Vesper Earn Pools
Vesper Earn is an innovative product that allows you to generate yield in a different digital asset than the one you deposited.
This pool operates similarly to all Vesper pools: you deposit a digital asset into an account where it is added to deposits in the same currency from other Vesper participants. The Vesper Earn contract then determines where to place those assets to obtain the best return consistent with your risk preference (that is, ‘conservative’ or ‘aggressive’).
The key difference between Vesper Grow pools and Vesper Earn pools is that in Grow pools the deposit and the yield are in the same digital asset, while in the Earn pools the yield is in a different digital asset than the deposit.
Vesper Grow: Deposit X, Earn X
Vesper Earn: Deposit X, Earn Y
As with all Vesper financial products, Vesper Earn deposits are routed through smart contracts. The strategy logic in the contract determines where to place funds and in what proportions, and when to make changes to these allocations. In this way Vesper reduces the complexity, and usually the risk, of making individual yield-farming placement decisions.
Vesper Earn codes a different set of rules into the smart contracts that dictates what happens to that yield. That “what” can be programmed to anything – hence Vesper Earn enables “programmable yield.” This conversion of yield can potentially take numerous forms, and represents a new DeFi primitive that offers several interesting use cases for users and projects alike.
In its initial release, Vesper Earn yields are programmed to be "dripped" to a pool of unclaimed Earn rewards. For example, the WBTC pending claim in the Vesper Earn DAI-WBTC pool sits as a Vesper Grow pool token and compounds until you claim it. As other options for deploying the yield stream become available, this documentation will be updated.
The earning rate, also known as 'yield' or 'APY', is the sum of two components:
Earn pool underlying yield is 'dripped' as the 'earn' asset. The "spot" earning rate is calculated as the last 72 hours’ performance annualized and compounded, while the "average" reflects the last 30 days, annualized and compounded.
The Universal Fee charges 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 illustration below shows how yield is implemented in Vesper Earn pools. Vesper offers ETH-DAI and DAI-ETH pools and other pools, but for the sake of this example we've created a fictitious new token, which we've called "COOL."
Say you have made a deposit in the form of ETH into the ETH-COOL Vesper Earn pool.
Step 1: ETH from all depositors is pooled together and deployed to the strategy module.
Step 2: The strategy determines where to place the funds. Deposited ETH earns yield ("APY"), in ETH.
Step 3: Periodically this "yield ETH" is used to purchase an equivalent amount of COOL on a decentralized exchange. You can claim your "COOL" whenever you like, with no withdrawal or claim fee.
Vesper Earn Logic
Because the family of Vesper pools is continuously growing and changing, for an accurate list of currently available deposited-asset/yield token pairs you should consult the Vesper App.
Vesper Earn embodies a fundamentally new concept in DeFi. In a traditional yield aggregator (like Vesper Grow) or yield automator (like Harvest Finance) users deposit assets to smart contracts that earn yield and periodically claim that yield in and add it to the original deposit.
In contrast, Vesper Earn codes a different set of rules into the smart contracts that dictates what happens to that yield. That “what” can be programmed to anything – hence Vesper Earn enables “programmable yield.” This conversion of yield can take numerous forms, and represents a new DeFi primitive that offers several interesting use cases for users and projects alike.
At launch, Vesper Earn delivers two new types of interactions for users looking to earn yield on their cryptocurrency assets.
1) The stablecoin-to-crypto-asset Vesper Earn pools – DAI-ETH, DAI-WBTC, DAI-DPI – reflect a steady average-in approach. Users who want to protect their principal with a non-volatile stablecoin can still passively increase exposure to crypto assets over time.
2) The crypto-asset-to-stablecoin Vesper Earn pools – WBTC-DAI, ETH-DAI – reflect an “income stream” experience. Users can maintain exposure to a crypto asset of choice and receive stablecoin each day to handle expenses without having to sell the principal deposited.
For many, these opportunities are more attractive than a simple compounding approach to yield. Over time, Vesper will introduce more and more choices for crypto asset deposit and payout pairs to enable more creative opportunities (e.g., average-in to a Crypto Punk via $PUNK token).
Another key benefit to users is the automated aspect of Vesper Earn. The act of withdrawing or realizing yield and converting is a time consuming and gas-intensive process. Vesper Earn eliminates a lot of burden for users who otherwise must “DIY” their own Earn experience.
DeFi projects can also benefit from Vesper Earn. Index Coop, for example, is able to offer their community a new way to interact with DeFi Pulse Index via the DAI-DPI pool. This is a feature that all communities can appreciate for their pertinent tokens and one that positions Vesper to build out working relationships with a wider variety of counterparts.
From a contract perspective, Vesper Earn is simple to interface with: It involves one transaction for deposit and one transaction for claiming. DAOs have expressed difficulty in making effective use of their capital due to the complexity of yield farming operations. In contrast, any DAO using tools like Gnosis or Aragon can easily interact with Vesper Earn as deposit and claim is just one straightforward transaction each.
The Earn capability is attractive to protocols because they have the ability to withdraw only the yield without touching the principal. This is not possible with Grow pools, as they autocompound the yield.