[PASSED] Yield on VST Enabled by Vesta Saving Module

[mikey]

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

@narok

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

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

@narok

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

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.

@narok

Locking period increases probabilities of dumps once period expiries thus bringing additional uncertainty to VST as stablecoin

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.

@narok

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)

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.

[mikey]

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.

[mikey]

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.