XVS Ethereum Mainnet Development Program with Lido, Frax, Curve and Gitcoin
Summary
2024 marks a pivotal point for Venus as it strides into the multichain paradigm for the first time. This significant leap reflects Venus’s commitment and aspiration to be at the forefront of decentralized finance.
To support the incentives offered to Venus by Lido, Curve & Frax plus grants management by Gitcoin this proposal contributes XVS rewards to those markets as follows below.
Key points of the plan:
- Market Emissions: 137,500 XVS allocated for the first quarter as liquidity incentives.
- XVS Vault Base Rewards: 22,500 XVS quarterly for the Ethereum vault, enhanced by an additional 10% from the protocol reserves on Ethereum Mainnet from the previous quarter as per tokenomics starting from Q3.
- Venus Prime on Ethereum: Users’ XVS deposits in the Governance Vault on Ethereum will be taken into account for Venus Prime eligibility from the same day the vault is enabled.
- Bootstrap Liquidity on Uniswap: 8,000 XVS and 30 ETH will be used to provide liquidity on Uniswap.
- Multichain Development Grants: 15,000 XVS allocated for community-driven multichain and cross-chain expansion.
- Lido and Curve Co-Incentive Partnership: Markets for wstETH and crvUSD will be co-incentivized with more than $140,000 in monthly incentives.
- Gitcoin Partnership: Quadratic funding and direct grants to boost innovation, with a total funding request of $150,000.
- Frax Co-Incentive Partnership: Markets for FRAX, frxETH, sFRAX, and sfrxETH, along with the liquidity pools for FRAXBP/VAI and frxETH/XVS, will be co-incentivized.
Lido Incentive Partnership
As indicated in the partnership proposal submitted by Lido, the wstETH market will have monthly incentives of 15.4 wstETH. To further incentivize this market, Venus will have monthly emissions of 4,800 XVS for the wstETH market.
Frax Incentive Partnership
The partnership proposal submitted by Frax aims to introduce FRAX (FRAX stablecoin), sFRAX (staked FRAX), frxETH (FRAX Ethereum), and sfrxETH (staked frxETH) as supported assets on Venus Protocol on Ethereum Mainnet and BNB Chain. These markets will be co-incentivized, along with FRAXBP/VAI, and frxETH/XVS liquidity pools on Curve.
Frax will have an incentive mechanism, which rewards based on the idle asset volume within each market. Some examples, taken from the proposal:
-
Lending Smart Contract (A) has 1000 FRAX supply, and 600 FRAX is borrowed:
Frax Finance incentives will be calculated based on the 400 FRAX balance of the contract -
Lending Smart Contract (B) has 1000 FRAX as collateral:
Frax Finance incentives will be calculated based on the 1000 FRAX balance of the contract
This approach ensures that the rewards are efficiently distributed, promoting the supply side liquidity and overall health of the supported markets.
Incentive schedule
In the first quarter of Venus Protocol’s multichain deployment, the distribution of XVS emissions across is aligned with competitive TVL distributions.
Table 1: Proportional distribution of XVS rewards
| Chain | % of Emissions |
|---|---|
| Ethereum (ETH) | 86% |
| Ethereum XVS Vault | 14% |
Table 2: XVS monthly distribution
| Chain/Quarter | Month 1 | Month 2 | Month 3 | Total |
|---|---|---|---|---|
| Ethereum (ETH) | 45,833 | 45,833 | 45,833 | 137,500 |
| Ethereum XVS Vault | 7,500 | 7,500 | 7,500 | 22,500 |
| Total | 53,333 | 53,333 | 53,333 | 160,000 |
Table 3: XVS distribution per market
| Pool | Markets | XVS Emission Distribution (%) |
|---|---|---|
| Core | ETH | 3 |
| Core | BTC | 10 |
| Core | USDT | 10 |
| Core | USDC | 10 |
| Core | crvUSD | 4 |
| Core | FRAX | 2 |
| Core | sFRAX | 2 |
| Core | frxETH | 2 |
| Curve | CRV | 1 |
| Curve | crvUSD | 4 |
| LST ETH | wstETH | 10 |
| LST ETH | sfrxETH | 2 |
| LST ETH | ETH | 40 |
Table 4: XVS monthly distribution per market
| Pool | Market | M1 Allocation | M2 Allocation | M3 Allocation | Total Allocation |
|---|---|---|---|---|---|
| Core | ETH | 1,500 | 1,500 | 1,500 | 4,500 |
| Core | BTC | 4,500 | 4,500 | 4,500 | 13,500 |
| Core | USDT | 4,500 | 4,500 | 4,500 | 13,500 |
| Core | USDC | 4,500 | 4,500 | 4,500 | 13,500 |
| Core | crvUSD | 2,000 | 2,000 | 2,000 | 6,000 |
