Premia’s New Tokenomics: vxPREMIA

9 min readJul 3, 2022

Soon we will be switching over to vxPREMIA tokenomics and sunsetting xPREMIA and if you’re wondering what that means — this article is for you.

Let’s look at the current tokenomics to see what’s changing and what’s staying the same.

Users will still be able to earn PREMIA tokens as liquidity rewards from depositing into the pools, Liquidity Mining rewards are not going away
In the old tokenomics, users stake PREMIA tokens in order to receive a number of xPremia tokens corresponding to the xPREMIA : PREMIA ratio but with vxPREMIA this is simplified so users stake PREMIA tokens in order to receive an equal number of vxPREMIA tokens. Goodbye confusing fluctuating ratio 👋
Staking PREMIA for xPREMIA was only available on Ethereum mainnet. Staking PREMIA for vxPREMIA will be available on all Premia supported chains, which will return rewards and discounts on the corresponding chain
xPremia could be locked for a specific period of time in order to get discounts on the Premia.finance app. Locking PREMIA for vxPREMIA is also done for a specific period of time, accrues discounts, and cannot be unlocked or withdrawn until this period is over. More about that below in Locking PREMIA for vxPREMIA
Unlocking or withdrawing xPremia required the lock period to be over, this will be the same with vxPREMIA
Users could bridge xPremia tokens from and to mainnet using our default bridge modal. vxPREMIA can also be bridged to other chains but it will use its own bridge functionality in the form of a function call on the vxPREMIA token contract itself. You won’t even notice the difference when using our bridge module, the change is on the backend.
xPremia and Premia tokens can be used to vote on protocol governance. With the updated tokenomics, only vxPREMIA can be used to vote in Premia Governance using snapshot for protocol governance. More on this below under Voting with vxPREMIA
There is a 10 day withdrawal period when unstaking xPREMIA, which is still a part of the vxPREMIA tokenomics

The Basics of vxPREMIA

If you noticed several things are unchanged between xPREMIA and vxPREMIA, that’s because vxPREMIA is an upgraded version of the original xPREMIA contract. If you are already staking in the xPREMIA contract then no action is necessary: as soon as the contract upgrade is deployed, all existing xPremia will be converted to vxPREMIA.

Users will not need to manually migrate.

The biggest changes in tokenomics are with regards to how locking, rewards, and voting work with vxPREMIA. Let’s take a look at both.

Locking PREMIA for vxPREMIA

Locking PREMIA for vxPREMIA is done for a specific period of time and cannot be unlocked or withdrawn until this period is over. The minimum locking period is 10 days because there is a 10 day withdrawal period when unstaking vxPREMIA. Any locking duration beyond the default 10 days is optional, but longer locking is incentivized. The longer the lock, the more rewards will be earned per staked PREMIA and the more voting power accrued per staked PREMIA.

An additional lock of 0 days accrues a multiplier of 0.25x on staked tokens, each additional year linearly adds a multiplier of 1x, up to a total of 4 years for a maximum multiplier of 4.25 (e.g. 1.5 years = 1.75x, 2.75 years = 3x, etc.)

The formula to determine the reward multiplier is:

Power = 0.25 + (1 * min(yearsLocked, 4)) * premiaAmountStaked

Locked PREMIA (vxPREMIA) becomes available to withdraw once the lock period is over. At that point it can still be used to vote, earn fees, and get discounts even though it is no longer timelocked. Your original lock boost from deposit will persist until the tokens are withdrawn or more tokens are deposited.

For example:

If someone locks for 4 years, they will maintain a 4.25x boost for all 4 years and even after, until they eventually deposit more or withdraw those tokens

“What do you mean until they deposit more?”

Locking more vxPREMIA will reset the lock period for all vxPREMIA held by the user to the new lock period. The new lock period cannot be less than the previous remaining lock time. If the lock selected is shorter than the previous lock, the multiplier for all staked tokens will be lowered to the new lock period.

For example:

Let’s say a user stakes 1000 PREMIA for 4 years, after 2 years has passed, he wants to stake 1000 more tokens and select 3 years lock, this will bring his multiplier down from 4.25x to 3.25x.

BRIDGING WHILE LOCKED

Users are able to bridge vxPREMIA to any chain supported by PREMIA. This is done through the vxPREMIA contract and will allow you to move vxPREMIA to the same address on any destination chain without it having to go through mainnet first. They can be bridged while still locked or while they’re withdrawable. When vxPremia is bridged, the underlying staked PREMIA will still remain on the original chain. This means that users can potentially not have enough PREMIA liquidity when they want to withdraw on a particular chain, and might have to bridge their vxPREMIA to another chain with enough liquidity to be able to withdraw.

