Seeing as though everyone is a stablecoin maxi or they are partaking in the “[INSERT NARRATIVE] WARS”, who better to cover than a protocol that can do both.
Get you a protocol that can do both… I couldn’t find a meme so the bold font will have to do for now.
Anyway, before we get into Vector Finance, it is always important to know your history. Those that do not know history are doomed to repeat it and all that… In DeFi terms, you are NGMI.
It all goes back to Convex and Curve, in a sense…
Curve is the largest protocol in DeFi by total value locked (TVL) allows like for like swaps between stablecoin pairs or more recently more exotic and volatile pairings.
WTF is going on with Curve’s UI – A Breakdown.
From left to right we have the following:
Pool – This is the liquidity pool and the assets it is comprised of. So, tricrypto2 is a liquidity pool of BTC, ETH and USDT. Users can deposit any of these assets into this pool to earn trading fees each time a trade happens using that specific pool.
It also doesn’t matter what proportion or ratio of assets you supply to Curve. This is not the same as Uniswap where you need to provide a 50:50 ratio in dollar-denominated terms i.e. If 1 ETH is $3000 (cope) then you would supply something to the tune of 1 ETH and 3000 USDC to the ETH-USDC liquidity pool on Uniswap.
For Curve this does not necessarily matter. You can supply any of the supported assets in that pool, even singular if you wish.
As you can see there are many similar pools. For instance, you could choose to swap USDC for USDT using the 3Crv pool or the sUSD pool. So, how do you choose?
Well, you want the tightest peg for your swap. You don’t want to trade $1m of USDC and receive $990,000 in USDT (losing $10k in the process) because the liquidity isn’t there to facilitate it. You want the deepest liquidity to ensure the most optimal swap and best return for the trade, as close to 1:1 as possible.
On top of that, a lot of Cruve pools will incur a 0.04% trading fee. Compared to Uniswaps 0.3%, this creates an optimal environment for larger traders.
Base Variable APY – This is the annual yield projected for providing liquidity to that particular pool given everything stayed the same. This is of course variable and can increase in times of volatility or decrease in times of traders shitting themselves on the sidelines. Scared money, don’t make money.
Rewards – Now things get interesting… Let’s imagine you have built a stablecoin and you deploy it to Curve… you want to ensure the deepest liquidity possible so that users can come along and use your stablecoin rather than the standard USDC, USDT, DAI…
So, how do you manage that?
Exactly, sir. Projects that have a requirement to ensure deep liquidity on Curve will incentivise and encourage liquidity providers by (as the labrador above alluded to) paying them.
This will usually come in the form of their project’s native token.
The eagle-eyed amongst you will see that the sUSD (the stablecoin of the Synthetix platform) currently has a higher TVL than the standard 3Pool, interesting…
This is because the Synthetix team are paying those who wish to supply liquidity in additional SNX (the governance token of the Synthetix platform) to do so.
It is all about incentives.
That isn’t where the rewards stop though, every 14 days or so CRV holders who lock up their CRV to generate veCRV are allowed to vote on the next set of CRV emissions and which pools they will be directed at. The more votes then the more CRV the liquidity providers will receive.
This is the Curve Gauge Weight voting system.
Here we go again… So, if the Synthetix team are smart (which they are) they will try to sway the veCRV holder’s vote in favour of the sUSD pool. Again, more rewards, more liquidity, and a better peg for their stablecoin.
This is where bribes come in.
Bribes are… well, quite frankly, just that. Protocols will effectively pay veCRV holders in their native token to have their vote for the next set of CRV emissions.
Okay so, wouldn’t it be smart for a protocol to just buy and lock up a shit load of CRV and sway the votes themselves each time? Well, kind of but that capital is then locked for a maximum of 4 years and isn’t liquid. Hmm
So, what else can they do?
In comes Convex and CVX.
Convex is an additional layer built on top of Curve. They say, come lock your CRV with us and in return, we will give you a synthetic version of CRV which is liquid, hence cvxCRV.