| Core | FRAX | 800 | 800 | 800 | 2,400 |
| Core | sFRAX | 800 | 800 | 800 | 2,400 |
| Core | frxETH | 800 | 800 | 800 | 2,400 |
| Curve | CRV | 500 | 500 | 500 | 1,500 |
| Curve | crvUSD | 2,000 | 2,000 | 2,000 | 6,000 |
| LST ETH | wstETH | 4,800 | 4,800 | 4,800 | 14,400 |
| LST ETH | sfrxETH | 800 | 800 | 800 | 2,400 |
| LST ETH | ETH | 18,333 | 18,333 | 18,333 | 55,000 |
| Total | 45,833 | 45,833 | 45,833 | 137,500 |
Table 5: Proportional distribution for supply and borrow
| Pool | Market | Supply | Borrow |
|---|---|---|---|
| Core | ETH | 40% | 60% |
| Core | BTC | 40% | 60% |
| Core | USDT | 40% | 60% |
| Core | USDC | 40% | 60% |
| Core | crvUSD | 40% | 60% |
| Core | FRAX | 40% | 60% |
| Core | sFRAX | 60% | 40% |
| Core | frxETH | 40% | 60% |
| Curve | CRV | 40% | 60% |
| Curve | crvUSD | 40% | 60% |
| LST ETH | wstETH | 100% | 0% |
| LST ETH | sfrxETH | 100% | 0% |
| LST ETH | ETH | 30% | 70% |
Values shown in all the tables for each market can change based on market conditions during the first year of deployment.
XVS Vault Base Rewards
Venus Protocol will maintain its commitment to the XVS vault rewards, for the new Ethereum vault deployment. Each quarter, a base reward of 22,500 XVS will be allocated to vault rewards, with an additional 10% of the protocol reserves added from the third quarter onwards.
Table: XVS Vault Base Rewards for Ethereum (XVS)
| Quarter (2024) | Rewards |
|---|---|
| Q1 | 22,500 XVS |
| Q2 | 22,500 XVS |
| Q3 | 22,500 XVS + 10% of Q2 Reserves |
| Q4 | 22,500 XVS + 10% of Q3 Reserves |
Details
The emissions schedule was calculated based on market proportions on Ethereum Mainnet. Moreover, the weight of the allocations was distributed based on market performance on ETH in terms of Total Value Locked.
It’s important to consider that the main use case for DeFi lending on Ethereum Mainnet is for stETH leveraged exposure, where users supply stETH, borrow ETH, and then convert that ETH into stETH to further supply and borrow again. This “loop” grants users the possibility to take advantage of the liquid staking token and multiply their position. Competitors have more than 70% of their liquidity within these two markets and this “looping” accounts for more than 80% of user behavior.
With this in mind, Venus’ deployment on the mainnet will take advantage of being the only DeFi protocol offering an isolated pool specifically for this use case. The “LST-ETH” pool will have the optimal parameters to facilitate and optimize ETH looping and will be boosted with emissions accordingly, in addition to Venus Prime.
Uniswap Boostrap Liquidity
With the new XVS vault to be soon enabled on ETH Mainnet for Venus Prime and Governance, this proposal aims to provide liquidity with 8,000 XVS and 30 ETH to seed a pair on Uniswap and ensure a smooth start. This Uniswap liquidity pool will be available on Mainnet for users and partners to participate in.
Multichain/Cross-Chain Development Grants
As Venus Protocol expands on its cross-chain deployments, a Multichain/Cross-Chain development grants program will be launched to further encourage integrations into multichain environments. The program will offer a budget grant of 15,000 XVS that will be used specifically for multichain/cross-chain development. This grant will be made available to the community, accessible either through a Request for Proposal (RFP) process or when Venus identifies a strategic funding opportunity. The primary goal of this initiative is to incentivize the community to actively participate in and contribute to Venus’s growth and innovation across various blockchain technology ecosystems.
Conclusion
In conclusion, the initial quarterly plan of Venus Protocol to support the Lido, Curve, Frax and Gitcoin’s Ethereum Mainnet deployment proposals includes allocating 160,000 XVS tokens for market emissions and XVS vault rewards. Additionally, 15,000 XVS will be used for multichain development grants to encourage further cross-chain opportunities. This strategy is set to be a major catalyst for the Venus ecosystem to grow across the multichain DeFi landscape.
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