Over the last few months, our vision for Buffer V2 and testnet launch has been received phenomenally by our community. So today, after months of strategy, testing, and implementation, we’d like to share our new token value accrual system with $BFR staking and an all-new USDC-based liqudity pool.
Why introduce a new Value Accrual System?
Although the iBFR model was robust, the upgrade will allow us to better distribute protocol revenue, incentivize liquidity, and scale the trading ecosystem.
The ultimate goal is to incentivize long-term holders and reward them with real yield (Generated from the protocol’s revenue)
Buffer’s new value accrual model is comprised of two tokens:
- BFR token — the platform’s utility and governance token.
- BLP token — a unique token for LPs who provide liquidity to Buffer’s stable asset liquidity pool.
To incentivize long-term holders and reward them accordingly, we have added two more reward tokens:
- Multiplier points — Boost APR for long-term BFR stakers
- Escrowed BFR — Additional reward offered over and above yield generated via protocol revenue.
BFR is the platform’s utility and governance token. The total supply remains at 100 Million.
Token contract address: 0x1A5B0aaF478bf1FDA7b934c76E7692D722982a6D
BFR has three key utilities:
- Yield generation: BFR holders can stake their tokens to earn up to 30% of the protocol revenue in stables (starting with USDC). Additionally, we have introduced the Multiplier points to increase the long-term staking incentive without adding any lock-up periods. These multiplier points act as a booster of APR for long-term stakers; the longer you keep your tokens staked more multiplier points you receive and the higher your USDC rewards get.
- Trade: BFR tokens can be used to trade options on the platform
- Voting: BFR holders will be able to vote on all the proposals and will be able to direct the course of product development
Over and above the protocol revenue staked, BFR will also earn esBFR tokens; distributed at a fixed emission rate. More on it in the esBFR section.
Users who stake BFR will receive 3 types of rewards:
- USDC: Up to 30% of the protocol fee generated is sent to BFR stakers
- esBFR: — Can be claimed and vested or can be compounded to receive more rewards just like the BFR token
- Multiplier points: Can be staked to boost the USDC APR (aka the real yield)
Escrowed BFR (esBFR)
esBFR is a non-transferable reward token emitted to BFR stakers and liquidity providers (BLP holders).
There are two options for what you can do with your esBFR rewards:
- Compound: can be taken for a share of protocol fees and more esBFR tokens (Just like BFR tokens)
- Claim: esBFR will be transferred to your wallet, and then they can be vested linearly over 365 days to receive BFR tokens. During the vesting period, esBFR doesn’t accrue any rewards.
How can ESBFR be vested in BFR?
Through vesting, escrowed BFR (esBFR) tokens can be converted into BFR tokens, accessed on the Earn page.
The average amount of BFR or BLP tokens used to earn the esBFR rewards will be reserved when vesting is initiated. (The required amount of staked BFR or BLP tokens to be reserved for vesting esBFR tokens can be checked while depositing esBFR tokens in the vesting vault). The reserved tokens cannot be unstaked or sold. To unreserve the token, the user needs to first withdraw (Partial withdrawal is not allowed) the reserved tokens and pause vesting. The esBFR tokens already vested to BFR tokens will still remain vested and can be claimed.
Here’s an example of how reserve works:
If you staked 2000 BFR and earned 200 esBFR tokens — then vesting 200 esBFR tokens, 2000 BFR tokens will be reserved, and 100 esBFR will require 1000 esBFR. Note: this is simply an illustrative example of building perspective and the actual ratio of the average staked amount and rewards earned by the user.
The unstaked esBFR deposited for vesting stops earning rewards, but the stacked BFR/esBFR/Multiplier points or BLP reserved for vesting will keep earning rewards.
The vested esBFR will mature into BFR tokens every second and will unvest over the span of 365 days. In the meantime, the escrowed tokens that have already matured into BFR tokens can be claimed at any time desired. Depositing more tokens to the vesting vault while earlier vesting is still going on is allowed.
If a user sells BFR or BLP tokens and would like to vest their esBFR rewards, later on, they would need to re-buy the BFR or BLP tokens.
Multiplier Points (MP)
Multiplier points reward long-term BFR stakers by boosting their APRs. The longer you keep your tokens staked, the higher the APR you can get — this mechanism also removes any requirement of introducing lock-up periods in the staking pool.
How do Multiplier points work?
As soon as you stake the BFR tokens, you start receiving the Multiplier points every second at an APR of 100%, For example, if you stake 100 BFR tokens, you will receive 100 Multiplier points in 1 year
The multiplier points can be staked to boost the APR by clicking the “Compound” button on the Earn page, and each multiplier point earns the same rewards as BFR or esBFR tokens.
When a user unstake BFR or esBFR, a proportional amount of Multiplier points are burnt.
The “Boost %” section on the Earn page indicates the individual boosted value from MPs. The boost % is calculated as the ratio of MPs (staked) to the total amount of staked BFR: 100 * (staked MP)/(staked BFR + staked esBFR)
Liquidity Pool & BLP Token
Buffer V2 has a USDC-based liquidity pool which means anyone can mint BLP tokens by providing liquidity to the liquidity pool. The price for minting and redeeming tokens is calculated based on: (the total worth of assets in the pool, including profits and losses of all previous trades) / (BLP supply).
Once minted, the BLP token is automatically staked, and you will start earning trading fees and esBFR rewards.
Upon minting, BLP is staked by default, and the user earns:
- USDC: Upto 60% of the platform fee
- esBFR tokens: At a pre-determined emission rate
How does the USDC vault generate yield?
The USDC vault acts as a counterparty to all the trades placed on the options trading platform. In return, 60% of the trading fee (In USDC) generated is distributed to BLP holders. Other than the trading fee, BLP holders can also earn from the PnL of the pool, whenever a trader makes a positive PnL, the pool loses, and whenever a trader makes a negative PnL, the pool makes a profit. The pool has a probabilistic edge that can generate a positive yield consistently over the long term. Additionally, esBFR rewards are also emitted to the liquidity providers That can be either claimed for vesting or compounded to earn additional USDC yield.
How does the liquidity pool manage risk?
Over and above having a probabilistic edge, we have added other features to manage long-tail risk for the liquidity providers.
- Trade size limit — Max trade size can be 2% of the available liquidity. For example, if the liquidity pool has 100,000 USDC of available liquidity, the max trade size can be 2000 USDC.
- Max utilization of vault — Max vault utilization at a time is capped at 64% of the total available liqudity
- Max cap — Max liquidity that can be deposited in the pool is $1M (Will be increased gradually)
- Pause trading — In the case of highly volatile scenarios trading for a given pair/asset can be paused.
Finally, a message for you,
The upcoming months will be extremely thrilling, and we look forward to this new chapter in the platform’s journey. However, as Buffer continues to grow, the subject of value encapsulation will become incrementally complex and dynamic. As such, we will continue to share guides, tutorials, and informative Twitter threads that help you navigate the complex yet rewarding ecosystem.