A deep dive into Metavault Tokenomics and Reward Mechanism

May 12, 2023

In conclusion

Hey! 

As I leisurely perch by the tranquil waterside, I find myself engrossed in yet another captivating chronicle unveiling the works of the illustrious Metavault project. Care to take the plunge into this immersive tale? I am well aware that in previous articles, quite sufficient information has already been penned about MetaVault, but this time, we look at something else. 

While the job of the Metavault team is to innovate and continuously improve, ours is to keep you abreast of the latest developments that’ll allow you to make astute trading choices, and ultimately optimize your returns while playing around with the products.

Moreso, whereas we’ve previously touched on Metavault tokenomics (the Ip’ing and staking processes) and reward mechanism, many people are sometimes confused with it, especially the difference between Metavault DAO and Metavault Perpetual DEX. 

If that is you, take a deep breath and wear your oxygen mask. We’re about to dive deep into this, starting with a return to familiar waters.

Metavault

If you’ve been following us, Metavault is no longer news. Nope! With over 8904+ users and $578M+ in trading volume, it’s hardly new.

For first-timers, (say you've been living under a rock) the Metavault ecosystem is one with many parts: the DAO otherwise called “Metavault DAO”, is a blockchain-based community-controlled investment platform, while on the other hand is Metavault.Trade, a decentralized exchange designed to provide a large range of trading features and very deep liquidity on many large-cap crypto assets.

Metavault DAO allows anyone to participate in the latest and most profitable blockchain, DeFi and metaverse projects and strategies. The rewards from these investments are paid out to investors who can also earn further rewards from successfully staking MVX tokens on Metavault.Trade. 

Two phases to pick out from the above — rewards and tokens —- are what we’ll be dissecting in this piece.

Understanding Metavault.Trade Tokenomics and Rewards

The focus, however, is on the tokenomics for Metavault.Trade; what can be classified as a unique tokenomics structure. 

$MVX

You already know MVX is the Metavault.Trade’s governance and utility token. It’s currently capped at a 10,000,000 tokens supply, and if additional tokens are required at any point, the new tokens minted will be subjected to a 28-day timelock. Changes in the circulating supply are determined by distributing tokens through other DEXs, vesting, burning, and marketing expenses.

MVX Staking

MVX holders are incentivised to maintain long-term positions due to the numerous rewards that accumulate. But by staking, they earn more.

Holders can presently and effortlessly stake their MVX on Polygon. Soon you will be able to bridge your MVX to zkSync Era and also stake there. We will be sure to alert you when this goes live. One can no doubt do this seamlessly thanks to Metavault’s latest partnership with Multichain, as well as via the Celer Bridge.

Staked MVX generates three types of rewards:

  • MATIC – The polygon- native token
  • esMVX — A non-transferable token, and 
  • Multiplier Points — which allow the holder to accrue protocol fee rewards and boost their APR %

Let’s see how each works in this context.

MATIC

When you stake MVX, you earn from the 30% of swap and leverage trading fees converted to $MATIC and $esMVX. However, if you stake on other blockchains that are not the Polygon network, rewards are paid in the native token of the blockchain.

Metavault.Trade earns revenue from 5 main sources:

  • Swaps: The fees charged vary based on the levels of the assets being swapped in the pool.
  • Opening and closing trades: A fee of 0.1% of the position size is charged.
  • Borrowing to leverage trade or short an asset: A fee of 0.01% * (assets borrowed) / (total assets in the pool) is charged and deducted at the beginning of every hour.
  • Liquidation of traders with leveraged positions: A fee of 10% of the position is charged.
  • Minting or redeeming MVLP by liquidity providers: This is called the “rebalancing fee” and varies based on the pool’s state.

From these revenue pools, 70% is paid out to MVLP providers (more on MVLP later), and 30% goes to MVX stakers. The image below illustrates MATIC reward flow better.

Stakers will also earn a non-transferable token, which brings us to the second reward.

Escrowed MVX (esMVX)

If MATIC is the cash or liquid asset of the Metavault ecosystem, think of esMVX as the real estate or illiquid assets that cannot be transferred. esMVX can be used in only two ways:

  1. Vesting esMVX:  Vesting esMVX tokens allows them to be converted and distributed as MVX. Opting for this route means that your esMVX tokens will unlock linearly over a period of one year, with MVX tokens sent to your wallet at each unlocking.
  1. Staking esMVX: Don’t want to vest your esMVX? You can stake your esMVX tokens and earn the same rewards as staked MVX, which include MATIC rewards from platform fees, additional esMVX tokens, and multiplier points. 

Now here’s the catch: To vest esMVX, it is necessary to lock the average MVX/MVLP with which you earned your esMVX in a vault. The MVX/MVLP held in this vault cannot be sold but will still accumulate rewards. While the locked MVX/MVLP in the vault can be withdrawn at any time, doing so will prevent further vesting of esMVX. On the other hand, staking esMVX allows for compounding rewards and generates a higher annual percentage rate (APR) and earnings over time. 

