The Arrival of Real Yield: Lazy River 2.0
The most anticipated feature on Perp is finally here: USDC fee sharing! As a big upgrade to our staking program on Optimism, Lazy River 2.0 will begin distributing a stablecoin yield to vePERP holders from the protocol’s revenue.
To start earning yield, you’ll first need to hold some PERP on Optimism. Check out this guide which provides a walkthrough for bridging to Optimism (we recommend using Optimism Gateway) and view the exchanges where you can buy PERP here.
With the arrival of real yield, Perp joins a handful of protocols that have generated substantial revenues and are delivering a cash flow to token holders. Following through with the initial proposal and governance vote result, the launch of Lazy River 2.0 will begin distributing a portion of Perp’s protocol revenue as USDC to all vePERP holders.
Read on for more information!
The Flow of Lazy River 2.0⛵
Currently, trading fees are split amongst market makers (80%) and the insurance fund (20%). As shown below, the distribution of trading fees will continue to flow towards the insurance fund and market makers if the insurance fund threshold is not met.
However, there are two conditions to trigger the distribution of trading fees in USDC:
The insurance fund threshold is met, where the threshold is calculated as 10% of the 30-day average of open interest across all markets, which is shown on the Lazy River 2.0 page and is to be updated every 30 days.
Protocol revenue is positive, where protocol revenue is defined as the insurance fund minus the activation balance. Protocol revenue is positive when the insurance fund balance increases on a week-on-week basis. The activation balance is the balance of the insurance fund at each snapshot, which is updated weekly.
The activation balance as of December 15th (00:00 UTC) is $1.48 million and 10% of open interest is $415,792. If in the following week the insurance fund balance remains above $1.48 million, then the fee distribution is activated. A new snapshot is to be taken on December 22nd (00:00 UTC) and each following week to update the activation balance.
Once USDC fee sharing triggers, the protocol revenue is to be distributed to the DAO Treasury (25%) and vePERP holders (75%). From this split, the total USDC rewards equal 75% of the protocol revenue (insurance fund balance - activation balance).
Earning Real Yield💸
The total USDC rewards are distributed according to the vePERP holding percentage of each holder, determined by the weekly snapshot on Thursdays at 00:00 UTC.
In Lazy River 2.0, the only requirement to participate is to lock some PERP into vePERP. With our veTokenomic model already in place, the more PERP you lock and/or the longer you lock, the higher your rewards will be.
The criteria and distribution schedule for Lazy River 2.0 are unchanged from the first version. As a refresher, users must:
Lock PERP at token.perp.com for at least 2 week to be eligible for rewards.
Lock PERP before each snapshot on Thursdays (00:00 UTC) to be eligible for the following week’s distribution.
The first snapshot is to be taken on December 15th (00:00 UTC), 2022, so token holders should lock PERP before the deadline to earn USDC from the first fee distribution. Surplus fees collected between December 15th-22nd, 2022 will be distributed on December 22nd, 2022, based on the first snapshot. All previous rewards will be claimable after each snapshot.
However, there are two changes from the first version of Lazy River:
vePERP holders will earn USDC from the weekly protocol revenue once the insurance fund threshold is hit and protocol revenue is positive. These rewards are distributed proportionally to your share of the vePERP supply.
Additional rewards will continue to be awarded to vePERP holders, however liquid PERP will be replaced by locked PERP (similar to our referral program). A maximum cap of 25,000 locked PERP will be distributed per week. The amount you receive is also proportional to your share of the vePERP supply.*
*Please note that additional rewards in vePERP is no longer sent as of October 2023.
After each snapshot, the reward data will be updated here. You can claim rewards weekly or all at once on a certain date. Remember there is no partial locking mechanism, meaning your rewards will have the same lock time as shown on the token.perp.com. If you have “max locked” PERP for 52 weeks, then any PERP rewards received will share the same lock time.
Yield Calculation Example
Let’s say trading fees total $200,000 over a particular week (Thursday through until the next Thursday). Assume the insurance fund threshold is met, the insurance fund balance has grown week-on-week by $40,000 to make protocol revenue positive and the 7-day time weighted average price of PERP is $0.50.
The protocol revenue in this case equals $40,000. As a result, 30,000 USDC (75%) is allocated proportionally to vePERP holders and 10,000 USDC (25%) is allocated to the Treasury DAO.
For locked PERP rewards, an amount equal to 10% of total trading fees is used in the calculation. In this example, it’s $20,000 divided by $0.50 (the 7-day TWAP of PERP), which equals 40,000 PERP. But since this amount is greater than the maximum cap, only 25,000 PERP would be distributed to vePERP holders.
For every 1% of the total vePERP supply you hold, you’d be entitled to rewards of 300 USDC and 250 locked PERP.
Ready, Set, Lock🔒
Under current market conditions and expectations, Lazy River 2.0 is expected to deliver a double digit yield in USDC during the depths of a bear market. As more token holders stake their claim on shared revenue and lock PERP for longer periods of time, this helps to better align the incentives of token holders with the protocol’s long-term success.
As the foundation team works on bringing more liquidity and traders to the platform, yields can potentially increase even further. With deeper liquidity, more markets and as we continue to deliver the features that are important to traders, this should lead to higher trading volume. In turn, this sparks a positive feedback loop where more trading fees are generated, which then translates into greater returns for vePERP holders.
Note: While the fee distribution parameters may only be changed with the input of our community and a governance vote, the team may modify some of the rules of Lazy River 2.0, such as the PERP emissions amount and duration.