# Staking Incentives

## The Problem

ESPN's core strategy involves deploying capital into long-dated convertible note positions. These positions generate strong yield, but they require time to mature. If capital flows in and out unpredictably, the vault manager must keep more capital idle in short-term, lower-yielding strategies — reducing returns for everyone.

Staking incentives solve this by rewarding holders who commit liquidity for longer periods, aligning individual incentives with the vault's need for predictable capital.

## Overview

ESPN holders earn yield just by holding the token — the redemption value of ESPN increases as option premiums flow into the vault. Staking ESPN LP tokens provides an additional layer of yield, with boosted rewards for longer lock durations.

## How It Works

1. **Provide liquidity** to the ESPN/USDS pool via [Arrakis](https://etherscan.io/address/0x2F63AE2184D876f156b9eF21f488d4E6B442FaD7) to receive ESPN LP tokens
2. **Stake** your LP tokens in the sESPN LP staking contract
3. **Choose a lock duration** between 1 week (minimum) and 6 months (maximum)
4. **Earn** boosted rewards proportional to your lock duration

### Lock Duration & Boost

The boost is tied to how long you lock:

* **Minimum lock period:** 1 week
* **Maximum lock period:** 6 months
* **Boost decay:** The increased reward rate decays linearly over time, reaching the base rate as the lock duration ends

Longer locks earn proportionally more rewards, incentivizing conviction and providing the vault with more predictable liquidity.

<figure><img src="/files/oyxFxeEIb4Yj5smeaagN" alt="ESPN staking incentives"><figcaption><p>Staking ESPN LP tokens with longer lock periods earns boosted yield that decays linearly over the lock duration.</p></figcaption></figure>

## Why Lock?

The lock mechanism serves two purposes:

1. **Predictable liquidity** — locked capital gives the vault manager confidence to deploy into longer-dated, higher-yielding strategies (the convertible note trade)
2. **Fair reward distribution** — holders who commit capital for longer periods earn more, reflecting the genuine value they provide to the vault's operation

## Contract Addresses

| Contract                 | Address                                                                                                               |
| ------------------------ | --------------------------------------------------------------------------------------------------------------------- |
| **sESPN LP (Staking)**   | [0xcD65F0b6E31e44225330DB8622a9e5307DDC6c1C](https://etherscan.io/address/0xcD65F0b6E31e44225330DB8622a9e5307DDC6c1C) |
| **Arrakis ESPN/USDS LP** | [0x2F63AE2184D876f156b9eF21f488d4E6B442FaD7](https://etherscan.io/address/0x2F63AE2184D876f156b9eF21f488d4E6B442FaD7) |

For all deployed contracts, see [Contracts](/references/contracts.md).

## Failure Modes & Gotchas

| Scenario                | What Happens                                                                                   | Mitigation                                                                                                    |
| ----------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------- |
| **Unlocking early**     | You cannot unstake before your lock period ends. Capital is committed for the full duration.   | Choose a lock period you're comfortable with. Start with shorter locks if unsure.                             |
| **Boost decay**         | Your boosted yield rate decreases linearly over the lock period, reaching base rate at expiry. | This is by design — it prevents a cliff where all locked capital exits simultaneously.                        |
| **LP impermanent loss** | As an LP, you're exposed to impermanent loss on the ESPN/USDS pair.                            | ESPN's value trends upward (yield accrues), so IL is partially offset by the underlying asset's appreciation. |


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