Ultimately, what to do with your esMVX reward is up to you! I love the option to choose.

In terms of esMVX distribution, 100,000 esMVX tokens are emitted and distributed monthly to users in this proportion:

  • 50,000 esMVX tokens are emitted and rewarded to MVX & esMVX stakers.
  • Further 50,000 esMVX tokens are emitted and distributed to MVLP providers monthly.

The chart below illustrates esMVX rewards better.

Multiplier Points (MP)

MP is the ultimate leverage to compound rewards already earned. It enables MVX stakers to accumulate rewards from protocol fees. Like a game, you earn MP or lose MPs by taking certain actions on-chain. 

To earn or retain multiplier points, both MVX and esMVX tokens must remain staked. Each MP gained, earns the same amount of MATIC as a single MVX token. If either of these tokens is unstaked, the proportional amount of multiplier points will be burned. 

Sounds confusing? Here’s an example: if you staked 1000 MVX and gained 200 MP, unstaking 500 MVX (50% of your total staked amount) will burn 100 MPs.

As you maintain a longer stake in MVX, you accumulate more MPs, increasing your rewards. Exciting stuff! Use the illustration below to make further sense of it.

Lest we forget, MVLP, brace yourself, this is next on our agenda.

MVLP and how it works

MVLP is a combined gauge of assets that are utilized for leverage trading and swaps on the platform. By contributing any index asset to the liquidity pool (LP), users can generate MVLP, which is then removed when an index asset is withdrawn from the LP.

As a reward for owning MVLP, you receive MATIC and esMVX tokens. The purpose of MVLP is to provide the necessary liquidity for leverage trading, with its holders serving as the liquidity providers. This implies that MVLP holders profit when leverage traders suffer losses but incur a loss when leverage traders make profits. This mechanic also ensures there’s a balance at both ends.

The cost for minting and redemption is determined by the total value of assets in the index, including profits and losses of open positions and the MVLP supply. Users can lower their fees by providing or redeeming assets that are in high or low demand by the protocol.

Also, newly minted MVLP tokens begin earning rewards immediately, but there is a 15-minute holding period after minting before they can be redeemed.

What you earn is up to you

So we’ve gone through the tokenomics structure and rewards mechanics. I think the setup is brilliant! Why? It allows you to create earning strategies depending on your time horizon or risk appetite. What you earn truly depends on what you choose to do with MVX and esMVX.

Again I must reiterate; if you want to gain the most share of the platform fees, staking all esMVX is the best option because it gives access to a compounding effect. Staked esMVX functions similarly to staked MVX regarding rewards so that this strategy can accumulate the most MATIC through MVX, esMVX, and multiplier point boosts.

But that’s not all there is to rewards on Metavault.Trade. There’s more . . .

0xBets, Metavault.Trade's new decentralised casino

I mean, it's a no-brainer! The decentralized casino narrative is currently exploding. The online casino market is expected to nearly triple from $60B to over $160B within the next 5 years and crypto traders are expected to fuel that growth.

However, online casinos face various challenges, chief among them being:

  • Lack of transparency in the probabilities and outcomes; players are unable to verify the exact odds of the games or the fairness of the results.
  • Often, the odds presented are inaccurate.
  • Withdrawal issues may arise at times.
  • Players must rely on a third party to make deposits, and withdrawals, and verify the odds.
  • Termination of a player’s account without any valid reason.

Blockchain-powered decentralized casinos solve these problems by providing open-source smart contracts that allow anyone to verify game odds, permissionless access without the need for KYC or documentation, player control of funds with no need for third-party deposits, and decentralized ownership of the platform by its community for decision-making and profit sharing.

Being a forward-thinking protocol, Metavault.Trade has just launched 0xbets. As if a decentralised exchange was not enough, the Metavault crew just keep on shipping!

The liquidity provided will be owned by the protocol; OGs, you already know that means, simply put this a huge gain for MVX holders! The flywheel effect will be huge as more products are being added.

0xBets Rewards for MVX holders

Now that 0xBets is a thing, $MVX holders will get:

  • A percentage of the fees traders pay for trading Spot and Perp on Metavault.Trade, and
  • A part of the fund players lose on the casino.

Pretty mouth-watering stuff right here.

At blocmates, we have always said that the success of a protocol is dependent on how much money is made for loyal customers. This is definitely a step in that direction.

https://twitter.com/0xBets/status/1656664321802502153?s=20

Wrapping up

That was quite a deep dive, wasn’t it? Fill your lungs with air as we emerge out of the water. And at your own convenience, feel free to take a second dip to get as familiar with Metavault as possible.

The exciting part of all of these is that we are just getting started. In the coming articles, we will take a steep dive into the Metavault DAO and the $MVD token. Just as eager as you are, we also can’t wait to shed light on the same ecosystem, but a different aspect of it. 

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