[PASSED] Yield on VST Enabled by Vesta Saving Module

Sounds promising. I agree with that the safet vault makes more sense than the other 2 options.

I’m not sure how I feel about the 90 day lock, because it might feel too long for some people that might otherwise decide to hold VST. I understand the rationale behind it and there may be enough people who find it worthwhile. I think this proposal is a great first step to be possibly tweaked later.

One idea is to have a tiered system, where more of the VRR goes to longer lockers. This could make it tempting for people who are not sure if they are able to lock for 90 to still hold VST, and they might hold for 90 days anyway by redepositing in lower lock time vault.

Another idea which I prefer as it makes it more tempting to lock in my opinion, is to offer the possibility of removing your VST earlier at the expense of the interest. That interest could then be fully distributed to continued lockers, or spread between them and the protocol.

How do you feel about 60 days? I guess they changed it after making the OP, see Mikey’s reply to me.

Another idea which I prefer as it makes it more tempting to lock in my opinion, is to offer the possibility of removing your VST earlier at the expense of the interest. That interest could then be fully distributed to continued lockers, or spread between them and the protocol.

Isn’t this just removing the time lock entirely? That sounds like it would be the same as having no lock at all. I think the lock-in is necessary because it actually removes that VST from circulation for a time, which is the main goal of the vault.

Hey guys, I’ve just updated the post. Deleting the cap on interest to be more of a soft cap, and changed the time lock from 90 days to 40 days. Let me know what you guys think. @Maswasnos @Mofe

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40 days seems like a reasonable amount of time. It should insulate VST from short term fluctuations while still allowing users to reevaluate their positions on a regular basis.

Do you have any ideas on how to encourage liquidity from external sources rather than from pre-existing VST pools? Maybe the SV could have some small token incentives for depositing in USDC or FRAX with an internal contract DEX trade to convert it to VST for the vault deposit.

Transaction-based incentives would be very game-able. Using what you mentioned as an example, I could start with VST and just swap to USDC directly before joining the pool, capturing the incentives.

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That’s very true. Maybe the initial rollout doesn’t need additional incentives and we can just see how it performs in the first two months or so.

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Great feature in my opinion. Just a question, does it make sense that liquidity is on curve? a 80/20 approach like balancer would not make more sense?


Hey welcome to our community. I believe a 80/20 pool is more of an option for the governance token. For a stablecoin it’s more optimal to use these tight-spread stablecoin pools.

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This is a great proposal to strenghten the peg and give utility to VST.

I would ideally remove the timelock period. I believe it does not provide true value as the yield reward should be enough to imcentivize people to stake in the safety vault , and might even deter some people to use the vault by fear of locking their capital.

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I think the 40-day lock is necessary mainly because Vesta wants to use that liquidity for other purposes, such as reinforcing stability pools. If you could withdraw at any time, it’s possible that everyone in the pool could choose to withdraw at once while funds were being used elsewhere and not everyone would be able to get their funds out. With a time-lock, it’s possible to have funds on-hand for withdrawals when terms mature while still using those funds elsewhere in the protocol during the term deposit.

It’s mostly a safety feature so that funds can be handled more reliably. Vesta could do a non-time-locked vault but I don’t believe it would be safe to use those funds anywhere else.

I personally don’t think 40 days is all that long anyway; many protocols such as Frax offer configurable time locks and users often choose terms much longer than 40 days.

I understand. Indeed if Vesta wants to use the liquidity then a timelock is necessary. To be honest I am also not a fan of Vesta using that liquidity for the same reason that you stated before. If Vesta wants to go forward with that to optimize the utility of those locked VST then it should be crystal clear what they will be used for and what are the risks involved. For me, you should get yield simply in exchange for the risk of holding VST as you allow people to borrow and you take the risk of depeg.

Or potentially if there is added risk due to the use of those funds, then additional yield could be added in exchange for those risks.

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Hey thanks for your response. The original intention of having the lockup is for monetary reason - a lock up would ensure that capital is staying in the system for longer and decreases the probability of capital flight especially in a depegging scenario. I’ve just updated the post to include how we plan to use the capital as a new general stability pool. So now there’s actually a brand new use case for the locked capital. Liquidation could actually be profitable in this case so it’s technically added benefit to safety vault as well.

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Hey guys, I’ve just updated the post once again. This update is fairly substantial, and you can see a summary of the update at the bottom of the first post. I’d love to see what you guys think. @Maswasnos @Mofe

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Thanks for the update!

  1. 7% seems like a reasonable starting point for yield. The other basic parameters like the 40-day lock and $1m cap sound fair as well.

