Overview of Vesper Pools
Important: Although contracts are accessible to all, you should not send assets directly to any Vesper contract address. Instead, you should always use the Vesper App. This is because, as explained in Vesper's Modular Architecture, Vesper pools (and other contracts) are designed to be upgradeable at any time. Sending funds directly to a contract may result in a total loss of user funds.
Vesper Pools combine tokens of the same kind from many depositors to generate yields for its participants. Assets in Vesper pools are used to borrow, lend, and farm yield across various DeFi projects. Each pool has its own deposit asset type, yield asset type, deployment approach (employing one or more "strategies"), and risk level.
Users select the pool or pools that let them employ the asset or assets they wish to use and which fits their risk tolerance.
Certain pools also generate rewards for participants in the form of VSP, Vesper's native token.
Vesper pools are designed for accessibility. Connect your wallet (for example, MetaMask) with any of the available deposit assets, and make your deposit through the Vesper web interface (that is, the Vesper App).
When you deposit, you’ll receive a vToken that represents your weight in the pool. For example, deposit ETH and get vETH.
To exit the pool, simply use the Vesper App and the withdraw function in the 'manage' section of pool you're participating in, and you will receive the underlying asset. The app is designed to be self-documenting, and many users find that it answers basically all of their questions about using Vesper products. Below, a representative view of the Vesper App.
A typical view of the Vesper App
- Vesper Grow : Grow Pools collect a particular asset (ETH, WBTC, USDC, others) via user deposits and deploy the capital to other DeFi platforms as outlined by the Grow pool's active strategies. Yield accrued by these strategies are used to buy back more of the deposited asset, which is delivered to pool participants.
- VSP/vVSP Governance Pool: Token holders can deposit VSP to the vVSP Governance Pool. Revenue generated across all Vesper products is used to buyback VSP from the open market. These tokens are delivered to the governance pool, where depositors earn VSP interest proportionate to the size of their deposit.
- Vesper Earn Pools: Mechanically, Earn Pools operate the same as Grow Pools: deploy deposited assets to defined strategy. However, the yield accrued by Earn Pools is in a different asset than the deposited asset. This Deposit X, Earn Y functionality is a first in DeFi.
- Vesper Lend Pools: Vesper Lend allows you to use the capabilities of custom lending platforms, such as Rari Fuse, to lend out your crypto-assets to obtain the highest safely-obtainable yield.
- Vesper Orbit Pools: Products that are aimed at generating higher yield by dealing in new, unproven assets and protocols which typically offer much higher returns than their more established counterparts.
Because the family of Vesper pools is continuously growing and changing, for an accurate list of currently available pools you should consult the Vesper App.
As explained above, each vToken functions as a claim ticket representing your share of the assets in the pool. While your funds are in the pool, you are free to move your tokenized stake to other wallets you control.
The calculation of the correspondence between the deposited token and the vToken differs according to the type of pool.
In the case of Grow Pools, as the pool accrues yield and purchases more of its asset, that tokenized stake will grant more of the underlying asset. Say, for example that you deposit one DAI into the Vesper Grow DAI pool, for which you receive one vDAI token in exchange. Let's say that over the course of a year, that pool's earning rate is 10%. At the end of that year, your 1 vDAI token would now be worth 1.1 DAI.
Note that when you deposit your crypto into a pool, your the amount of the vTOKEN you receive depends on whatever the current rate of the vToken is. The pool started at a ratio 1:1 and the vToken increases overtime. So unless you deposit on day 0 of the pool, you are going to receive less than one 1 vDAI per 1 DAI. That vDAI will continue to appreciate in value as explained above.
The same reasoning holds true for the vVSP token: VSP tokens in the Governance Pool are deployed to earn yield.
The situation for Earn Pools is different, since the yield is not automatically re-deployed in the original collateral pool, but rather "dripped" to a separate pool denominated in the yield token. So at the end of the year your 1 vDAI token would be worth your original deposit of 1 DAI while your yield was paid out in a different asset.
