oKUS
KuSwap v3's oKUSv3 is a new options token that helps to reduce sell pressure on the native KUSv3 token. It is earned by liquidity providers (LPs) who provide liquidity to the KUSv3-wKCS pool.
oKUSv3 can be redeemed for KCS at a discount, or it can be locked up for a period of time as veKUS. veKUS is the governance token that allows holders to vote on the distribution of emissions, as well as receive weekly bribes and fees.
There are three main options for LPs who earn oKUSv3:
KUSv3-wKCS LP Lock Option: This option allows LPs to lock their oKUSv3 rewards for a period of time. During this time, the oKUSv3 rewards will be compounded back into the KUSv3-wKCS pool, earning the LP additional oKUSv3 and wKCS.
veKUS Option: This option allows LPs to redeem their oKUSv3 rewards for veKUS. veKUS is a governance token that allows holders to vote on the distribution of emissions.
KUSv3 Option: This option allows LPs to sell their oKUSv3 rewards for KUSv3 at a discount. This option allows LPs to take advantage of the discount on KUSv3 and sell their oKUSv3 rewards for a profit.
Benefits of oKUSv3
The introduction of oKUSv3 has a number of benefits, including: Reduced sell pressure: oKUSv3 can be redeemed for KUSv3 at a discount, which reduces the sell pressure on the native KCS token. Increased liquidity: The KUSv3-wKCS pool will be more liquid as a result of oKUSv3, as LPs will be incentivized to lock their oKUSv3 rewards in the pool. More sustainable APRs: The KUSv3-wKCS pool will be able to offer more sustainable APRs as a result of oKUSv3, as the pool will be more liquid and there will be less sell pressure on the native KUSv3 token.
Practical Examples
Let's illustrate this mechanism with another example. Say the price of KUSv3 is $100, and there is a call option token oKUSv3. oKUSv3 gives its holder:
a perpetual right to buy KUSv3 at 75% of the market price;
a perpetual right to buy max locked veKUS at 10% or even 0% of the market price (currently 5% but 0 for example's sake);
a perpetual right to LP into KUSv3/wKCS pool with a 40-80% discount. In this case holder is locked from withdrawing liquidity for x amount of time (7-60 days). When x amount of time passes the holder is allowed to initiate withdrawal.
The protocol issues 1 oKUSv3 to a farmer Alice, who immediately exercises the option to buy 1 KUSv3 for $75 and sells it on a DEX for $100. The tally of gains & losses are as follows:
The protocol: -1 KUSv3, +$75
The farmer Alice: +$25
The DEX LPs: +1 KUSv3, -$100
Compare this to second possible choice of Alice (veKUS):
The protocol: -1 veKUS
The farmer Alice: +$100 worth of veKUS max locked (1 year) giving a right to claim voting bribes and fees
The DEX LPs: 0 change
Compare this to third possible choice of Alice (KUSv3/wKCS LP):
The protocol: 0 change
The farmer Alice: +100$ worth of KUSv3/wKCS LP receiving LP rewards ino KUSv3 AND wKCS claimed from people who choose to redeem oKUSv3 immediately.
The DEX LPs: +1 KUSv3/wKCS, +100$
We have the following observations:
Reallocation of value: Using oKUSv3 instead of KUSv3 as the reward token effectively transfers gains from the mercenary farmers and notorious dumping bandits to those invested in the protocol's success who see long term value in earning passive income from veKUS.
Trading off incentivization efficiency for protocol tokens LP depth: In our example, for each KUSv3 token issued by the protocol, the farmer Alice can choose option 3 and provide liquidity for a fixed amount of time which is crucial for protocol long term sustainability.
This effectively creates a continuous token sale: instead of giving away tokens for free in regular liquidity mining, we turn incentivization into a continuous token sale with options to:
Redeem into liquid KUSv3 with the lowest discount, partially returning extracted value to the protocol;
To redeem into locked KUSv3 with the greatest discount, decreasing circulation of KUSv3 and reducing short-term selling pressure;
To redeem into LP with a moderate discount and the ability to collect wKCS gained from those who chose option 1
Conclusion
The introduction of oKUSv3 is a positive development for the KUSv3 ecosystem. oKUSv3 has the potential to reduce sell pressure on the native KUSv3 token, increase liquidity in the KUSv3-wKCS pool, and offer more sustainable APRs for retail & protocols.
Key terms
oKUSv3: A new token that is earned by LPs who provide liquidity to the oKUSv3-wKCS pool. oKUSv3 can be redeemed for KUSv3 at a discount, or it can be locked up for a period of time in order to earn veKUS.
KUSv3: The native token of the KUSv3 ecosystem.
veKUS: A governance token that allows holders to vote on the distribution of emissions and receive weekly bribes and fees.
LP: A liquidity provider. An LP is someone who provides liquidity to a liquidity pool.
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