[VIP-37] oVCX Cool Down Period

VaultCraft Improvement Proposals
1
  • Yes
  • No
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Summary

This proposal outlines a strategy to implement a 1-week cool-down period for the oVCX discount program. The cool-down period will temporarily restrict users from exercising oVCX and immediately selling VCX tokens, with the goal of improving the efficiency of the buyback and burn mechanism. This change will be manually managed by the core team and remain in effect while VCX liquidity is limited to less than $2M in the Balancer Pool and until VCX is listed on a centralized exchange (CEX).

Value Proposition

Implementing a cool-down period for the oVCX discount program offers several key benefits:

Enhanced Buyback and Burn Efficiency
By introducing a 1-week window where users cannot exercise oVCX to sell VCX, we can create a more controlled environment for the buyback and burn mechanism to operate effectively.

Improved Liquidity Management
With limited liquidity in the Balancer Pool, this measure helps protect against sudden liquidity drains that could destabilize the token price.

Stakeholder Protection
The cool-down period benefits all VCX stakeholders by promoting a more stable token economy and potentially preserving token value.

Flexibility
Manual adjustment by the core team allows for quick adaptation to changing market conditions and liquidity levels.

Implementation

The implementation of the cool-down period will involve the following steps:

  1. Technical Adjustment: Change the discounts price to zero to enforce the 1-week cool-down period after oVCX exercise.
  2. Manual Oversight: The core team will manually manage and adjust the cool-down period as needed, based on market conditions and liquidity levels.
  3. Communication: Clearly communicate the new policy to all oVCX holders and the broader VCX community, explaining the rationale and expected benefits.
  4. Monitoring: Closely track the effects of the cool-down period on token price, liquidity, and overall market dynamics.
  5. Review Process: Establish a regular review process to assess the effectiveness of the cool-down period and make adjustments as necessary.

Conclusion

Implementing a 1-week cool-down period for the oVCX discount program is a strategic move to enhance the efficiency of the VCX token’s buyback and burn mechanism. By temporarily restricting the immediate selling of exercised oVCX, this measure aims to create a more stable environment for all VCX stakeholders. The core team’s manual oversight ensures flexibility to adapt to changing market conditions. As VCX liquidity grows and the token potentially lists on centralized exchanges, this policy can be reevaluated to ensure it continues to serve the best interests of the VCX ecosystem.

1 Like
2

It’s a bit unclear how this would work from a user perspective. An example would help.

Let’s say I have $25 of oVCX and the discount is 25%. Today I can use $75 of WETH to execute and immediately get $100 of VCX.

With the cooldown period, would I have $0 today and $100 of VCX “unlock” in a week? If so, would it be $100 at today’s VCX price or the price of VCX after the cooldown period in a week?

Also what exactly would the team “manage and adjust” here?

3

This how it work from a user’s perspective, for example, assuming there is 4 weeks in a month:

  • The oVCX discount is 25% for 3 weeks
  • Then the oVCX discount is 0% in the 4th week, thus there is no profit opportunity for oVCX during this 4th week.

Depositors in gauges with oVCX emissions never stop accumulating oVCX.

Manage and Adjust means we need to change the oVCX discount price via multi-sig.

5

Ah got it. So this just proposes that for one week each month, users will not be able to execute oVCX at a discount, correct?

If so would the schedule for the cooldown weeks be communicated in advance?

6

Correct.

Yes it would be communicated in advance.

1 Like
7

Cool, would be good to clarify that it’s one week per month in the proposal since that isn’t mentioned

8

I’m not sure how this should help except for using that week for buybacks. But after that buyback period oVCX farmers would simply dump right after the cooldown phase. So what do we gain except for a price spike every 4 weeks. Smarter that room temperature entities would simply execute before that cooldown phase, wait for the buyback and dump right into the price spike.

I would really like to see some narrative change that would convince rational actors to hold on to their VCX because they will expect a rise in price. For that the success of the project (increased TVL) needs to have an direct effect (increased buybacks by using parts of the fees) on the token price.

1 Like