria

  • 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

veVCX

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.

veVCX Utility

  • 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.

For example

  • 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:

Where,

  • 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.

Unlock

There are two options for unlocking locked veVCX:

  1. waiting until your vote lock expires and unlocking penalty-free
  2. 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

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 Rewards

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.

Why oVCX?

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.

oVCX Example:

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.

Gauges

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.

oVCX example:

  1. Provide liquidity in a Smart Vault that has a gauge
  2. Your vault shares are automaticall staked in the gauges
  3. You lock stake your VCX LP token
  4. oVCX rewards are distributed over time, which need to be claim from the gauge contract

Boosting

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.

IMPORTANT

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.

Protocol Revenue

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.

Conclusion:

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.

2 Likes
2

So is the idea to convert all of POP into VCX and have VaultCraft be the main protocol to use for launching and boosting vaults with VCX?

1 Like
3

What will happen to POP? I imagine there will be some supply that will be unconverted…

1 Like
4

Seems like a straight up pivot. Not sure how I feel about that…

1 Like
5

This could be better for the following reasons:

  • it doesn’t address the current supply/demand imbalance issue. Actually it makes it worse. There’s an opportunity to reduce both the POP supply, and make the new token supply much smaller. This proposal should address the supply imbalance for both tokens. If it does, the value naturally goes up for both and its a win-win. Those bullish on pop, keep their pop and see benefits from the burn.

I suggest, burn the POP tokens (including the 46M protocol tokens), thereby reducing the supply. And instead of having a fixed 1:10 ratio of new tokens, instead dynamically fix it according to demand: e.g. early adopters get greater % of VCX, and the limit the VCX inflation such that the supply is a fraction of current supply.

Ultimately, and this is a very important point, a successful new token would reduce supply for POP token, and would make the scarcity of VCX even greater than that of POP.

1 Like
7

Thanks for your feedback! Let me address a few of your points:

  • Theoretically, the POP supply should be reduced to zero once conversion is live with a new supply of VCX that rewards early adopters. Up to 50% additional VCX in supply will be locked for 1 year IF users convert their POP AND lock stake their VCX LP’s for 1 year. Realistically, all POP stakeholders will not provide liquidity in the 80/20 pool, however they are incentivized to do so.
  • Regarding burning, this is an opportunity to pass another proposal to use protocol revenue to “buyback and burn” VCX off the market using protocol revenue earned from exercising oVCX for VCX.
  • To incentivize conversion, POP stakeholders will have 1 month to convert POP to VCX. After 1 month, there will be a 50% penalty.
  • Burning the 46M tokens as you suggest eliminates potential future revenue and drastically reduces customer acquisition. This highly unadvisable, especially as we need a significant amount of VCX for oVCX.
2 Likes
8

Yes, VCX will replace POP as designed for POP 2.0.

1 Like
9

Realistically, not all POP will be converted. But if you want to boosted yield on vaults, you will need VCX.

10

Restart the chart! LFG

2 Likes
11

Theoretically, the POP supply should be reduced to zero once conversion is live with a new supply of VCX that rewards early adopters.

This is categorically incorrect and for this to be the basis of your argument weakens the foundation on which the rest of the proposal sits. Game theoretically, I don’t see Zero being anywhere close to a potential reality, in any alternative reality.

You are proposing that 20% of ones POP stash is supplemented with ETH in order to get VCX. How out of touch with token holders could one be? You are asking token holders to re-buy chips to sit at the table when we already have a full stack. It’s insulting actually and I don’t know of any token conversion process that has gone before that required something like that.

  • Regarding burning, this is an opportunity to pass another proposal to use protocol revenue to “buyback and burn” VCX off the market using protocol revenue earned from exercising oVCX for VCX.

There is 0 protocol revenue and likely, if things remain as they have been, protocol revenue will remain in the same vicinity, meaning and buyback and burn will be immaterial.

Look at a specific supply/demand imbalance metric example: fully diluted market cap vs protocol revenue as a metric. Popcorn is extremely low in its ranking there and this is an important metric token holders look at to value the token. Its one of the significant metrics defillama highlights for example.

To improve this metric, you need to reduce the FDV, and that can easily be done by burning the tokens.

If this proposal doesn’t address this imbalance, the new token will be DOA.

  • Burning the 46M tokens as you suggest eliminates potential future revenue and drastically reduces customer acquisition. This highly unadvisable, especially as we need a significant amount of VCX for oVCX.

Burning those tokens wouldn’t “eliminate potential further revenue”. I’m having trouble understanding this point.

New VCX should be minted according to demand - plain and simple. Therefore protocol inflation will be consistent with demand which is a highly desirable property of a new token.

It seems the proposal author should speak with a tokenomics expert or two and consider the points raised before launching another token which, to me, seems DOA based on the outline of this proposal.

12

Here’s an objective review on the matter: Tokenomics Proposal: VCX vs. POP

13

In the conversion criteria, I stated 1:10 conversion. Meaning you get 10 VCX per 1 POP. If you already have a stack, you don’t need to rebuy. If you decide to LP in the Balancer pool and lock for 1 year then you receive a 50% bonus. We don’t know how many users will do this, but I believe its a good way to incentivize and deepen liquidity on top of what the DAO supplies.

Regarding “This is categorically incorrect and for this to be the basis of your argument weakens the foundation on which the rest of the proposal sits. Game theoretically, I don’t see Zero being anywhere close to a potential reality, in any alternative reality.”

This is why I said theoretically. The conversion is set up such that you are incentivized convert with everyone else.

Again, let me be clear, you don’t need to rebuy if you have a stack. The reason why the max supply is 1,499,995,500 is because users potentially will supply liquidity in the Balancer pool and receive a 50% bonus. If no one provides liquidity, the max supply is just a 10X of the current total supply, which would be 999,999,700.

Appreciate the feedback!

14

Ok so you’re essentially telling people they will be rewarded by creating deeper liquidity?

And the “revenue” you mention is coming from users exercising the call option using WETH? Is that the idea?

15

Yes, we want all POP holders convert their POP for VCX, including the DAO. Anyone will be able to launch vaults with VaultCraft and boost vaults using VCX (oVCX).

1 Like
16

goal to convert all pop, some pop stay trading

1 Like
17

So how about my POP of my wallet from Popstar program? Will i convert it to VCF ? (it has been lock up to 2 year)