The Venus Prime program has successfully incentivized XVS staking, allowing users to access Prime benefits with a baseline of 1,000 XVS. However, the current structure does not fully reflect the relative commitment of users with varying Total Value Locked (TVL) in the protocol. To enhance both fairness and the market cap of XVS, I propose a scaling requirement that adjusts XVS staking based on the user’s TVL, particularly targeting larger accounts. Here’s why:
- Mathematical Foundation for Fairness
The reward distribution in Venus Prime follows a Cobb-Douglas formula, which takes into account:
XVS Staked (τ) for each user.
Qualified supply and borrow balance (σ), reflecting the user’s activity in the protocol.
The formula prioritizes the XVS stake but does not differentiate between smaller and larger accounts in terms of relative financial commitment.
By introducing a tiered XVS staking model, we address this gap:
For accounts with a lower TVL, maintaining the baseline of 1,000 XVS is fair, as these users often have a larger proportion of their assets directly tied up in XVS.
For whale accounts, where the risk is lower due to higher liquidity, the required XVS staking should increase proportionally to their TVL to access top-tier Prime yields. This would mean a whale with $3 million TVL might need to stake between 100,000 and 200,000 XVS to reflect a commitment similar to a smaller investor.
- Avoiding Exploits and Stimulating XVS Demand
By scaling XVS staking based on TVL, we minimize potential exploits, such as creating multiple wallets to bypass requirements. This model:
Encourages larger accounts to commit more heavily to XVS, stimulating demand.
Retains a fair playing field where users’ rewards are proportional to their engagement and risk.
- Strategic Benefits for XVS Market Cap
Stimulates Demand: Requiring higher XVS stakes for larger TVL accounts will drive XVS purchases, supporting its price.
Increases Retention: Users with significant XVS stakes will have a vested interest in maintaining their assets, aligning incentives with Venus’s long-term goals.
Enhances Market Cap: A deeper commitment to XVS by larger players increases its circulating demand, potentially leading to a higher market cap and a stronger ecosystem.
Conclusion
This proposal is not just about adjusting numbers; it’s about ensuring fairness and strengthening the protocol. By leveraging a tiered XVS requirement tied to TVL, we align incentives for all participants, making the Venus ecosystem more robust and fair. The Cobb-Douglas formula already serves as a solid foundation, but this enhancement would elevate Venus Prime to better reflect users’ relative commitments and secure XVS’s long-term value.
Let’s discuss how we can implement these adjustments to stimulate XVS’s market cap while fostering a fair and engaging protocol for all users!