Voting with vxPREMIA

You might be used to participating in Premia governance with PREMIA tokens but that’s changing. With the updated tokenomics, only vxPREMIA can be used to vote in Premia Governance. Here’s how it works:

When tokens are staked into vxPremia contract, users obtain “power” which allows them to participate in governance vote, vote for liquidity mining allocations, earn protocol fees, and get protocol fee discounts when using the platform.
Voting power, protocol fee distribution percentages, and protocol fee discount percentages are all scaled directly by the vxPREMIA power (e.g. 2 power earns 2x more protocol fees and 2x more votes than 1 power)

We will be using “gauge weight votes” to further decentralize our liquidity mining rewards. Gauge weight votes (Manifold Control) are a new feature that will occur on the upcoming vxPremia page. This allows users to vote on the percentage of total liquidity mining rewards to devote to each pool on that specific chain. The rewards “gauge” is the complete distribution of reward %’s per pool on each chain.

In practice it looks like this:

Pools can have a weighting of 0%, which would mean that pool receives 0 rewards from liquidity mining
Pool can have a weighting of 100%, which would mean that pool receives all of the PREMIA liquidity mining rewards on that chain
Pool votes are multiplied by utilization rate of the pool (with a minimum of 25%), so that pools with high utilization get more rewards

This encourages vxPREMIA holders to vote on the pools with the highest expected fee revenue, because more fee revenue for the protocol directly results in more rewards for stakers. It is an important step in further decentralizing the Premia protocol.

Protocol Fees

Protocol fees will be distributed based on which % of (pro-rata) power each user owns from the total power (vxPremia with multiplier applied). Protocol fees will be added to the contract as USDC, and will be distributed over time through a decay function.

Users with accumulated rewards can either:

Withdraw (“Claim”) their rewards to their wallet as USDC at any time
Swap (“Compound”) their USDC rewards for more vxPREMIA to earn more rewards over time

USDC rewards that are compounded will be swapped for PREMIA at the best market rate using a DEX-aggregator, then deposited for vxPREMIA with a lock matching the compounding user’s current remaining lock time.

The decay function works by releasing fees over time instead of all at once. When fees are distributed, they’re added to a balance that rewards stakers over time. The decay function is set to release ~50% of the current balance over the next month, perpetually. This ensures that the rewards will be dripped over time and not in sporadic, lump sums.

So let’s say there’s 10k USDC in the reward fund: if no funds were added, after a month there would be 5k distributed and 5k left in the balance, after 2 months there would be 2.5k distributed and 2.5k left. This mechanism is designed to prevents user hopping from chain to chain to try to game the fee distribution.

What to Expect When vxPREMIA Goes Live

As we already mentioned, if you are staked in the xPREMIA contract — no action is necessary, your vxPREMIA will be automatically distributed to you upon contract upgrade. Unlike xPREMIA, there is a constant 1:1 ratio of PREMIA : vxPREMIA so there is always 1 underlying PREMIA for any vxPREMIA token. Is 1 PREMIA = 1 vxPREMIA the new 1 BTC = 1 BTC? 🤔

PREMIA tokens can be bridged to any of the other supported chains using our standard bridge (Arbitrum native bridge and Multichain for Fantom). vxPREMIA can also be bridged to any supported chain, even while locked, but this is done through the vxPREMIA contract with the help of LayerZero.

💡 vxPREMIA can only be bridged to the same wallet address on another chain.
Note: please exercise caution if bridging with a multi-sig address as you may not be able to retrieve the tokens on the other chain.

LayerZero is an omni-chain interoperability protocol that enables cross-chain transactions through their low-level communication primitive. The protocol makes use of a verifiable oracle and relayer network to secure the cross-chain transactions.

💡 From their site: When a message is sent from chain A to chain B, the message is routed through the LayerZero endpoint on chain A. The endpoint then notifies the Oracle and Relayer of the message and its destination chain. The Oracle forwards the block header to the endpoint on chain B and the Relayer then submits the transaction proof. The proof is validated on the destination chain and the message is forwarded to the destination address to complete the cross-chain transaction.

The benefits of holding vxPREMIA will be applied to whichever chain you hold the vxPREMIA on. For example: you could have your vxPREMIA on Ethereum mainnet, buy some options with reduced fees, then bridge your vxPREMIA to Arbitrum to get reduced fees buying options on Arbitrum. This means users aren’t tied to one chain and can flexibly move chains as the market evolves, or to take advantage of price differences in options on other chains.

The new vxPremia page will show 3 PREMIA token balances:

PREMIA: unstaked PREMIA tokens in the user’s wallet
vxPREMIA: staked vxPREMIA tokens in the user’s wallet (includes Withdrawable and NON-Withdrawable tokens)
Rewards earned: claimable USDC tokens that have been earned through staking. These rewards can be claimed at any time.

“What does it mean to withdraw my tokens?”

Withdrawing tokens converts them back into PREMIA and removes any residual lock boost on the withdrawn tokens. So for example, you could have 1,000 Withdrawable vxPREMIA after being locked for a year earning a 1.25 multiplier — you are still able to earn that multiplier and vote with your vxPREMIA until you decide to perform the withdraw and receive the 1,000+ PREMIA tokens back in exchange for your 1,000+ vxPREMIA (it could be higher than 1,000 if you compounded).

And that’s the deal with vxPREMIA! We are excited to roll it out and if you have any questions don’t hesitate to ask us about vxPREMIA or anything else.

Have questions about Premia?

Drop by our Discord server and chat with us, we would be happy to answer all your questions about the Premia ecosystem.