KLEX Rewards and Ve
As of writing, "Ve" has been successfully used by several DeFi protocols in order to incentivize long term holding tokens. There have been several derivations of Ve, and we have chosen to put together several innovations into one model that incentivizes long-term holding/locking of KLEX.
The model below will naturally weed out mercenary farm & dumpers by:
- 1.Giving short-term mercenary capital a penalty on their total rewards.
- 2.Funneling those penalties to further incentivize lockers.
- 3.Giving yield boosters to long-term users and lockers. It will quickly become less economically viable for mercenary capital to stay on the protocol (unless they change their strategy), because each dollar spent on farming will have less and less efficiency without Ve over time.
All KLEX rewards received from lending/borrowing are vested for 6 weeks (1.5 months) by default. Similar to Geist / Ellipsis Finance, they can be claimed immediately by paying a 50% penalty.
The penalty goes back to the KLEX token treasury (separate from the treasury which holds protocol fees). VeNFT holders can govern the usage of this treasury. The KLEX in this treasury will likely be used to give more rewards to stakers/lockers. Therefore, those that claim early to sell are basically paying their rewards to the long-term holders and lockers.
The minimum lockup for veNFTs is 3 months, and the maximum lockup is 24 months. The longer the lockup duration, the more ve "points" that the user will receive. The amount of ve determines voting power and boost multipliers on amounts of capital being lent/borrowed/deposited into Pool 2.
Something that KLEX added is that by staking into Ve, users can get their 50% penalty waived. For example, if they have 100 in KLEX rewards (not fully vested), they can stake all 100 KLEX into Ve immediately.
Ve stakers also get a bonus KLEX reward paid out at the end of the lock period. The formula for the reward amount can be found here.
The longer the lockup duration and larger the lock amount, the more KLEX bonus rewards they will get. In summary, by staking into Ve instead of claiming all, the user receives the following benefits:
- No penalty
- Yield boosters from Ve
- Governance rights through Ve
- Bonus KLEX rewards for VeStakers (additional APR)
- At least 100% to 300% more KLEX received based on lock duration