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Addendum -- Original Tokenomics Draft Revisions
Summary of the motivations and considerations for the updated VRTX Tokenomics compared to the original 2022 draft of the Vertex Tokenomics.
Primarily, these changes were a result of thorough review and consideration of the original draft’s contents, incentive mechanics, and feasibility amidst evolving conditions in both a dynamic market and the core Vertex product.
The revised version of the VRTX Tokenomics preserves the core utility and incentive structure of the original draft, while provisioning several major improvements. The overarching goal of the VRTX Tokenomics remains steadfast – striving to reward various levels of contributions to the protocol with a focus on users asserting long-term perspectives.
The principal considerations for the updated Tokenomics include, but are not limited to:
- Optimizing the Utility & Reward Mechanics of VRTX
- Simplifying the Tokenomics Design
- Maintaining Robust Risk Parameters & Market Specifications
Removal of xVRTX: After extensive review, the functionality of xVRTX was determined to be redundant to the extent that it added unnecessary complexity to the VRTX Tokenomics with only a marginal positive impact that was easily substituted with VRTX anyways. More specifically:
- Insurance Fund Staking: The use of xVRTX for Insurance Fund staking was replaced with USDC.e, making the Insurance Fund more robust to situations where more immediate USDC.e liquidity is required – where the Insurance Fund is already composed of USDC.e. Depositing USDC.e is also more accessible to most users.
- voVRTX User Score: The utility of staking xVRTX to generate a higher voVRTX “User Score” was mostly redundant, and the functionality of boosting voVRTX scores based on similar parameters was simplified by replacing xVRTX with VRTX instead.
- DAO Governance: Staking and re-staking xVRTX as a signal of users displaying long-term perspectives and commitment to the protocol was an additional step that was unnecessary for achieving the same goals via staking VRTX.
Removal of the DAO: After significant consideration and diverse input, the plans for the Vertex DAO were excluded from the updated VRTX Tokenomics.
- The principal motivation for this decision was to preserve the highest degree of risk management for Vertex’s market parameters and specifications without the coordination overhead, complexity burden, and accompanying risks derived from distributed decision-making at scale – especially when applied to critical risk parameters of the exchange.
Fee-Based voVRTX: The quote currency of Vertex is USDC.e, meaning that paying trading fees in USDC.e is already the current state of Vertex.
- Compared to paying fees in either VRTX or voVRTX, paying fees in USDC.e is both more straightforward for users and less convoluted than implementing another layer of fee-based voVRTX scores considering #1 and #2 above.