LST Proposal - Vector Finance

Infrastructure proposals - LST
1

Vector Reserve - vMETIS Decentralized Sequencer Expansion

Project Name:

Vector Reserve

Short description of the Project:

Vector is a recently launched LST/LRT liquidity layer launched on Ethereum. Vector issues a new type of LST called a Liquidity Position Derivative (vETH). Our intention is to bring vETH to Metis AND launch an equivalent vMETIS LPD in order to become the de facto liquidity layer for LSTfi (and LRTfi) on Metis for both ETH and METIS liquid staked derivaitves. To explain how this would work for vMETIS we have provided an overview of vETH (as the mechanics would be the same).

How Vector Works:

vETH is an ETH-pegged token (like Lido’s stETH for example) that is backed not by ETH, not by stETH (or any other LST) but by a mix of them, paired with each other as LP positions. Since the entire backing is made up of ETH and ETH-denominated assets, vETH cannot be left undercollateralized by ETH volatility. It is a product designed for people who want diversified, risk adjusted, optimized ETH yields, without sacrificing ETH exposure or risking Impermanent Loss (IL). What makes vETH so special is the diverse sources of yield it accrues:

  1. The yield from the LP positions that underly it (trading fees, arbitrage and emissions).
  2. The yield from the LSTs within the LP positions.
  3. Superfluid Staking yield (when enabled by EigenLayer)

Because vETH derives yield not only from restaking but from LP positions, the yield on vETH should drastically outperform a standard LST or LRT, whilst also creating a highly liquid, tightly pegged and fungible asset for use across DeFi. Given the upcoming Metis sequencers and Metis LST adoption, the vETH model can be easily replicated for vMETIS creating a highly liquid, high yielding METIS derivative that can power LSTfi on Metis.

Regarding the Vector token (VEC), it acts as a value accrual token for the entire platform. VEC maintains a perpetually growing intrinsic value, similar to past iterations of “reserve currencies”. However, unlike traditional reserve currencies, VEC accrues revenue from additional sources beyond merely bonding.

  1. VEC is backed by vETH/ETH LP (and other relevant ETH denominated LPs) - meaning the intrinsic value is perpetually growing with yield accrued.
  2. VEC sells bonds to acquire more vETH/ETH LP (or other accepted ETH denominated LPs) - growing the backing more rapidly.
  3. VEC has a transaction tax that goes towards bribing for LP provision across various DEXs - rapidly scaling VEC liquidity.
  4. 20% of yield generated by the vETH collateral reserves goes towards the VEC token, either as perpetual buyback-and-burn or by staking yield.

The future introduction of veVEC will enable veVEC holders to vote on and direct liquidity for the LST/LRT market controlled by Vector, leading to a strong liquidity and bribes market for liquidity akin to examples like Curve, Convex and Conic.

Current Traction:

Within one month of launch we have built an ecosystem with a number of blue chip partnerships and integrations across liquidity venues, LSTs, LRTs, and DeFi utility with plenty more to come:

This includes a high level of support from some key players in the space such as Balancer, Redacted and others:

*New—Vector On Metis - Introducing Vector LST:

Original proposal: Snapshot

To add to our initial proposal, we present an improved architecture below that includes the introduction of an LST created by Vector Reserve: xMETIS. With Metis’ LST ecosystem still in a nascent stage, there aren’t very many assets for a vETH-style asset to unify liquidity between. Accordingly, there’s a clear opportunity to launch our own LST for METIS tokens, designed to work seamlessly with the existing vMETIS product.

Our native LST allows users to mint vMETIS in one-click, going from METIS to xMETIS to vMETIS directly. vMETIS then pairs newly acquired xMETIS with other Metis LSTs to create collective liquidity across each LST, generating additional yield beyond the base rate provided by xMETIS or other LSTs. Implementing a two-product system, vMETIS and xMETIS, enables us to provide both the base-layer product(access to the decentralized sequencer) and further yield opportunities on top of it with the meta-asset(vMETIS). This widens the LST options available for the Metis community, while also creating a more diversified range of collateral assets for vMETIS.

Benefits For Metis Ecosystem:

Our new Vector LST for the Metis ecosystem will widen the LST options available for METIS holders and also ensure the broader LST/LRT liquidity layer outlined in our original proposal has sufficient collateral options from Day 1.

Combined with the features outlined in our original vMETIS proposal, this will:

  • Create a highly liquid ETH and METIS LST platform for adoption across DeFi
  • Increase capital efficiency for participants in the METIS decentralized sequencer
  • Bring established partnerships with LSTs, LRTs and DeFi platforms to help rapidly scale LSTfi on Metis
  • Solve the issue of liquidity fragmentation for ETH and METIS LSTs (and LRTs) by aggregating one liquidity layer under vETH and vMETIS respectively.
  • Create deep sticky, protocol owned liquidity to lock and rapidly scale TVL for Metis, with lowered risk of capital flight.
  • Introduce an omnipool/bribes model to incentivise liquidity growth and create a robust set of liquidity pools for ETH and METIS LST trading.

Category:

LSTs

Contact Info

vectorreserve@gmail.com

Website

Whitepaper Link

Twitter

https://twitter.com/vectorreserve

Project Telegram:

Protocol TVL

TVL breakdown can be viewed on the DeFi Llama link below, with a brief summary of figures at time of writing outlined here:

  • vETH TVL: $20,000,000
  • VEC Treasury Backing/POL: $14,000,000
  • Staked VEC: $28,000,000

You may also see our current liquidity pools on Ethereum, here:

Contract Addresses

Contract Audits

Current audits linked below:

Total Transactions

Please see a detailed breakdown of all protocol stats at the following Dune dashboard (a few stats missing as currently updating with the new collateral assets accepted and new LPs launched):

https://dune.com/whale_hunter/vector-reserve