Each time a user does this that CRV is then locked in Convex… Forever. This is how Convex has amassed a shit tonne of CRV over the past 12 months or so and has led them to have a very influential part to play in each round of voting.
So, what do you think happens from there? Well, the CVX token also has a lot of say about the whole matter. Those who buy and lock their CVX for 16 weeks + 7 days then have voting rights over how Convex votes on the Curve pools.
Isn’t this a long-winded way, why don’t you just use veCRV instead? Well, the fact cvxCRV is liquid and also the fact that you get more bang for your buck.
Due to the sheer amount of CRV locked in the protocol compared to the amount of vote locked CVX depositors, there then becomes a leveraged CRV voting mechanism. Each CVX effectively has 4.41x the amount of voting power to that of veCRV (at the time of writing).
Interesting… So, for Synthetix, it makes a lot more sense to 1) have some vlCVX to sway the vote themselves or 2) bribe the CVX holders who have larger voting power/CRV or 3) both.
Cool… so that’s a brief history and you can see how both Curve and Convex complement each other’s flywheel effect.
I’ll now get on with the article and stop waffling on.
Platypus Finance –
It doesn’t take a genius to work out that Curve is a minefield for the average user, the UI feels like it is purposely built to be difficult and providing liquidity in the most optimal way is a part-time job… trust me.
Platypus has taken the idea of low-slippage, low-cost stable swaps and built an innovative product on Avalanche.
You will immediately notice that there aren’t any complex pools that need constant monitoring and rebalancing. The genius in the design is liquidity providers can supply stablecoins, single-sided and that is about it… Then, if you wish to change pool, it won’t cost you an arm and a leg to do so in gas fees.
So, how low is the slippage in comparison to Curve?
That is extremely tight for a $1m trade between native USDT and native USDC… very impressive. Around $21 is lost.
Interesting… Curve on Ethereum has around $170 lost on a $1m swap.
Even On Curve (Avalanche) the highest liquidity for NATIVE stables not synthetic assets like USDT.e or USDC.e is still being outperformed.
Interesting indeed. Believe the hype!
So why does any of this even matter? Well, if you are looking for yield on your stablecoins Platypus could well be the place for them.
With each separate pool, you are going to see a base APR and a boosted APR.
This is the USDC (native) main pool.
So, if you just want to deposit your USDC you can earn 3.6%. Then we have the boosted APR. This additional yield is afforded to those who stake PTP for vePTP.
As you can see from the image above the base APR is 3.6% and given the median amount of PTP staked, it is earning an additional 14.1% or a combined median amount of 17.7%.
Not bad at all, but…
If you run some numbers then you can see how much PTP you are required to stake for there to be such a high boosted yield.
With a 10,000 USDC deposit and 3333 PTP (at $3) roughly equating to $10,000, the estimated boosted yield is coming in at 3.9%. So, in total based on the base yield above a grand total of 7.5%.
For every 1PTP you stake, each hour you will receive 0.014 vePTP. Why is this important? Well, it is the vePTP where the boosted yield comes from, so the longer you stake your initial amount of PTP, the more vePTP you accumulate and the higher your boosted APR will be.
If you want to unstake your initial PTP, you will immediately lose your accumulated vePTP and any pending vePTP. Note: You do not lose your initial deposit, just the accrued vePTP.
If you are a lunatic and manage to stake for so long that your vePTP balance is 100x that of your PTP staked then this will be capped at the 100x and you can’t accumulate any more vePTP and hence you will be earning the maximum boosted yield.
So, the trade-off is having to purchase at least an equal amount of PTP and staking in over a longer period of time to generate a sufficient yield. If you were early and you had a great cost basis for your PTP, then you will be in a very good position right now with regards to boosted yields.
What if you aren’t early? What if you are a smaller fish? What if you can’t be bothered to actively manage your stables?
Well, when you throw all of the above together you get Vector Finance.
What is Vector Finance –
In its first form Vector is to Platypus, what Convex is to Curve…
Vector will take in PTP, perpetually lock it up forever and in return, you will receive xPTP. Once converted, this process is irreversible. This way Vector has amassed over 4.5m PTP to xPTP, whilst having a perpetually increasing balance of vePTP which is now hitting 39m at the time of writing.
If all of the above went over your head, let’s break the protocol down, piece by piece.
PTP – Platypus Token
vePTP – vote escrowed PTP, deposited into Platypus to earn boosted yield on stable deposits.
xPTP – This is a liquid version of vePTP. Once you convert PTP to xPTP on Vector, your PTP is locked and staked in Platypus. xPTP-PTP liquidity pools are available on Trader Joe if you wish to trade back to PTP.
Once you convert PTP to xPTP on Vector, you can then stake xPTP to earn 66.6% of the protocol revenue on the platform.
VTX – The governance token of Vector Finance. Unlike the majority of governance tokens out there, VTX also receives 33.3% of the revenue generated from the Vector platform.
VTX can be staked, or it can be locked for a period of 16 weeks to earn boosted yield and voting rights.
Now, think about it… if Vector owns a shit load of PTP which is staked earning an even bigger shit load of vePTP as time goes by, they have an enormous amount of boosted rewards.
These rewards are then distributed to the liquidity pools on Vector, so users can come and deposit their stables, and earn boosted yield by taking advantage of Vectors’ war chest of vePTP.
If you flick back to our USDC example above where we have to buy 3333 PTP (at $3) and stake it to earn around 7.5% on our 10,000 USDC deposit on Platypus… then we can see the core benefit of Vector here.
Anyone can bring their stables along and earn (at present) 12.7% on USDC, without needing to touch PTP.
Naturally, if you had been early and accumulated enough PTP to generate a more beneficial yield than 12.7%, through Platypus directly, then fine, congrats. But, I don’t think a lot of people will pay the premium to do so, personally.
Vector Strategy –
I put a Tweet out a while back asking who is building the Convex to Platypus on Avalanche and the Vector guys responded. As soon as I spoke with them I knew the project would be a success.
From there myself and the Expo treasury decided to support the project in any way we could by trying out a range of strategies.
This is a snapshot from the current Expocapital.eth wallet that we deployed.
USDC – In one of the new alt-pools earning a nice 12.5% in PTP yield and additionally in VTX.
VTX locked – earning 33.3% of the protocol fees in VTX, xPTP and the eagle-eyed amongst you will see zJOE is about to go live, wtf is that?! More below… it’s a good one.
xPTP – We converted this on day one and have quite frankly just forgotten about it. We earn 66.6% of protocol revenue from this position in the form of VTX and PTP.
xPTP-PTP – My favourite position… Not only is the APR on this 205%, but the peg is also 0.99:1.00, so it’s effectively single-sided staking earning this non-dilutive incredible yield. I kind of hate that I just told you that haha.
At the end of every week or so we then head to the claim page and just hit compound and the rest is done for us.
Compounding daily is more optimal to increase that already tasty APR to a nice fat APY.
Did they stop there? Absolutely not. Let’s talk about veJOE…
How Vector Finance utilises veJOE for boosted yields –
So, if you understand all of the above then you can kinda work out how this is going to work.
Those who stake their JOE for veJOE on the Trader Joe platform will receive boosted JOE rewards when you provide liquidity.
An example would be…
Let’s say you have AVAX-USDC and you want to provide liquidity on Trader Joe, you will earn trading fees (0.25% of trading volume, proportionally to your share of the AVAX-USDC pool), additional JOE as incentives and now, if you stake JOE for veJOE, you will receive boosted JOE tokens, as a reward on your LP positions.
Similar to vePTP, when you stake JOE, your veJOE token balance will creep up over time and hence the longer you stake JOE as veJOE, the higher your boosted rewards will be. Quite clever if you ask me.
As soon as you unstake, the accrued veJOE will be lost. This is important to note that if you say deposit 1000 JOE and accrue 4000 veJOE over time. As soon as you unstake you will receive your 1000 JOE back. It is the accrued value you lose, not your initial stake.
Can you see where Vector comes in yet?
Yes, that is correct. Those who convert JOE to zJOE on the Vector platform will receive the lion’s share of the protocol revenue. From there, Vectors smart contracts will lock the JOE indefinitely into the protocol and then share their accrued veJOE boost benefit with those who wish to deploy their LPs directly to Vector. Smart, Giga-brain move.
There are a few others trying to attempt the JOE wars but I will just leave these hard numbers here…
TLDR: you are vastly better off depositing your LPs with Vector.
Don’t just take my word for it either…
This brilliant tool https://www.defiwars.xyz/joe highlights the top holders of governance tokens such as vePTP and veJOE.
The sheer amount of JOE that Vector has amassed is quite ridiculous in all honesty. They have excesses in veJOE resulting in excellent boosted rewards for Vector LP depositors. It just makes sense.
Info : https://www.defiwars.xyz/joe
There is also a very handy calculator built by the Yield Yak community which helps you see the additional boosted yield achieved by staking JOE for veJOE, or as we have learnt today, just depositing into Vector.
All good? Let’s look at the ape-onomics.
What is the VTX token?
The section the apes have been waiting for. What is the VTX token? Where is the Utility? What can we expect next?
The VTX token is the governance and utility token of the Vector Finance Protocol. To stake or to lock VTX earns you additional protocol revenue rewards coming in at around 33% of the total. Nice and sustainable yields there, coming directly from protocol fees. This is extremely important at this time in the market.
VTX is also used to incentivise deposits on the protocol. So, immediately the shortsighted will say well it’s a farm token. Those who say that couldn’t be any more wrong.
I didn’t just take you down a trip on memory lane with Convex and Curve for no reason. Where is the natural progression for Platypus and Trade Joe to head with their new veTokenomics?
Gauges, bribes and voting.
Just as Convex has the majority say over the Curve emissions which causes protocols to buy a shit load of CVX to sway the vote in their favour. As soon as Platypus and Trade Joe implement this gauge weight voting system, guess who will be the top dog? Yup, the JOE and PTP blackhole that is, Vector Finance.
When Avalanche hits the heights that everyone knows it will achieve, and Platypus and Trader Joe are both the bluechip projects of that ecosystem, Vector and the VTX token will have an incredible supply shock through necessary demand placed on them.
If you are an algorithmic stablecoin or a new protocol looking for deep liquidity (the end goal is the same), you will have to own VTX. There are no two ways about it.
There is one thing when retail begins to buy a token, it’s another when its protocols and businesses buy the same token. It is a matter of when not if.
Currently sat at a $9m market cap with an FDV of around $48m, it’s one of the only tokens I will hold and lock for the foreseeable, regardless of what happens. This is not financial advice I am literally an idiot.
This article took a while to write and that was deliberate. I was putting 2 and 2 together and talking closely with the team and wanted to wait until the Trader Joe pools were live, to give the story a few more dimensions.
This is a great short term play don’t get me wrong but, you have to look at what is coming down the mountain.
I expect Vector to be a top 5 Avalanche project. I am a self-confessed Avalanche maxi so take this with a pinch of salt, but even looking past my bias for a second, the roadmap and direction line up extremely well.
They have innovated thus far and I expect this to continue. The team can build quick and pivot to where the value is. This is an extremely potent ability for any successful team and they have already proved this to the market and its users.
I like this project a lot.
Vector Resource –
Website and dApp – https://vectorfinance.io/
Docs – https://docs.vectorfinance.io/
Discord – https://discord.com/invite/vectorfinance
Twitter – https://twitter.com/vector_fi
blocmates Resources –
blocmates links –
Patreon – https://patreon.com/blocmates
Personal telegram – @blocmates
Personal Discord – blocmates#0001
Discord Community – https://discord.gg/blocmates
Telegram – https://t.me/+UtYbMzXmlhb6R4Xd
Email – [email protected]
OK so we’ve got incentives to hold it. I understand it essentially is the CVX of avalanche.
Have you got any info around emission schedules?
What are the various strategies. Ir is it just a buy and hold