Following the result of the governance vote, the Lazy River 2.0 reward program now distributes a portion of the protocol’s revenue to vePERP holders. Lock PERP here to earn USDC and locked PERP rewards.
- Buy PERP on Optimism DEXes such as Uniswap or Velodrome. If you hold PERP on other chains (e.g., Ethereum mainnet), you’ll need to bridge to Optimism. Check out this guide for a walkthrough.
- Once you have some PERP tokens on the Optimism chain, head over to https://token.perp.com. Select the amount of tokens you want to lock and the lock duration (at least 2 weeks). Note that locking is irreversible and your tokens only become liquid once the lock time expires. More details about staking can be found here.
- Earn a greater share of the rewards by locking more tokens and/or locking for the maximum of 52 weeks.
Check out this video guide for a full walkthrough of Lazy River 2.0.
How It Works
Trading fees are usually distributed to market makers (80%) and the insurance fund (20%). According to the governance proposal and voting result, the protocol revenue is to be distributed to the DAO Treasury (25%) and vePERP holders (75%).
There are two conditions for USDC fee sharing to be activated:
- When the insurance fund threshold is met. The threshold is defined as 10% of the 30-day average of open interest across all markets on Perp, which is shown on the Lazy River 2.0 page and is to be updated every 30 days.
- The protocol revenue is positive week-on-week, where protocol revenue is defined as the insurance fund minus the activation balance. When it's positive, the insurance fund balance increases on a week-on-week basis. The activation balance is the balance of the insurance fund at each snapshot (updated weekly).
The activation balance as of December 15th (00:00 UTC) was $1.48 million and 10% of open interest was $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 taken on December 22nd (00:00 UTC) and in each following week to update the activation balance.
When the insurance fund is greater than the threshold and protocol revenue is positive, then 15% of all trading fees will accrue to vePERP holders and 5% will accrue to the DAO Treasury. Open interest for all markets on Perp can be tracked here while the insurance fund stats are available on Dune Analytics.
The 30-day average of open interest is recalculated every 30 days to update the insurance fund threshold. For example, the initial threshold will be set to the 30-day average of open interest between November 16th, 2022 and December 15th, 2022. Once 30 days have passed, it will be recalculated and updated using the data from December 16th, 2022, to January 15th, 2023.
There are three possible scenarios with regards to the insurance fund threshold, protocol revenue and USDC fee distribution:
- The threshold is met, the protocol revenue is positive and USDC fee sharing is activated. For example, the 30-day average of open interest is $5 million, which means the threshold is 10% of this figure: $500,000. If the insurance fund is $1 million, then the threshold is met. In the following week, assume the protocol revenue is positive where the insurance fund balance increases to $1.1 million. The protocol revenue of $100,000 is shared amongst vePERP holders and the DAO treasury for the second week and the insurance fund balance reverts to $1 million for the third week.
- The threshold is met but protocol revenue is not positive. Let’s say the insurance fund threshold is $500,000 and in the first week the insurance balance is $1 million. But then in the next week, the insurance fund balance loses money and drops to $900,000. Then the protocol revenue is negative for that week and no fees will be distributed. In the following week, the insurance fund must grow to activate fee sharing in the third week. For example, if the insurance fund balance increases to $1 million in the third week, then the fees shared amongst vePERP holders and the DAO treasury will be equal to $100,000.
- The threshold is not met and the protocol revenue is equal to zero. For example, if the 30-day average of open interest is $5 million, then the threshold is $500,000. If in the first week the insurance fund balance is $1 million but then falls below $500,000 in the following week, then the threshold is not met and no USDC fee distribution takes place.
USDC fee sharing rewards are calculated as follows:
- The total USDC rewards for the week are equal to: (protocol revenue x 0.20 x 0.75).
- USDC is then distributed to all vePERP according to their share of the vePERP supply.
Lazy River 2.0 also includes rewards in the form of locked PERP/vePERP. The calculation for locked PERP rewards is as follows:
- An amount equivalent to 10% of the trading fees is distributed as locked PERP.
- A 7-day time-weighted average price is used to calculate the amount of PERP that’s equal to 10% of the trading fees.
- This amount is then distributed as locked PERP according to your percentage of the vePERP supply that you hold.
- A maximum cap of 25,000 locked PERP will be distributed each week.
The chart below shows how trading fees and locked PERP rewards are determined in the scenario where the protocol revenue is positive and $200,000 in trading fees are generated over the course of one epoch (Thursday to Thursday).
Each epoch starts on Thursday (00:00 UTC) and ends the following Wednesday (23:59 UTC). The rewards distributed depend on the trading fees generated during each epoch.
A snapshot of vePERP balances is taken every Thursday (00:00 UTC) to determine the following week’s reward distribution. Make sure you lock PERP before the snapshot to be eligible to claim rewards the next week.
Once the next snapshot passes on Thursday, these rewards become claimable. The protocol revenue and total locked PERP reward amount will revert to 0, with the next distribution depending on the protocol revenue generated over the next 7 days.
For example, the first snapshot will take place on Thursday, December 15th (00:00 UTC). The protocol revenue for December 15th until December 22nd will be distributed one week after the first snapshot. So users must lock their PERP before the first snapshot to be eligible to claim the rewards distributed on December 22nd.