veCHI & Governance
Understanding veCHI
Last updated
Understanding veCHI
Last updated
Vote-escrowed CHI, or veCHI, is CHI that has been boosted for a specified period. The longer you boost your CHI, the more veCHI you receive. veCHI cannot be transferred, and the only way to obtain it is by boosting CHI.
veCHI serves multiple purposes within the Chi Protocol. The primary uses of veCHI include participating in governance decision, earning yields from the underlying LST/LRT assets of the protocol, and receiving additional CHI incentives.
Boosting CHI for four years yields an initial balance of one veCHI per CHI locked. The veCHI balance decays linearly over time as the boost period shortens. For example, boosting 4,000 CHI for one year yields the same amount of veCHI as locking 2,000 CHI for two years or 1,000 CHI for four years.
By boosting CHI, holders are entitled to the following benefits:
Participate in Governance: Influence protocol decisions and vote on proposals.
Earn stETH Rewards: Receive staking rewards generated by the protocol.
Earn CHI Incentives: Gain additional CHI incentives as a reward for boosting your tokens.
veCHI holders will have the power to influence the direction of the Chi community, treasury, and protocol by actively participating in governance decisions. They will use their voting rights to adjust protocol parameters and introduce new collateral assets, playing a crucial role in shaping the future and evolution of the Chi ecosystem.
veCHI holders are rewarded with a portion of the LST/LRT yield generated by the protocol's reserves. Additionally, to compensate veCHI holders for boosting their positions, the protocol allocates extra incentives to veCHI. The longer the lock period, the greater the amount of CHI earned and the higher the rewards. This structure ensures that the protocol's interests are aligned by directing emissions and incentives toward long-term participants, encouraging sustained commitment to the ecosystem.
veCHI holders currently earn 15% of the total weETH and stETH rewards generated by the protocol's reserves. This allocation allows them to benefit directly from the yield generated by the protocol, enhancing their rewards alongside the CHI incentives.
Suppose the protocol's reserves are worth $5 million, and the average annual yield of the protocol's LSTs and LRTs is 3%. This means the protocol is currently generating $150,000 in yearly rewards from the USC reserves. veCHI holders are entitled to:
$22,500 to veCHI Holders (15% of $150,000)
By boosting CHI and obtaining veCHI, users benefit from the growth in the protocol's reserves. This strategy not only allows users to participate in governance but also provides a steady stream of rewards, offering a sense of predictability and stability for their positions within the protocol.
Here are some important points to note:
Claiming LST/LRT Rewards: LST/LRT rewards distributed to CHI boosters are claimable at any time, providing flexibility for users to access their rewards whenever they choose.
CHI Incentives: CHI incentives earned by veCHI holders are auto-boosted for the same duration as the user's underlying veCHI position, aligning incentives with the long-term commitment of the participant.
weETH to stETH Conversion: weETH rewards are first converted into stETH and then distributed to veCHI holders in the form of stETH, ensuring that all rewards are received as staked ETH.
Reward Distribution Timing: veCHI holders earn rewards on a per epoch basis, with distributions occurring each Sunday at around 12 a.m. BST.
CHI can be boosted for a minimum of one month (4 weeks) and a maximum of 4 years (208 weeks). The formula to calculate veCHI is as follows:
veCHI Balance = CHI Amount * lock time/ max lock time
where the lock time and max lock time are both denominated in weeks. This formula determines the amount of veCHI a user receives based on the amount of CHI they boost and the duration of the lock period.
However, it is important to note the inflexibility of the lock-up period for veCHI. Once veCHI is boosted for a specific period, the duration of this lock-up cannot be shortened.
Assuming that within a given epoch, 1 stETH, 1 weETH, and 1 CHI are distributed, veCHI holders would be entitled to a portion of these rewards based on their boosted CHI amount. Specifically:
