In order to revamp the Warp Token model and enhance user benefits, Warp Finance is enabling governance and other new functionalities by releasing veWarp tokens.
Many exciting changes are coming to Warp Finance, as we are launching v2 which introduces custom lending pool generation, Uniswap V3 compatibility, and the acceptance of new receipt tokens as collateral. With this new version, Warp has doubled down on its efforts to provide users with an optimal DeFi lending experience. A major part of this effort includes the decision to revamp the existing Warp Token model, with the veWarp fee sharing and governance token representing the first of many updates to be put into effect.
What is veWarp and how will it work?
Warp Finance has created a functionality for effectively making the existing Warp Token capable of delivering governance functionalities and fee sharing on the Warp Platform. Specifically, users can lock up their Warp Tokens into our vault, and will receive veWarp tokens in return. These veWarp are capable of sharing in profits from the platform, governance over Warp Token emissions to lending pairs, as well as voting on the supported lending pairs themselves. In this manner, highly active Warp users who already have earned Warp Tokens will be able to further participate in the platform and vote on various metrics via veWarp, being additionally rewarded with shared platform fees.
Lockup & Minting:
Under this new Warp Token function, users can lock up Warp Tokens to mint veWarp. Specifically, users can lock Warp tokens in the vault for 1 month to 2 years, and mint veWarp in return. The longer that tokens are locked up for, the higher amount of veWarp will be generated.
This veWarp is non-transferable and non-tradeable, and can only be used to vote, earn shared profits, or to be redeemed for the locked Warp tokens. There is a 50% penalty on unlocking Warp tokens earlier than the designated periods.
Furthermore, in Warp V2, we are opening up lending pairs for veWarp by giving veWarp holders receipt tokens to use as collateral. Within these pairs, because 50% is given up when the user pulls out of their agreement, then we can have the value of veWarp be 50% of the Warp collateral used, and using a 200% collateralization ratio, we can assume 25% of the total value of the Warp backing the veWarp can be used as collateral. This provides an additional benefit to veWarp in addition to those listed below.
Purpose and Benefits:
As mentioned, the veWarp token will be utilized to enable community governance over Warp token emissions to lending pairs, as well as the lending pairs supported on Warp. The veWarp token’s governance capacities will be structured similarly to that of Curve’s veCRV and SushiSwap’s oSushi. Like oSushi does for SushiSwap’s liquidity pairs, veWarp will act as a means for voting on the emissions to each lending pair, in addition to being used to vote for which lending pairs are supported. veWarp can be minted by locking up Warp tokens in our vault, meaning that those users earning veWarp are existing Warp protocol participants, and those earning a significant amount of veWarp must have a significant amount of Warp, which is only earned through platform participation. Warp team members will be kicking this off by locking up some of their team tokens for veWarp.
Furthermore, veWarp will act as a fee sharing token similar to xSushi. veWarp gives users a share of the fees generated by the platform — meaning, the fees generated will be able to be used to purchase Warp on the open market, giving the ability for veWarp holders to redeem their veWarp for Warp. This is what enables veWarp token holders to share in the fees generated from Warp Tokens.
In this manner, Warp ensures that there is a close alignment between the success of the protocol and the long-term believers. Token holders who lock up their tokens the longest will have the highest voting power, and receive the highest financial incentives, all while having skin in the game and prioritizing long-term growth over short-term fees.
One veWarp token is proportional to one vote.
Voting on lending pool selection and Warp token emission allocations to lending pools will occur each month. After voting, the vote will remain directed in the same pool, unless modified to select another pool, which can be done once per week. A user’s veWarp can be spread out across various lending pools, so that they are able to support multiple pools in proportions of their choosing.
Gauge weighting is used to determine the amount of veWarp required for a vote to pass (i.e. for a lending pool/emissions to be supported). Gauge weighting is calculated by dividing the total amount of veWarp voting for a particular option divided by the total amount of veWarp. Rewarded Warp tokens per vault is calculated based on this gauge weighting.
veWarp is launching after the launch of Warp V2, with more details to be announced. The capability of staking Warp for veWarp to be made available directly within the existing Warp Protocol interface.
By enabling users to lock up their Warp tokens for veWarp, the Warp protocol delivers essential governance and profit sharing capabilities in proportion to platform participation. This is just the first phase of remodelling the utility of the existing Warp Token, so keep an eye out for more updates.