What is Vector Reserve?
Last updated
Last updated
The core objective of Vector Reserve is to harness optimized liquid staking and liquid restaking yields to introduce a diversified, risk adjusted reserve currency built on ETH, offering market leading yield. It does this by harnessing ETH, and associated Liquid Staking Tokens (LST) and Liquid Restaked Tokens (LRT) to create a diversified treasury of in traditional ETH/LST or ETH/LRT LPs, which can earn a further yield boost via EigenLayer's . vETH is able to accrue both protocol airdrop points from partner LRT and LSTs, and EigenLayer points from underlying LRTs. The end result is a diversified, fully collateralized basket of optimized ETH yields in the form of ; providing both a best-in-class yield experience for users, but also driving significant value to the VEC reserve currency.
vETH is a novel DeFi primitive designed to expand the composability of liquidity positions, while taking advantage of the stable nature of stable-pair LPs (examples would be a USDT/USDC pair, or in our case, any ETH derivative paired with ETH). When you pair a native asset with a derivative of the native asset that is fully backed, Impermanent Loss (IL) ceases to be an issue for yield generation, meaning the backing of vETH cannot diminish - only increase. The concept of the LPD means that vETH can act essentially as an LST, with the same price peg to ETH, albeit with substantially higher returns.
The VEC token acts as the cornerstone of Vector Reserve, and is designed to consistently accrue value via mechanisms designed to enable a robust and theoretically increasing backing and price floor. This is achieved through a strategic reserve of diversified assets, accumulated from bond sales, transaction taxes, and a portion of the yields generated via vETH.
Vector Reserve is designed to counteract the pitfalls of traditional reserve currencies in DeFi, such as inflation and over-reliance on bonding for growth. By focusing on generating real revenue through innovations tied to robust and proven ETH yields, it solves a number of previous challenges in establishing a sustainable and scalable economic model for ETH backed reserve currencies. Unlike other reserve currency projects, bonding and volume are not the sole drivers for revenue - vETH is only the first product designed to drive increasing value to the Vector Reserve.