Value Accrual

How is ESPN value ‘felt’ by holders?

The premiums generated from the strategy is the yield, it’s felt by holders in 2 ways

1. Price increase of ESPN

2. Rewards paid out to stake USDS/ESPN LP

On launch, the premiums harvested will be split as follows

1. Protocol fee (10% of all premiums generated)

2. A fixed portion equating to a 12% growth rate on the capital base of ESPN itself

3. The remainder to LP rewards

This breakdown is subject to change as the managing team decides how best to incentivize and best balance the overall system.

LP Staking

ESPN staking for liquidity providers (to receive yield) will be enabled next week. Please pay attention to official channels, for the launch of ESPN, all you can do is mint the token, or buy/sell in the LP.

ESPN holders will benefit from the auto-compounding of the asset base, but a proportion of yield earnt from Derive is set aside for liquidity provision rewards. A target growth rate of 12% for asset base growth set, with the remaining yield (minus a 10% protocol reserve fee) used for liquidity provision rewards.

LP staking is the way that yield is actively paid out. To stake, ESPN will need to be paired with USDS. The ratio of ESPN to USDS required will shift with the market price of ESPN. Rewards will be paid for managed LP, in LP tokens, with the majority of staked LP concentrated in the range $10-$1000 (first tranche of ESPN will be minted at $100).

In order to pay LP rewards, the ESPN manager, on each yield pay out, is a net buyer of ESPN for the purpose of pairing with USDS and paying out yield. These buybacks will be done in the market.

In normal dynamics, we don’t expect every ESPN holder to LP stake, as such, the effective yield for LP rewards will be boosted based on the ratio of ESPN holders to LP stakers.