  2. I like the basic idea of using this as a universal stability pool of sorts, but I’m wondering if there are statistics on how often this may have been utilized in the past. Do the stability pools need to be backstopped frequently? Just trying to get an idea for how often the capital in the vault may be used.

Thanks for your speedy feedback Maswasnos! Historically no stability pools have been emptied before so such a general stability pool actually would have never been used. However I expect some capital from existing stability pools to move over so the outlook may change.

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Hi @mikey and all,

I welcome the efforts undertaken by team to help stabilize the peg, especially now that introduction of VRR has made depeg even more harmful to Vault users.

I do, however, believe that Safety Vault is very unattractive product for almost everyone in DeFi. Reasons:

  • Interest rate of 7% is just too low given that we failed to attract sufficient liquidity even with much higher APR on Liquidity mining program
  • Locking capital even for newly updated term of 40 days is also hard pass for most of us.
  • Funding Safety Vault with VRR means that it will offer higher APR in case of lower peg which is extremely undesirable as it means you have probably lost on the value of locked capital
  • In the event of peg stability around 1.00 VRR revenue will be extremely low and thus Vault will offer extremely low APR which will frustrate locked users
  • Locking period increases probabilities of dumps once period expiries thus bringing additional uncertainty to VST as stablecoin

I believe that right solutions are:

  • incentivise liquidity directly with other stablecoin partners that are willing to offer LP partnerships (Liquity has been doing this already for some time. Also, Sperax is offering shared liquidity with it’s stablecoin)
  • add VST as collateral to lending protocols (some rumours where mentioned in discord)

Hi guys, what is going to be my incentive to deposit VST in the safety vault if the APY is capped at 7% while my minted VRR on VST can cost me much more than that? I would not put any cap APY on the safety vault and would increase its max capacity to 30% of the VST TVL. 1M might no mean much of the difference to aim the equilibrium PEG. The safety vault could be earning 100/30XavgVRRX70%. Therefore 30% on safety vault could really be enough fire power to drain some VST offered from the market, sustaining its Peg, and at the some time contributing to reduce the VRR and make it quite more sustainable and self feeding.

Hey Narok! Thanks for your feedback. I would like to address each of your point individually.

The vote toward VST-FRAX has been consistent. The declining APR is likely due to

VRR should fill the required emission if the capacity cap is implemented. For example, at current VST market cap and mint distribution, it should return roughly 88k in total annual VRR, which would still cover the 7% return requirement. To simulate expected VRR please visit this file: VRR Simulation - Google Sheets.

The program intends on attracting liquidity with low-risk appetite. We do not want to attract liquidity that chase after high yield as those indeed would fleet immediately after APR come down. This is why we structured the APR cap and also capacity cap to ensure that we can always guarantee not a extremely high APR but a sustainable APR that’s in line with market expectation.

Vesta is currently incentivizing VST-FRAX LP heavily through a deal that is extremely favorable to Vesta (see this passed proposal). Partnering with other LP would increase VSTA emission, which could increase selling pressure. It would also set up LPs that quite possibly no one would end up using. Rather, a single-sided VST pool would encourage people to take VST away from the LP. A section in the top post in this topic has discussed on this point.

On the other hand, we are working on a staking module that would enable further VSTA emission. The model is inspired by Andre’s options liquidity mining program and further gamified. We expect this program to drive further LP.

Regarding adding VST as a collateral to other lending protocols - that’s something we are working on as well. Many lending protocols require a Chainlink oracle - we are working on meeting the integration requirements. I’m also working on a proposal to have VST be integrated in Radiant.

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Hey Nserafim thanks for joining Curia! Happy holidays!

The APY cap is in place to ensure that APY does not increase wildly just to decrease later. But you do make a good point that the capped APY may not work as good as an uncapped one especially when the token is severely depegged, which is also when VRR is the highest.

Again the issue with a highly fluctuating APY is that those who enter and lock might see their return decrease significantly. A potential solution here is to remove the cap, but to remind the user of the potential decrease in APY once token re-peg and once more users enter the pool.

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Edit 2023/01/17

  • Changes locking system to look more like vote-escrowed CRV, where users will have the option to lock in CRV to earn more. After consulting with Risk DAO, we realized it’s better to utilize the veCRV model so the protocol may gauge for how long people would like to lock up for. In the new design, users will have the ability to lock in VST for either 30, 60, or 90 days. We did not go with a continuous lock time as discrete time is better in terms of implementation.
  • Changes yield cap to 10% to be more in line with current market condition.
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