During Vesper's first year of operation, there were two types of fees associated with Vesper pools: withdrawal fees and platform fees. These fees were allocated to the Vesper Treasury and to the pool's architect.
As of April, 2022, these fees are being phased out in favor of a Universal Fee. The Universal Fee will charge a 2% annual fee on the assets deposited (principal) at the time of rebalance. If this fee is greater than 50% of the yield earned, then the fee will only equate to 50% of the yield earned. The fee is assessed as part of the rebalancing process, as explained below.
In addition to their crypto yield, certain pools additionally generate VSP rewards.
After you claim VSP rewards, you can use that asset however you wish. One common approach is to deposit it into the Vesper Governance Pool. When you place your VSP in this pool you are issued a "tracker" token in the form of vVSP. This vVSP functions as a claim ticket on your share of the VSP pool. The amount of your vVSP holding determines your voting power in Vesper governance decisions. Because the platform and withdrawal fees are used to purchase VSP on the open market and distribute it to vVSP holders, the amount of your VSP grows as long as you leave it in this pool. In addition, you can use the vVSP as collateral for other DeFi actions.
In Vesper pools that offer VSP rewards, depositors accrue yield in two denominations: The original asset they deposited, and VSP (from the rewards account).
In the illustration below, these two types of yield are listed in the “Earning Rate” field. For example, if you look at the FEI pool, and click on the value in the “Earning Rate” column you will see a pop up like the one shown here. In this example the 6.67% value represents the total APY on your deposit. It comprises 4.45% yield in FEI, and 2.29% represents the APY on your deposited asset, denominated in VSP.
The field labeled "My Deposits" shows your current balance in the pool, including any yield that has already accrued.
To withdraw your deposited cryptocurrency from the pool (incurring the withdrawal fee) you click on “Withdraw;” to claim your VSP rewards, click on “Claim.” You can claim these rewards at any time.
Note that the displayed APY is after the performance fee has been subtracted
Rebalancing is the process by which yield is allocated to pools.
It works as follows:
- Each pool has a 'high water' and 'low water' percentage that correlates to the collateral requirements enforced by the lending platform. Whenever users interact with the pool, or the pool claims yield, it determines the current collateralization ratio and compares it to the high and low water ratios.
- The
RebalanceFrictionadministrative parameter protects the pools from excessive rebalance calls. - Any member of the public, user or not, may call the rebalance function every
RebalanceFrictionnumber of seconds. When the rebalance function is called, if the assets are in 'high water', more loans are taken out. If the pool is at 'low water', some of the loan are returned to partially close out the loan. - This rebalance function also claims interest, and swaps interest to collateral tokens on a decentralized exchange.
Rebalance Mechanics
The initial conservative pools use 250% and 275% collateralization benchmarks as the boundaries for low water and high water variables, respectively.
When the collateral on outstanding loans is greater than 275% at time of call, additional loans are taken out to bring the collateral ratio back down. If outstanding loans are less than 250% collateralized, then the loans will be partially repaid to bump the ratio up into a healthy midpoint between low water and high water.
All strategies additionally rebalance as per the strategy module to realize yield and allocate as dictated by the pool (to compound in Vesper Grow and convert in Vesper Earn). The frequency of each strategy depends on network congestion and the TVL in the pool.
In order to reduce gas burden, more expensive strategies and smaller pools rebalance less frequency than large pools/cheap strategies. All pool strategies target a minimum rebalance frequency of once per week.
Rebalance frequency is not static. Because this operation requires a significant amount of gas, we have logic built into the process which is aware of the current gas rates and adjusts the rebalance timing accordingly to optimize for transaction costs. The amount of time between rebalances can be impacted on the scale of days if gas remains above the threshold. Once gas returns to lower levels, the rebalance operation will execute. After a rebalance, it’s not a simply a “dump” of all claimable rewards, but they will come in slowly every block going forward (for Earn pools).